Washington, DC 20549
ANNUAL REPORT
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
December 31, 2020
Franklin Templeton Variable Insurance Products Trust Annual Report
Table of Contents
Important Notes to Performance Information .. . . . . . . . . . . | i |
Fund Summaries |
|
Franklin Allocation VIP Fund . . . . . . . . . . . . . . . . . . . . | FFA-1 |
Franklin Global Real Estate VIP Fund .. . . . . . . . . . . . . | FGR-1 |
Franklin Growth and Income VIP Fund . . . . . . . . . . . . . | FGI-1 |
Franklin Income VIP Fund .. . . . . . . . . . . . . . . . . . . . . | FI-1 |
Franklin Large Cap Growth VIP Fund . . . . . . . . . . . . . . | FLG-1 |
Franklin Mutual Global Discovery VIP Fund .. . . . . . . . . | MGD-1 |
Franklin Mutual Shares VIP Fund .. . . . . . . . . . . . . . . . | MS-1 |
Franklin Rising Dividends VIP Fund . . . . . . . . . . . . . . . | FRD-1 |
Franklin Small Cap Value VIP Fund . . . . . . . . . . . . . . . | FSV-1 |
Franklin Small-Mid Cap Growth VIP Fund . . . . . . . . . . . | FSC-1 |
Franklin Strategic Income VIP Fund . . . . . . . . . . . . . . . | FSI-1 |
Franklin U.S. Government Securities VIP Fund . . . . . . . | FUS-1 |
Templeton Developing Markets VIP Fund . . . . . . . . . . . | TD-1 |
*Prospectus Supplement . . . . . . . . . . . . . . . . . . . . . | TD-7 |
*Statement of Additional Information .. . . . . . . . . . . . | TD-9 |
*Special Meeting of Shareholders . . . . . . . . . . . . . . . | TD-11 |
Templeton Foreign VIP Fund .. . . . . . . . . . . . . . . . . . . | TF-1 |
Templeton Global Bond VIP Fund .. . . . . . . . . . . . . . . . | TGB-1 |
Templeton Growth VIP Fund . . . . . . . . . . . . . . . . . . . . | TG-1 |
Index Descriptions .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | I-1 |
Board Members and Officers . . . . . . . . . . . . . . . . . . . . . . . | BOD-1 |
Shareholder Information .. . . . . . . . . . . . . . . . . . . . . . . . . . | SI-1 |
*Not part of the annual report. Retain for your records
Not FDIC Insured May Lose Value
No Bank Guarantee
MASTER CLASS - 1
Important Notes to Performance Information
Performance data is historical and cannot predict or guarantee future results. Principal value and investment return will fluctuate with market conditions, and you may have a gain or loss when you withdraw your money. Inception dates of the funds may have preceded the effective dates of the subaccounts, contracts or their availability in all states.
When reviewing the index comparisons, please keep in mind that indexes have a number of inherent performance differentials over the funds. First, unlike the funds, which must hold a minimum amount of cash to maintain liquidity, indexes do not have a cash component. Second, the funds are actively managed and, thus, are subject to management fees to cover salaries of securities analysts or portfolio managers in addition to other expenses. Indexes are unmanaged and do not include any commissions or other expenses typically associated with investing in securities. Third, indexes often contain a different mix of securities than the fund to which they are compared. Additionally, please remember that indexes are simply a measure of performance and cannot be invested in directly.
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i
Franklin Allocation VIP Fund
This annual report for Franklin Allocation VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares* represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | +12.19% |
5-Year | +9.21% |
10-Year | +7.87% |
*On May 1, 2019, the Fund’s investment strategies changed. Performance prior to May 1, 2019, is attributable to the Fund’s performance before the strategy change. The Fund has an expense reduction contractually guaranteed through 4/30/21. Fund investment results reflect the expense reduction; without this reduction, the results would have been lower.
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
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Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Standard & Poor’s® 500 Index (S&P 500®), the Bloomberg Barclays U.S. Aggregate Bond Index, the MSCI World ex USA Index-NR and the Linked Allocation VIP Fund Benchmark. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund
Summaries.
$40,000
$35,000 | $36,700 | |
| ||
$30,000 |
| |
$25,000 | $24,837 | |
$20,000 | $21,328 | |
$16,579 | ||
$15,000 | ||
$14,576 |
$10,000 |
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$5,000 |
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1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
| Franklin Allocation VIP Fund | MSCI World ex USA Index-NR** |
| ||
| S&P 500** |
| Linked Allocation VIP Fund |
| |
|
|
| Benchmark*** |
|
|
Bloomberg Barclays U.S. Aggregate
Bond Index**
**Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
***Source: FactSet. The Linked Allocation VIP Fund Benchmark was calculated internally and was composed of 40% S&P 500, 40% Bloomberg Barclays U.S. Aggregate Bond Index and 20% MSCI World ex USA Index-NR. Please see Index Descriptions following the Fund Summaries.
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Franklin Allocation VIP Fund
Fund Goal and Main Investments
The Fund seeks capital appreciation, with income as a secondary goal. Under normal market conditions, the Fund allocates approximately 60% of its assets to the equity asset class and 40% of its assets to the fixed income asset class by allocating the Fund’s assets among various sleeves (investment strategies).
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Because the Fund invests in underlying funds, and the Fund’s performance is directly related to the performance of the underlying funds held by it, the ability of the Fund to achieve its investment goals is directly related to the ability of the underlying funds to meet their investment goals. Additionally, because these underlying funds may engage in a variety of investment strategies involving certain risks, the Fund may be subject to these same risks. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bonds are affected by changes in interest rates and the creditworthiness of their issuers. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds adjust to a rise in interest rates, the Fund’s share price may decline. Higher- yielding, lower-rated corporate bonds entail a greater degree of credit risk compared to investment-grade securities. Derivatives involve costs and can create economic leverage in the Fund’s portfolio which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. Foreign investing carries additional risks such as currency and market volatility and political or social instability, risks that are heightened in developing countries. Value securities may not increase in price as anticipated or may decline further in value. The Fund’s prospectus also includes a description of the main investment risks.
Portfolio Composition 12/31/20
| % of Total |
| Net Assets |
Common Stocks | 60.1% |
Corporate Bonds | 11.0% |
U.S. Government and Agency Securities | 11.0% |
Mortgage-Backed Securities | 9.7% |
Management Investment Companies | 2.9% |
Other | 1.6% |
Short-Term Investments & Other Net Assets | 3.7% |
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Fund’s benchmark, the Standard & Poor’s 500 Index (S&P 500), posted a +18.40% total return.1 The Fund’s other benchmarks performed as follows: the Bloomberg Barclays U.S. Aggregate Bond Index posted a +7.51% total return, the MSCI World ex USA Index-NR posted a +7.59% total return and the Linked Allocation VIP Fund Benchmark posted a +12.61% total return.1,2
Economic and Market Overview
Global developed and emerging market equities, as measured by the MSCI All Country World Index (USD), posted a +16.82% total return for the 12 months ended December 31, 2020.1 Stocks fell sharply in early 2020 as many investors sold equities amid fears of a global economic slowdown due to the novel coronavirus (COVID-19) pandemic. Global equities began to rebound in late March 2020 amid optimism about easing lockdown restrictions, vaccine and treatment development and economic stimulus measures. Despite declines in September and October due to geopolitical tensions and rising infection rates, markets rebounded in November and December, as positive sentiment about successful trials of COVID-19 vaccines, the beginning of vaccination programs in some countries and apparent resolution of political uncertainty supported markets.
1.Source: Morningstar.
2.Source: FactSet. The Linked Allocation VIP Fund benchmark was calculated internally and was composed of 40% S&P 500, 40% Bloomberg Barclays U.S. Aggregate Bond Index and 20% MSCI World ex USA Index-NR.
One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
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FFA-3
FRANKLIN ALLOCATION VIP FUND
In the U.S., pandemic-related restrictions caused stiff economic headwinds, including mass layoffs that drove the unemployment rate to 14.8% in April 2020.3 According to the National Bureau of Economic Research, the longest U.S. economic expansion in history ended in February, and the country slipped into a deep recession. Equities began to rebound in the spring amid the government’s fiscal and monetary stimulus, declining jobless claims, rising retail sales and optimism about treatments and potential vaccines for COVID-19. Following a record annualized decline in second-quarter gross domestic product (GDP), resilient consumer spending helped drive third-quarter GDP to expand at a record annualized rate, although growth slowed in the fourth quarter. Equities continued to rise during the summer but declined in the fall due to concerns about possible new restrictions amid rising COVID-19 infection rates and uncertainties about additional fiscal stimulus and the U.S. presidential election. Despite signs that the economic recovery was stalling as the unemployment
rate remained relatively high (6.7% at period-end) and consumer spending declined, stocks rallied in November and December, buoyed by the outcome of the U.S. presidential election, the start of COVID-19 vaccination programs and the passage of a new U.S. stimulus bill.3
In an effort to support the economy, the U.S. Federal Reserve (Fed) lowered the federal funds target rate to a range of 0.00%–0.25% in March 2020. The Fed also enacted quantitative easing measures aimed at ensuring credit flows to borrowers and supporting credit markets with open- ended bond purchasing. Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded its 2% target.
In the eurozone, the economy contracted again in the fourth quarter of 2020, following quarter-on-quarter expansion in the third quarter and contractions in the first and second quarters. After several months of gains due to easing restrictions and robust stimulus measures, European developed market equities, as measured by the MSCI Europe Index (USD), declined in September and October as rising infection rates heightened investor concerns that the nascent economic revival could stall. Nevertheless, successful vaccine development and a Brexit resolution supported European developed market equities, as measured by the MSCI Europe Index (USD), to post a +5.93% total return for the period.1
Asian developed and emerging market equities, as measured by the MSCI All Country Asia Index (USD), posted a +21.30% total return for the 12 months under review.1
3. Source: U.S. Bureau of Labor Statistics.
Although pandemic-related lockdowns derailed economic growth in early 2020, sharp market declines were followed by rebounds as China's economy, a key driver of the region's economic activity, recovered from the contraction in the first quarter and expanded during the rest of 2020. Asian stocks rose as the region’s economies reopened, aided by robust stimulus measures and optimism that economic revitalization would be further spurred by COVID-19 vaccines.
Global emerging market stocks, as measured by the MSCI Emerging Markets Index (USD), posted a +18.69% total return for the period, despite steep pandemic-related declines in early 2020, benefiting from improving economic activity, stabilizing oil prices and U.S. dollar weakness.1 In spite of higher COVID-19 cases in some countries, emerging market stocks rallied near the end of 2020, bolstered by easing political uncertainty, commencement of COVID-19 vaccinations and rising commodity prices.
Geographic Composition 12/31/20
| % of Total |
| Net Assets |
North America | 73.7% |
Europe | 14.1% |
Asia | 6.1% |
Australia & New Zealand | 1.2% |
Other | 1.2% |
Short-Term Investments & Other Net Assets | 3.7% |
Investment Strategy
The Fund seeks to achieve its investment goals by allocating its assets among the broad asset classes of equity and fixed income investments through a variety of investment strategies or sleeves managed by the investment manager or its affiliates, which include Franklin U.S. Smart Beta Equity Strategy, Franklin Total Return Strategy (liquidated on 7/15/20 and transferred into existing Franklin U.S. Core Bond Strategy and new Franklin U.S. Treasury Securities Strategy), Franklin Growth Strategy, Templeton Foreign Strategy, Franklin International Growth Strategy, Franklin U.S. Government Securities Strategy, Franklin Rising Dividends Strategy, Franklin Investment Grade Corporate Strategy, Templeton Global Bond VIP Fund , Franklin International Core Equity Strategy, Franklin U.S. Core Equity (IU) Strategy, Franklin Emerging Market Core Equity (IU) Strategy and Franklin U.S. Core Bond Strategy. The Fund is structured as a multi-manager fund (meaning the Fund’s assets are managed by multiple subadvisors), with the investment manager having overall responsibility for the Fund’s investments. The investment manager allocates
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Annual Report
FRANKLIN ALLOCATION VIP FUND
assets among various asset classes and strategy sleeves to seek to diversify the Fund’s portfolio, to add incremental return and to reduce the Fund’s risk of being significantly impacted by changes in a specific asset class or by changing market conditions. The investment manager may, at times, implement a risk overlay strategy, which seeks to neutralize certain market risks that may exist in the Fund primarily through the use of equity and interest rate/bond futures. Allocation to each sleeve will generally not exceed 20% and will vary with market conditions. However, under normal market conditions, no sleeve constitutes a majority of the Fund’s assets.
Manager’s Discussion
The Fund’s performance can be attributed largely to its allocation among the underlying sleeves and their investments in domestic and foreign equity securities, fixed income securities, equity index and U.S. Treasury futures, and short-term investments and other net assets.
During the 12 months under review, on the equity side, the Franklin International Growth Strategy and the Franklin International Core Equity Growth Strategy outperformed the Fund’s foreign equity benchmark, the MSCI World
ex USA Index-NR, while the Templeton Foreign Strategy underperformed the index. The Franklin Growth Strategy and the Franklin Rising Dividends Strategy outperformed the Fund’s domestic equity benchmark, the S&P 500, while the Franklin U.S. Core Equity Strategy and the Franklin U.S. Smart Beta Equity Strategy underperformed the index. On the fixed income side, the Franklin Total Return Strategy and Franklin Investment Grade Corporate Strategy outperformed the Fund’s fixed income benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, while the Franklin U.S. Government Securities Strategy, Franklin Global Bond VIP Fund, the Franklin U.S. Core Bond Strategy and the Franklin U.S. Treasury Bond Strategy underperformed the index. The Fund utilized U.S. Treasury and equity index futures for daily cash equitization as well as dynamic asset allocation purposes during the period, which contributed to returns.
Top 10 Holdings 12/31/20
Company | % of Total |
Industry, Country | Net Assets |
U.S. Treasury Notes | 7.9% |
Diversified Financial Services, United States |
|
GNMA II, Single-family, 30 Year | 4.1% |
Diversified Financial Services, United States |
|
FHLMC Pool, 30 Year | 2.7% |
Diversified Financial Services, United States |
|
U.S. Treasury Bonds | 2.7% |
Diversified Financial Services, United States |
|
Microsoft Corp. | 2.1% |
Software, United States |
|
Schwab U.S. TIPS ETF | 1.9% |
Capital Markets, United States |
|
FNMA, 30 Year | 1.8% |
Thrifts & Mortgage Finance, United States |
|
Apple, Inc. | 1.5% |
Technology Hardware, Storage & Peripherals, |
|
United States |
|
Amazon.com, Inc. | 1.3% |
Internet & Direct Marketing Retail, United States |
|
Alphabet, Inc. | 1.0% |
Interactive Media & Services, United States |
|
Thank you for your participation in Franklin Allocation VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
Annual Report
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FRANKLIN ALLOCATION VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
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| Actual |
| Hypothetical |
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| (actual return after expenses) |
| (5% annual return before expenses) |
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| Fund-Level |
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| Fund-Level |
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| Expenses |
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| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201, 2 |
| Value 12/31/20 | 7/1/20–12/31/201, 2 | a | Ratio2 |
1 | $1,000 |
| $1,134.30 | $2.96 | $1,022.36 | $2.80 |
| 0.55% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Franklin Allocation VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $6.86 | $6.37 | $7.44 | $7.13 | $6.80 |
Income from investment operationsa: | 0.10 | 0.11c | 0.23c | 0.21c | 0.21c |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 0.45 | 1.11 | (0.89) | 0.63 | 0.64 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.55 | 1.22 | (0.66) | 0.84 | 0.85 |
Less distributions from: |
|
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|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.12) | (0.27) | (0.24) | (0.22) | (0.29) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.80) | (0.46) | (0.17) | (0.31) | (0.23) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.92) | (0.73) | (0.41) | (0.53) | (0.52) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $5.49 | $6.86 | $6.37 | $7.44 | $7.13 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 12.19% | 20.04% | (9.34)% | 12.17% | 13.43% |
Ratios to average net assets |
|
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|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 0.60% | 0.44% | 0.12% | 0.12% | 0.11% |
Expenses net of waiver and payments by affiliates. . . . . . . | 0.55%e | 0.39% | 0.10% | 0.10% | 0.10% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 1.79% | 1.55% | 3.13% | 2.75% | 3.09% |
Supplemental data |
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Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $811 | $842 | $984 | $1,047 | $1,025 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 99.02% | 170.79% | 2.23% | 1.28% | 0.10% |
Portfolio turnover rate excluding mortgage dollar rolls. . . . . | 91.62%f | 158.11%f | 2.23% | 1.28% | 0.10% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchas- es of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the Fund invests.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Prod- ucts Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%. fSee Note 1(h) regarding mortgage dollar rolls.
The accompanying notes are an integral part of these financial statements.
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Allocation VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $6.81 | $6.32 | $7.39 | $7.08 | $6.75 |
Income from investment operationsa: | 0.09 | 0.09c | 0.21c | 0.18c | 0.19c |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 0.43 | 1.11 | (0.89) | 0.64 | 0.64 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.52 | 1.20 | (0.68) | 0.82 | 0.83 |
Less distributions from: |
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Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.10) | (0.25) | (0.22) | (0.20) | (0.27) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.80) | (0.46) | (0.17) | (0.31) | (0.23) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.90) | (0.71) | (0.39) | (0.51) | (0.50) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $5.43 | $6.81 | $6.32 | $7.39 | $7.08 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 11.74% | 19.86% | (9.65)% | 11.98% | 13.18% |
Ratios to average net assets |
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Expenses before waiver and payments by affiliates.. . . . . . | 0.85% | 0.69% | 0.37% | 0.37% | 0.36% |
Expenses net of waiver and payments by affiliates. . . . . . . | 0.80%e | 0.64% | 0.35% | 0.35% | 0.35% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 1.54% | 1.30% | 2.88% | 2.50% | 2.84% |
Supplemental data |
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Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $398,620 | $403,040 | $390,300 | $480,402 | $474,669 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 99.02% | 170.79% | 2.23% | 1.28% | 0.10% |
Portfolio turnover rate excluding mortgage dollar rolls. . . . . | 91.62%f | 158.11%f | 2.23% | 1.28% | 0.10% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchas- es of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the Fund invests.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Prod- ucts Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%. fSee Note 1(h) regarding mortgage dollar rolls.
FFA-8
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Allocation VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 4
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $6.97 | $6.46 | $7.53 | $7.21 | $6.87 |
Income from investment operationsa: | 0.08 | 0.08c | 0.20c | 0.18c | 0.19c |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 0.46 | 1.13 | (0.89) | 0.64 | 0.64 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.54 | 1.21 | (0.69) | 0.82 | 0.83 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.09) | (0.24) | (0.21) | (0.19) | (0.26) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.80) | (0.46) | (0.17) | (0.31) | (0.23) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.89) | (0.70) | (0.38) | (0.50) | (0.49) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $5.62 | $6.97 | $6.46 | $7.53 | $7.21 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 11.75% | 19.56% | (9.58)% | 11.78% | 12.92% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 0.95% | 0.79% | 0.47% | 0.47% | 0.46% |
Expenses net of waiver and payments by affiliates. . . . . . . | 0.90%e | 0.74% | 0.45% | 0.45% | 0.45% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 1.44% | 1.20% | 2.78% | 2.40% | 2.74% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $409,388 | $406,693 | $393,385 | $528,862 | $530,403 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 99.02% | 170.79% | 2.23% | 1.28% | 0.10% |
Portfolio turnover rate excluding mortgage dollar rolls. . . . . | 91.62%f | 158.11%f | 2.23% | 1.28% | 0.10% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchas- es of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the Fund invests.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Prod- ucts Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%. fSee Note 1(h) regarding mortgage dollar rolls.
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-9
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Franklin Allocation VIP Fund
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks 60.1% |
|
|
|
|
| Aerospace & Defense 1.4% |
|
|
|
|
| BAE Systems plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 90,743 |
| $605,189 |
| BWX Technologies, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,343 |
| 623,476 |
| aDassault Aviation SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 365 |
| 397,474 |
| General Dynamics Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,600 |
| 684,572 |
| Huntington Ingalls Industries, Inc... . . . . . . . . . . . . . . . . . . . . . . . . | United States | 362 |
| 61,714 |
| Lockheed Martin Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,976 |
| 2,121,360 |
| aMercury Systems, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,600 |
| 405,076 |
| MTU Aero Engines AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 7,500 |
| 1,955,099 |
| Northrop Grumman Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,328 |
| 1,928,268 |
| Raytheon Technologies Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 33,711 |
| 2,410,674 |
|
|
|
|
| 11,192,902 |
| Air Freight & Logistics 0.7% |
|
|
|
|
| CH Robinson Worldwide, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,330 |
| 124,847 |
| Deutsche Post AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 14,214 |
| 704,130 |
| DSV PANALPINA A/S.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Denmark | 10,300 |
| 1,731,179 |
| Expeditors International of Washington, Inc.. . . . . . . . . . . . . . . . . . | United States | 5,695 |
| 541,652 |
| FedEx Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 348 |
| 90,348 |
| United Parcel Service, Inc., B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,736 |
| 2,313,142 |
|
|
|
|
| 5,505,298 |
| Airlines 0.0%† |
|
|
|
|
| aInternational Consolidated Airlines Group SA.. . . . . . . . . . . . . . . . . | United Kingdom | 179,897 |
| 391,484 |
| Auto Components 0.2% |
|
|
|
|
| Aptiv plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,300 |
| 299,667 |
| Cie Generale des Etablissements Michelin SCA. . . . . . . . . . . . . . . | France | 2,451 |
| 315,596 |
| Gentex Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,776 |
| 229,909 |
| Toyota Industries Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 5,149 |
| 409,094 |
|
|
|
|
| 1,254,266 |
| Automobiles 0.4% |
|
|
|
|
| Bayerische Motoren Werke AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 7,192 |
| 634,768 |
| Fiat Chrysler Automobiles NV.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 38,275 |
| 691,507 |
| Honda Motor Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 20,700 |
| 584,077 |
| Isuzu Motors Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 63,100 |
| 600,689 |
| Peugeot SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 3,057 |
| 83,721 |
| aTesla, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 685 |
| 483,384 |
|
|
|
|
| 3,078,146 |
| Banks 1.3% |
|
|
|
|
| Associated Banc-Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 308 |
| 5,251 |
| Banco de Sabadell SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Spain | 224,093 |
| 96,983 |
| Bank of America Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,969 |
| 241,540 |
| aBNP Paribas SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 14,623 |
| 772,012 |
| aCredit Agricole SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 31,834 |
| 402,460 |
| aFinecoBank Banca Fineco SpA.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Italy | 116,802 |
| 1,926,380 |
| aING Groep NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 156,476 |
| 1,454,949 |
| JPMorgan Chase & Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,830 |
| 613,748 |
| Kasikornbank PCL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Thailand | 135,292 |
| 509,439 |
| KB Financial Group, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | South Korea | 20,247 |
| 802,935 |
| aKBC Group NV.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Belgium | 3,581 |
| 250,613 |
| People's United Financial, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 923 |
| 11,934 |
| Shinhan Financial Group Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . | South Korea | 20,714 |
| 613,719 |
| aStandard Chartered plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 153,094 |
| 972,209 |
| Sumitomo Mitsui Financial Group, Inc.. . . . . . . . . . . . . . . . . . . . . . | Japan | 29,300 |
| 908,246 |
| Sumitomo Mitsui Financial Group, Inc., ADR.. . . . . . . . . . . . . . . . . | Japan | 106,000 |
| 654,020 |
| Wells Fargo & Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,589 |
| 229,036 |
FFA-10
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Banks (continued) |
|
|
|
|
| Western Alliance Bancorp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,431 |
| $145,739 |
|
|
|
|
| 10,611,213 |
| Beverages 0.9% |
|
|
|
|
| Anheuser-Busch InBev SA/NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Belgium | 1,013 |
| 70,677 |
| aBoston Beer Co., Inc. (The), A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 257 |
| 255,533 |
| Brown-Forman Corp., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 462 |
| 33,943 |
| Brown-Forman Corp., B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,030 |
| 796,683 |
| Coca-Cola Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,118 |
| 554,871 |
| Constellation Brands, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,104 |
| 679,931 |
| Kirin Holdings Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 23,643 |
| 558,282 |
| aMonster Beverage Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 24,136 |
| 2,232,097 |
| PepsiCo, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 14,529 |
| 2,154,651 |
|
|
|
|
| 7,336,668 |
| Biotechnology 1.7% |
|
|
|
|
| AbbVie, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 20,496 |
| 2,196,146 |
| aAlexion Pharmaceuticals, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 960 |
| 149,990 |
| Amgen, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 9,465 |
| 2,176,193 |
| aBiogen, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,840 |
| 940,262 |
| aCertara, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,500 |
| 50,580 |
| CSL Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 10,372 |
| 2,266,205 |
| aDeciphera Pharmaceuticals, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,300 |
| 188,331 |
| aExelixis, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,363 |
| 47,425 |
| aGalapagos NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Belgium | 3,636 |
| 359,886 |
| aGenmab A/S.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Denmark | 3,800 |
| 1,541,003 |
| Gilead Sciences, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,610 |
| 734,659 |
| aIovance Biotherapeutics, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,300 |
| 106,720 |
| aNeurocrine Biosciences, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,609 |
| 250,073 |
| aPTC Therapeutics, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,200 |
| 134,266 |
| aRegeneron Pharmaceuticals, Inc... . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,646 |
| 795,199 |
| aSeagen, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,413 |
| 422,613 |
| aUnited Therapeutics Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,361 |
| 206,586 |
| aVertex Pharmaceuticals, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,836 |
| 906,600 |
|
|
|
|
| 13,472,737 |
| Building Products 0.6% |
|
|
|
|
| A O Smith Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,010 |
| 219,828 |
| Allegion plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,407 |
| 512,887 |
| Geberit AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 1,374 |
| 860,084 |
| Johnson Controls International plc. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 18,900 |
| 880,551 |
| aKingspan Group plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Ireland | 2,043 |
| 143,172 |
| Lennox International, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,190 |
| 326,024 |
| Masco Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,707 |
| 423,346 |
| Owens Corning.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,313 |
| 175,233 |
| Trane Technologies plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,657 |
| 966,330 |
| aTrex Co., Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 447 |
| 37,423 |
|
|
|
|
| 4,544,878 |
| Capital Markets 2.7% |
|
|
|
|
| BlackRock, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,265 |
| 912,748 |
| Charles Schwab Corp. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 17,031 |
| 903,324 |
| Deutsche Boerse AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 8,000 |
| 1,362,234 |
| Evercore, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,339 |
| 146,808 |
| FactSet Research Systems, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,457 |
| 484,453 |
| bFlow Traders, 144A, Reg S.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 6,603 |
| 218,611 |
| Goldman Sachs Group, Inc. (The).. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,082 |
| 1,867,594 |
| Hargreaves Lansdown plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 12,355 |
| 257,276 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Capital Markets (continued) |
|
|
|
|
| Hong Kong Exchanges & Clearing Ltd... . . . . . . . . . . . . . . . . . . . . | Hong Kong | 15,900 |
| $872,143 |
| Intercontinental Exchange, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,855 |
| 905,603 |
| Intermediate Capital Group plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 74,000 |
| 1,741,353 |
| Invesco Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 14,122 |
| 246,146 |
| Japan Exchange Group, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 8,500 |
| 217,190 |
| Lazard Ltd., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,039 |
| 170,850 |
| Magellan Financial Group Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 4,546 |
| 188,288 |
| MarketAxess Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,485 |
| 847,282 |
| Moody's Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,774 |
| 1,675,846 |
| Morgan Stanley. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,759 |
| 1,079,964 |
| Morningstar, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 796 |
| 184,330 |
| Nasdaq, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,700 |
| 623,878 |
| Nomura Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 90,800 |
| 480,066 |
| Partners Group Holding AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 664 |
| 780,228 |
| S&P Global, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,897 |
| 2,595,981 |
| SEI Investments Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,361 |
| 250,627 |
| Singapore Exchange Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Singapore | 30,300 |
| 212,964 |
| State Street Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,723 |
| 416,520 |
| T Rowe Price Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,006 |
| 1,212,028 |
| Tradeweb Markets, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,400 |
| 337,230 |
| UBS Group AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 65,357 |
| 920,216 |
|
|
|
|
| 22,111,781 |
| Chemicals 2.3% |
|
|
|
|
| Air Products and Chemicals, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 11,688 |
| 3,193,395 |
| Albemarle Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,330 |
| 1,523,882 |
| Celanese Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 728 |
| 94,596 |
| bCovestro AG, 144A, Reg S.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 10,684 |
| 658,305 |
| Eastman Chemical Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 999 |
| 100,180 |
| Ecolab, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,621 |
| 1,865,240 |
| EMS-Chemie Holding AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 317 |
| 304,942 |
| Huntsman Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 768 |
| 19,308 |
| Koninklijke DSM NV.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 9,800 |
| 1,685,386 |
| Linde plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 12,885 |
| 3,395,326 |
| LyondellBasell Industries NV, A.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,931 |
| 268,655 |
| NewMarket Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 69 |
| 27,482 |
| Nitto Denko Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 6,300 |
| 564,354 |
| Sherwin-Williams Co. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,025 |
| 753,283 |
| Symrise AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 12,000 |
| 1,595,386 |
| Tosoh Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 30,725 |
| 480,053 |
| Umicore SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Belgium | 36,000 |
| 1,730,414 |
| Valvoline, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,097 |
| 25,385 |
| Yara International ASA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Brazil | 1,381 |
| 57,293 |
|
|
|
|
| 18,342,865 |
| Commercial Services & Supplies 0.4% |
|
|
|
|
| Cintas Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,469 |
| 1,579,613 |
| aCopart, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,113 |
| 396,129 |
| Downer EDI Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 58,693 |
| 241,176 |
| Republic Services, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,700 |
| 356,310 |
| Rollins, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,680 |
| 339,128 |
|
|
|
|
| 2,912,356 |
| Communications Equipment 0.1% |
|
|
|
|
| aArista Networks, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 221 |
| 64,216 |
| Cisco Systems, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,275 |
| 549,306 |
| aF5 Networks, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 578 |
| 101,694 |
FFA-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Communications Equipment (continued) |
|
|
|
|
| Motorola Solutions, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,451 |
| $246,757 |
|
|
|
|
| 961,973 |
| Construction & Engineering 0.1% |
|
|
|
|
| Obayashi Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 25,300 |
| 218,455 |
| Quanta Services, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,604 |
| 115,520 |
| Sinopec Engineering Group Co. Ltd., H.. . . . . . . . . . . . . . . . . . . . . | China | 602,000 |
| 259,921 |
| Taisei Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 17,800 |
| 614,074 |
|
|
|
|
| 1,207,970 |
| Construction Materials 0.1% |
|
|
|
|
| Martin Marietta Materials, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,263 |
| 642,624 |
| Taiheiyo Cement Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 2,300 |
| 57,613 |
|
|
|
|
| 700,237 |
| Consumer Finance 0.0%† |
|
|
|
|
| Santander Consumer USA Holdings, Inc.. . . . . . . . . . . . . . . . . . . . | United States | 773 |
| 17,022 |
| SLM Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,921 |
| 135,311 |
|
|
|
|
| 152,333 |
| Containers & Packaging 0.0%† |
|
|
|
|
| Ardagh Group SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 38 |
| 654 |
| Avery Dennison Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 316 |
| 49,015 |
| International Paper Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 863 |
| 42,908 |
| Packaging Corp. of America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 771 |
| 106,329 |
| Sonoco Products Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 890 |
| 52,732 |
|
|
|
|
| 251,638 |
| Distributors 0.1% |
|
|
|
|
| Pool Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,490 |
| 555,025 |
| Diversified Consumer Services 0.3% |
|
|
|
|
| aGrand Canyon Education, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,360 |
| 126,629 |
| H&R Block, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 28,737 |
| 455,769 |
| aTAL Education Group, ADR.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 21,000 |
| 1,501,710 |
|
|
|
|
| 2,084,108 |
| Diversified Financial Services 0.4% |
|
|
|
|
| aBerkshire Hathaway, Inc., B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,438 |
| 797,169 |
| EXOR NV.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 3,681 |
| 299,009 |
| Investor AB, B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Sweden | 10,848 |
| 789,659 |
| Jefferies Financial Group, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 823 |
| 20,246 |
| aKinnevik AB, B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Sweden | 8,404 |
| 422,245 |
| M&G plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 95,428 |
| 257,595 |
| Mitsubishi UFJ Lease & Finance Co. Ltd.. . . . . . . . . . . . . . . . . . . . | Japan | 15,800 |
| 75,870 |
| ORIX Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 48,000 |
| 738,438 |
|
|
|
|
| 3,400,231 |
| Diversified Telecommunication Services 0.6% |
|
|
|
|
| AT&T, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,191 |
| 724,493 |
| bCellnex Telecom SA, 144A, Reg S. . . . . . . . . . . . . . . . . . . . . . . . . | Spain | 20,500 |
| 1,231,136 |
| CenturyLink, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,338 |
| 22,796 |
| Deutsche Telekom AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 30,280 |
| 552,711 |
| Verizon Communications, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 37,106 |
| 2,179,978 |
|
|
|
|
| 4,711,114 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Electric Utilities 0.5% |
|
|
|
|
| Alliant Energy Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,042 |
| $105,224 |
| American Electric Power Co., Inc... . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,380 |
| 198,183 |
| Evergy, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,543 |
| 85,652 |
| Eversource Energy.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,629 |
| 227,435 |
| Hawaiian Electric Industries, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 946 |
| 33,479 |
| NextEra Energy, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 19,016 |
| 1,467,084 |
| NRG Energy, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,824 |
| 293,791 |
| PPL Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,240 |
| 147,768 |
| Red Electrica Corp. SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Spain | 16,339 |
| 335,471 |
| Southern Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,198 |
| 442,173 |
| Tohoku Electric Power Co., Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 16,900 |
| 139,479 |
| Xcel Energy, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,603 |
| 173,542 |
|
|
|
|
| 3,649,281 |
| Electrical Equipment 0.5% |
|
|
|
|
| Acuity Brands, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,167 |
| 141,312 |
| AMETEK, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,718 |
| 449,655 |
| Eaton Corp. plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 832 |
| 99,956 |
| Emerson Electric Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,980 |
| 641,353 |
| aGenerac Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 208 |
| 47,301 |
| GrafTech International Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 388 |
| 4,136 |
| Hubbell, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 110 |
| 17,247 |
| Mitsubishi Electric Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 61,300 |
| 926,467 |
| nVent Electric plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,600 |
| 316,744 |
| Rockwell Automation, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,455 |
| 615,739 |
| Schneider Electric SE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 8,084 |
| 1,168,407 |
|
|
|
|
| 4,428,317 |
| Electronic Equipment, Instruments & Components 0.7% |
|
|
|
|
| Amphenol Corp., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,233 |
| 1,076,629 |
| aArrow Electronics, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,245 |
| 218,438 |
| Avnet, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,043 |
| 457,940 |
| Cognex Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,187 |
| 175,583 |
| Hitachi Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 28,735 |
| 1,134,151 |
| Jabil, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,709 |
| 115,214 |
| aKeysight Technologies, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,062 |
| 536,550 |
| SYNNEX Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,177 |
| 95,855 |
| TE Connectivity Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,449 |
| 1,265,060 |
| aVontier Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,485 |
| 216,599 |
|
|
|
|
| 5,292,019 |
| Energy Equipment & Services 0.1% |
|
|
|
|
| SBM Offshore NV.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 33,612 |
| 635,020 |
| aTecnicas Reunidas SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Spain | 14,015 |
| 185,834 |
|
|
|
|
| 820,854 |
| Entertainment 0.9% |
|
|
|
|
| Activision Blizzard, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,486 |
| 602,225 |
| CTS Eventim AG & Co. KGaA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 24,000 |
| 1,604,257 |
| aElectronic Arts, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,388 |
| 773,717 |
| aNetflix, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 676 |
| 365,533 |
| Nintendo Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 1,300 |
| 834,524 |
| aSpotify Technology SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 764 |
| 240,400 |
| Square Enix Holdings Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 900 |
| 54,568 |
| aWalt Disney Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,323 |
| 2,413,861 |
|
|
|
|
| 6,889,085 |
FFA-14
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Equity Real Estate Investment Trusts (REITs) 0.8% |
|
|
|
|
| Boston Properties, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,875 |
| $460,834 |
| CoreSite Realty Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 143 |
| 17,915 |
| Crown Castle International Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,485 |
| 1,032,347 |
| EPR Properties.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 671 |
| 21,807 |
| Equinix, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 598 |
| 427,080 |
| Equity Commonwealth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,728 |
| 101,700 |
| Extra Space Storage, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 264 |
| 30,587 |
| Gaming and Leisure Properties, Inc... . . . . . . . . . . . . . . . . . . . . . . | United States | 6,073 |
| 257,495 |
| Gecina SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 397 |
| 61,736 |
| Goodman Group.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 46,464 |
| 679,186 |
| Kimco Realty Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 16,450 |
| 246,915 |
| Klepierre SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 3,919 |
| 88,393 |
| National Retail Properties, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,557 |
| 63,712 |
| Omega Healthcare Investors, Inc... . . . . . . . . . . . . . . . . . . . . . . . . | United States | 485 |
| 17,615 |
| Public Storage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,190 |
| 1,429,457 |
| Realty Income Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,895 |
| 179,982 |
| Simon Property Group, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,313 |
| 1,050,053 |
| Spirit Realty Capital, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 967 |
| 38,844 |
| STORE Capital Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,841 |
| 62,557 |
| Suntec Real Estate Investment Trust.. . . . . . . . . . . . . . . . . . . . . . . | Singapore | 50,600 |
| 57,104 |
| VICI Properties, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,159 |
| 29,555 |
| WP Carey, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,331 |
| 93,942 |
|
|
|
|
| 6,448,816 |
| Food & Staples Retailing 0.8% |
|
|
|
|
| Casey's General Stores, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 316 |
| 56,444 |
| Cosmos Pharmaceutical Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 800 |
| 129,182 |
| Costco Wholesale Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,369 |
| 515,812 |
| Koninklijke Ahold Delhaize NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 41,949 |
| 1,183,486 |
| Kroger Co. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 28,468 |
| 904,144 |
| Matsumotokiyoshi Holdings Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . | Japan | 11,300 |
| 481,975 |
| Seven & i Holdings Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 7,600 |
| 269,120 |
| aSprouts Farmers Market, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 892 |
| 17,929 |
| Sundrug Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 12,243 |
| 489,315 |
| Walgreens Boots Alliance, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,170 |
| 246,059 |
| Walmart, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,702 |
| 2,263,443 |
| Welcia Holdings Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 3,600 |
| 135,801 |
|
|
|
|
| 6,692,710 |
| Food Products 0.5% |
|
|
|
|
| aa2 Milk Co. Ltd. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | New Zealand | 5,244 |
| 45,619 |
| Calbee, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 3,600 |
| 108,520 |
| Campbell Soup Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 720 |
| 34,812 |
| Flowers Foods, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,841 |
| 132,182 |
| General Mills, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,837 |
| 343,216 |
| Hershey Co. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,579 |
| 240,529 |
| Hormel Foods Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,732 |
| 127,339 |
| Ingredion, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 581 |
| 45,707 |
| J M Smucker Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 841 |
| 97,220 |
| Kellogg Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,757 |
| 109,338 |
| Lamb Weston Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,932 |
| 230,866 |
| McCormick & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,200 |
| 975,120 |
| MEIJI Holdings Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 4,600 |
| 323,747 |
| Mondelez International, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,269 |
| 483,488 |
| Nestle SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 2,916 |
| 344,704 |
| Toyo Suisan Kaisha Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 3,400 |
| 165,468 |
| Tyson Foods, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,551 |
| 164,386 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Food Products (continued) |
|
|
|
|
| bWH Group Ltd., 144A, Reg S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 366,000 |
| $306,910 |
|
|
|
|
| 4,279,171 |
| Gas Utilities 0.1% |
|
|
|
|
| Atmos Energy Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,010 |
| 96,384 |
| Osaka Gas Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 14,800 |
| 303,364 |
| Toho Gas Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 2,700 |
| 178,876 |
| Tokyo Gas Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 14,300 |
| 330,976 |
| UGI Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,611 |
| 231,121 |
|
|
|
|
| 1,140,721 |
| Health Care Equipment & Supplies 3.4% |
|
|
|
|
| Abbott Laboratories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 19,760 |
| 2,163,522 |
| aABIOMED, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 712 |
| 230,831 |
| aAlcon, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 23,500 |
| 1,560,309 |
| aAlign Technology, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 335 |
| 179,017 |
| Becton Dickinson and Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,700 |
| 1,676,474 |
| Cochlear Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 10,700 |
| 1,561,295 |
| Coloplast A/S, B.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Denmark | 3,394 |
| 519,083 |
| Danaher Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 9,509 |
| 2,112,329 |
| DiaSorin SpA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Italy | 920 |
| 192,095 |
| aEdwards Lifesciences Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 11,678 |
| 1,065,384 |
| Fisher & Paykel Healthcare Corp. Ltd... . . . . . . . . . . . . . . . . . . . . . | New Zealand | 8,230 |
| 195,493 |
| GN Store Nord A/S.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Denmark | 23,000 |
| 1,833,576 |
| aHaemonetics Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,424 |
| 644,100 |
| Hoya Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 6,200 |
| 858,668 |
| aIDEXX Laboratories, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,357 |
| 1,178,194 |
| aIntuitive Surgical, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,422 |
| 1,981,438 |
| Medtronic plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,200 |
| 1,780,528 |
| aQuidel Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 809 |
| 145,337 |
| ResMed, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,790 |
| 380,482 |
| aSonova Holding AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 1,770 |
| 460,366 |
| Stryker Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,392 |
| 3,036,536 |
| Teleflex, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,984 |
| 1,228,125 |
| West Pharmaceutical Services, Inc.. . . . . . . . . . . . . . . . . . . . . . . . | United States | 9,012 |
| 2,553,190 |
|
|
|
|
| 27,536,372 |
| Health Care Providers & Services 0.7% |
|
|
|
|
| Chemed Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400 |
| 213,044 |
| Cigna Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 894 |
| 186,113 |
| CVS Health Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,297 |
| 498,385 |
| Fresenius Medical Care AG & Co. KGaA.. . . . . . . . . . . . . . . . . . . . | Germany | 9,509 |
| 792,963 |
| Humana, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 775 |
| 317,959 |
| aLaboratory Corp. of America Holdings.. . . . . . . . . . . . . . . . . . . . . . | United States | 2,810 |
| 571,975 |
| Premier, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 455 |
| 15,970 |
| Quest Diagnostics, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,950 |
| 351,552 |
| Sinopharm Group Co. Ltd., H. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 96,800 |
| 234,820 |
| UnitedHealth Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,192 |
| 2,171,411 |
| Universal Health Services, Inc., B.. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,382 |
| 190,025 |
|
|
|
|
| 5,544,217 |
| Health Care Technology 0.2% |
|
|
|
|
| aAmerican Well Corp., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,300 |
| 58,259 |
| Cerner Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 11,803 |
| 926,299 |
| M3, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 800 |
| 75,574 |
| aVeeva Systems, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,500 |
| 952,875 |
|
|
|
|
| 2,013,007 |
FFA-16
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Hotels, Restaurants & Leisure 0.5% |
|
|
|
|
| aAirbnb, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 600 |
| $88,080 |
| Domino's Pizza, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,572 |
| 602,799 |
| Las Vegas Sands Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,938 |
| 532,705 |
| McDonald's Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,505 |
| 1,610,423 |
| Yum! Brands, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,982 |
| 866,526 |
|
|
|
|
| 3,700,533 |
| Household Durables 0.4% |
|
|
|
|
| aBarratt Developments plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 35,415 |
| 323,791 |
| Berkeley Group Holdings plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 4,626 |
| 299,267 |
| DR Horton, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,669 |
| 115,027 |
| Garmin Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,341 |
| 160,464 |
| Iida Group Holdings Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 5,700 |
| 115,244 |
| Lennar Corp., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,310 |
| 176,091 |
| aMohawk Industries, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,038 |
| 146,306 |
| aNVR, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 30 |
| 122,396 |
| Persimmon plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 11,258 |
| 424,939 |
| PulteGroup, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,652 |
| 243,714 |
| Sekisui House Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 24,100 |
| 490,960 |
| Sony Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 6,862 |
| 691,471 |
| aTaylor Wimpey plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 32,654 |
| 73,868 |
|
|
|
|
| 3,383,538 |
| Household Products 0.9% |
|
|
|
|
| Church & Dwight Co., Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,321 |
| 202,461 |
| Clorox Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,596 |
| 726,104 |
| Colgate-Palmolive Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 39,485 |
| 3,376,362 |
| Kimberly-Clark Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,915 |
| 393,030 |
| Pigeon Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 1,300 |
| 53,655 |
| Procter & Gamble Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,865 |
| 2,207,456 |
|
|
|
|
| 6,959,068 |
| Independent Power and Renewable Electricity Producers 0.0%† |
|
|
|
|
| Vistra Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 14,746 |
| 289,906 |
| Industrial Conglomerates 1.0% |
|
|
|
|
| 3M Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,641 |
| 1,160,780 |
| Carlisle Cos., Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,100 |
| 484,158 |
| CK Hutchison Holdings Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 148,500 |
| 1,036,803 |
| Honeywell International, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,929 |
| 2,324,598 |
| Roper Technologies, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,200 |
| 3,103,848 |
|
|
|
|
| 8,110,187 |
| Insurance 0.8% |
|
|
|
|
| Admiral Group plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 7,074 |
| 279,740 |
| Aflac, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 29,075 |
| 1,292,965 |
| AIA Group Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 72,046 |
| 877,961 |
| American National Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 70 |
| 6,728 |
| Aviva plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 141,202 |
| 628,117 |
| aCNP Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 6,249 |
| 101,532 |
| Direct Line Insurance Group plc. . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 14,253 |
| 62,343 |
| Erie Indemnity Co., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,699 |
| 662,874 |
| First American Financial Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,098 |
| 159,950 |
| Japan Post Insurance Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 8,900 |
| 182,487 |
| MetLife, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,435 |
| 630,773 |
| NN Group NV.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 6,503 |
| 281,138 |
| Progressive Corp. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,211 |
| 218,624 |
| Prudential Financial, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,672 |
| 989,303 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Insurance (continued) |
|
|
|
|
| aRoot, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,400 |
| $37,704 |
| Unum Group.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,290 |
| 144,293 |
|
|
|
|
| 6,556,532 |
| Interactive Media & Services 1.9% |
|
|
|
|
| aAlphabet, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,084 |
| 5,405,142 |
| aAlphabet, Inc., C.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,752 |
| 3,069,294 |
| bAuto Trader Group plc, 144A, Reg S.. . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 38,282 |
| 311,628 |
| aBaidu, Inc., ADR.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 4,002 |
| 865,393 |
| aFacebook, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,983 |
| 4,365,916 |
| aIAC/InterActiveCorp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,607 |
| 304,285 |
| Kakaku.com, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 5,100 |
| 139,604 |
| aMatch Group, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,330 |
| 654,653 |
|
|
|
|
| 15,115,915 |
| Internet & Direct Marketing Retail 2.0% |
|
|
|
|
| aAlibaba Group Holding Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 17,493 |
| 508,775 |
| aAlibaba Group Holding Ltd., ADR. . . . . . . . . . . . . . . . . . . . . . . . . . | China | 3,045 |
| 708,663 |
| aAmazon.com, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,034 |
| 9,881,526 |
| aboohoo Group plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 375,000 |
| 1,760,487 |
| aBooking Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 328 |
| 730,545 |
| eBay, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,422 |
| 71,455 |
| aMercadoLibre, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Argentina | 1,200 |
| 2,010,264 |
| Qurate Retail, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 828 |
| 9,083 |
| a,bZalando SE, 144A, Reg S.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 4,883 |
| 543,165 |
| ZOZO, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 4,100 |
| 101,001 |
|
|
| �� |
| 16,324,964 |
| IT Services 3.3% |
|
|
|
|
| Accenture plc, A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,108 |
| 3,946,361 |
| a,bAdyen NV, 144A, Reg S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 1,204 |
| 2,797,659 |
| aAkamai Technologies, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 587 |
| 61,629 |
| Amadeus IT Group SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Spain | 23,550 |
| 1,738,468 |
| Amdocs Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,250 |
| 88,662 |
| Automatic Data Processing, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,021 |
| 1,060,900 |
| Booz Allen Hamilton Holding Corp.. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 885 |
| 77,154 |
| Broadridge Financial Solutions, Inc.. . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,128 |
| 172,810 |
| Cognizant Technology Solutions Corp., A. . . . . . . . . . . . . . . . . . . . | United States | 4,119 |
| 337,552 |
| aConcentrix Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,177 |
| 116,170 |
| Fujitsu Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 7,300 |
| 1,055,109 |
| International Business Machines Corp... . . . . . . . . . . . . . . . . . . . . | United States | 4,240 |
| 533,731 |
| Jack Henry & Associates, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 752 |
| 121,816 |
| aKeywords Studios plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Ireland | 55,000 |
| 2,147,906 |
| Mastercard, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 9,450 |
| 3,373,083 |
| NEC Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 1,800 |
| 96,677 |
| Nomura Research Institute Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 10,900 |
| 389,931 |
| aOkta, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 700 |
| 177,982 |
| Otsuka Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 3,900 |
| 205,714 |
| Paychex, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,321 |
| 309,451 |
| aPayPal Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,300 |
| 1,007,060 |
| aShopify, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 1,200 |
| 1,358,340 |
| aSnowflake, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,600 |
| 450,240 |
| aTwilio, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,462 |
| 833,387 |
| aVeriSign, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,998 |
| 648,767 |
| Visa, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 17,357 |
| 3,796,497 |
| Western Union Co. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 952 |
| 20,887 |
|
|
|
|
| 26,923,943 |
FFA-18
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Leisure Products 0.0%† |
|
|
|
|
| Brunswick Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,300 |
| $175,352 |
| Polaris, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,714 |
| 163,310 |
|
|
|
|
| 338,662 |
| Life Sciences Tools & Services 1.1% |
|
|
|
|
| a10X Genomics, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,500 |
| 212,400 |
| Agilent Technologies, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,019 |
| 950,171 |
| aBio-Rad Laboratories, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 47 |
| 27,398 |
| aIllumina, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,346 |
| 1,238,020 |
| aMaravai LifeSciences Holdings, Inc., A. . . . . . . . . . . . . . . . . . . . . . | United States | 2,900 |
| 81,345 |
| aMettler-Toledo International, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,225 |
| 3,675,468 |
| PerkinElmer, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,241 |
| 465,083 |
| Sartorius Stedim Biotech. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 972 |
| 345,798 |
| aSeer, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300 |
| 16,842 |
| Thermo Fisher Scientific, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,205 |
| 1,027,045 |
| aWaters Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 272 |
| 67,298 |
| a,bWuxi Biologics Cayman, Inc., 144A, Reg S.. . . . . . . . . . . . . . . . . . | China | 52,500 |
| 696,221 |
|
|
|
|
| 8,803,089 |
| Machinery 1.7% |
|
|
|
|
| Allison Transmission Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . . . | United States | 810 |
| 34,935 |
| Amada Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 7,600 |
| 83,632 |
| Atlas Copco AB, A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Sweden | 13,271 |
| 682,173 |
| Atlas Copco AB, B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Sweden | 5,986 |
| 268,732 |
| Caterpillar, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,146 |
| 572,635 |
| Cummins, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,781 |
| 1,312,865 |
| Deere & Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,786 |
| 749,573 |
| Donaldson Co., Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,400 |
| 413,512 |
| Dover Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,600 |
| 959,500 |
| Epiroc AB, A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Sweden | 22,977 |
| 417,656 |
| Epiroc AB, B.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Sweden | 13,688 |
| 231,108 |
| Fortive Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,217 |
| 440,288 |
| GEA Group AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 1,588 |
| 56,801 |
| Graco, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,237 |
| 451,247 |
| Illinois Tool Works, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,730 |
| 1,575,992 |
| aIngersoll Rand, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,326 |
| 242,653 |
| Komatsu Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 23,626 |
| 652,037 |
| Kone OYJ, B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Finland | 5,006 |
| 407,906 |
| Kurita Water Industries Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 1,900 |
| 72,627 |
| Lincoln Electric Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,968 |
| 228,780 |
| Otis Worldwide Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,534 |
| 441,372 |
| PACCAR, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,052 |
| 177,047 |
| Pentair plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,000 |
| 637,080 |
| Schindler Holding AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 461 |
| 124,672 |
| Schindler Holding AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 767 |
| 207,315 |
| Snap-on, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,528 |
| 261,502 |
| Stanley Black & Decker, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,452 |
| 794,949 |
| Techtronic Industries Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 23,000 |
| 328,749 |
| Timken Co. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,904 |
| 147,294 |
| Toro Co. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,050 |
| 99,582 |
| Xylem, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,000 |
| 305,370 |
| Yangzijiang Shipbuilding Holdings Ltd.. . . . . . . . . . . . . . . . . . . . . . | China | 97,400 |
| 70,456 |
|
|
|
|
| 13,450,040 |
| Marine 0.1% |
|
|
|
|
| Kuehne + Nagel International AG. . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 2,013 |
| 456,787 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Media 0.8% |
|
|
|
|
| a,bAscential plc, 144A, Reg S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 324,885 |
| $1,700,992 |
| Cable One, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 361 |
| 804,207 |
| Comcast Corp., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 18,331 |
| 960,544 |
| CyberAgent, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 26,000 |
| 1,793,601 |
| aInforma plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 39,994 |
| 299,072 |
| Interpublic Group of Cos., Inc. (The).. . . . . . . . . . . . . . . . . . . . . . . | United States | 2,976 |
| 69,995 |
| Nippon Television Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 12,900 |
| 140,634 |
| Omnicom Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,972 |
| 122,994 |
| TBS Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 14,200 |
| 249,745 |
|
|
|
|
| 6,141,784 |
| Metals & Mining 0.8% |
|
|
|
|
| aArcelorMittal SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Luxembourg | 44,256 |
| 1,012,174 |
| BHP Group plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 12,376 |
| 326,805 |
| Evraz plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Russia | 19,488 |
| 124,555 |
| Fortescue Metals Group Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 68,957 |
| 1,245,529 |
| Newmont Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,941 |
| 176,137 |
| Nucor Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,101 |
| 271,322 |
| Reliance Steel & Aluminum Co... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,280 |
| 273,030 |
| Rio Tinto Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 10,187 |
| 895,860 |
| Rio Tinto plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 8,411 |
| 633,168 |
| Southern Copper Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Peru | 167 |
| 10,875 |
| Steel Dynamics, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,693 |
| 283,641 |
| Sumitomo Metal Mining Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 20,290 |
| 902,520 |
| Wheaton Precious Metals Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Brazil | 14,617 |
| 610,832 |
|
|
|
|
| 6,766,448 |
| Multiline Retail 0.5% |
|
|
|
|
| Dollar General Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,047 |
| 640,784 |
| aNext plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 4,918 |
| 474,259 |
| Seria Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 8,168 |
| 299,850 |
| Target Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,898 |
| 2,806,474 |
|
|
|
|
| 4,221,367 |
| Multi-Utilities 0.4% |
|
|
|
|
| AGL Energy Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 23,608 |
| 217,911 |
| Ameren Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,720 |
| 134,263 |
| Consolidated Edison, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,810 |
| 203,079 |
| Dominion Energy, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,978 |
| 374,345 |
| DTE Energy Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,083 |
| 738,537 |
| E.ON SE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 64,969 |
| 719,447 |
| MDU Resources Group, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,469 |
| 170,393 |
| Public Service Enterprise Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . | United States | 4,586 |
| 267,364 |
| Veolia Environnement SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 12,180 |
| 300,339 |
| WEC Energy Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,164 |
| 107,123 |
|
|
|
|
| 3,232,801 |
| Oil, Gas & Consumable Fuels 1.1% |
|
|
|
|
| BP plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 213,177 |
| 735,673 |
| Cabot Oil & Gas Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,782 |
| 45,291 |
| Chevron Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,800 |
| 489,810 |
| Diamondback Energy, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,250 |
| 254,100 |
| EOG Resources, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 23,343 |
| 1,164,115 |
| Equinor ASA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Norway | 49,194 |
| 830,246 |
| Exxon Mobil Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 51,995 |
| 2,143,234 |
| Galp Energia SGPS SA, B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Portugal | 43,845 |
| 464,618 |
| Husky Energy, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 77,400 |
| 383,319 |
| Neste OYJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Finland | 3,341 |
| 242,579 |
FFA-20
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Oil, Gas & Consumable Fuels (continued) |
|
|
|
|
| OMV AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Austria | 2,130 |
| $85,082 |
| Pioneer Natural Resources Co... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,635 |
| 186,210 |
| Royal Dutch Shell plc, B.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 50,513 |
| 856,193 |
| TOTAL SE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 16,169 |
| 697,919 |
| Valero Energy Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,553 |
| 144,423 |
|
|
|
|
| 8,722,812 |
| Personal Products 0.2% |
|
|
|
|
| Estee Lauder Cos., Inc. (The), A.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,431 |
| 647,108 |
| aHerbalife Nutrition Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,658 |
| 127,717 |
| Nu Skin Enterprises, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 437 |
| 23,873 |
| Unilever plc, (GBP Traded).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 6,625 |
| 397,355 |
| Unilever plc, (EUR Traded).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 8,329 |
| 504,350 |
|
|
|
|
| 1,700,403 |
| Pharmaceuticals 2.8% |
|
|
|
|
| Astellas Pharma, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 10,600 |
| 164,128 |
| AstraZeneca plc, ADR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 11,514 |
| 575,585 |
| Bayer AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 21,965 |
| 1,294,037 |
| Bristol-Myers Squibb Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,551 |
| 530,419 |
| aCatalent, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 19,089 |
| 1,986,592 |
| Chugai Pharmaceutical Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 1,200 |
| 64,026 |
| Eli Lilly and Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,711 |
| 2,146,125 |
| aGW Pharmaceuticals plc, ADR. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 1,226 |
| 141,493 |
| Hikma Pharmaceuticals plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Jordan | 47,000 |
| 1,615,537 |
| aHorizon Therapeutics plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 732 |
| 53,546 |
| Ipsen SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 559 |
| 46,225 |
| aJazz Pharmaceuticals plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,240 |
| 204,662 |
| Johnson & Johnson. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,261 |
| 3,975,576 |
| Merck & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 23,961 |
| 1,960,010 |
| Novartis AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 2,077 |
| 195,566 |
| Novo Nordisk A/S, B.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Denmark | 18,134 |
| 1,265,117 |
| Orion OYJ, B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Finland | 3,796 |
| 174,376 |
| Otsuka Holdings Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 7,300 |
| 312,779 |
| Pfizer, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 30,667 |
| 1,128,852 |
| Roche Holding AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 7,281 |
| 2,535,962 |
| Sanofi. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 7,426 |
| 719,780 |
| Shionogi & Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 900 |
| 49,204 |
| Takeda Pharmaceutical Co. Ltd., ADR.. . . . . . . . . . . . . . . . . . . . . . | Japan | 70,604 |
| 1,284,993 |
| aTeva Pharmaceutical Industries Ltd., ADR.. . . . . . . . . . . . . . . . . . . | Israel | 11,100 |
| 107,115 |
| aViatris, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 474 |
| 8,883 |
| Zoetis, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,775 |
| 293,762 |
|
|
|
|
| 22,834,350 |
| Professional Services 1.1% |
|
|
|
|
| Adecco Group AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 5,766 |
| 384,035 |
| CoreLogic, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 162 |
| 12,526 |
| aCoStar Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300 |
| 277,284 |
| Equifax, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,090 |
| 595,875 |
| Experian plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 45,000 |
| 1,709,614 |
| aFTI Consulting, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 124 |
| 13,853 |
| IHS Markit Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,109 |
| 1,087,751 |
| ManpowerGroup, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,552 |
| 771,219 |
| Nihon M&A Center, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 5,500 |
| 367,803 |
| Persol Holdings Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 4,700 |
| 84,914 |
| aRandstad NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 4,410 |
| 285,483 |
| Recruit Holdings Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 8,000 |
| 336,024 |
| Robert Half International, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,710 |
| 294,281 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Professional Services (continued) |
|
|
|
|
| SGS SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 228 |
| $687,277 |
| Verisk Analytics, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 9,149 |
| 1,899,241 |
| Wolters Kluwer NV.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 5,202 |
| 438,896 |
|
|
|
|
| 9,246,076 |
| Real Estate Management & Development 0.3% |
|
|
|
|
| aCBRE Group, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,736 |
| 171,602 |
| CK Asset Holdings Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 133,330 |
| 682,236 |
| Daito Trust Construction Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 2,600 |
| 242,982 |
| Kerry Properties Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 24,500 |
| 61,967 |
| Mitsui Fudosan Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 29,600 |
| 619,811 |
| Sun Hung Kai Properties Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 46,500 |
| 594,688 |
| Swire Pacific Ltd., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 61,500 |
| 338,767 |
|
|
|
|
| 2,712,053 |
| Road & Rail 1.0% |
|
|
|
|
| Canadian National Railway Co... . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 5,414 |
| 594,728 |
| Canadian Pacific Railway Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 2,872 |
| 995,694 |
| JB Hunt Transport Services, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,251 |
| 580,899 |
| Kansas City Southern.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,095 |
| 835,912 |
| Knight-Swift Transportation Holdings, Inc... . . . . . . . . . . . . . . . . . . | United States | 3,948 |
| 165,105 |
| Landstar System, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,575 |
| 212,090 |
| Norfolk Southern Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,700 |
| 879,157 |
| Old Dominion Freight Line, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,398 |
| 663,222 |
| Schneider National, Inc., B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 220 |
| 4,554 |
| aUber Technologies, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,638 |
| 287,538 |
| Union Pacific Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 14,093 |
| 2,934,444 |
|
|
|
|
| 8,153,343 |
| Semiconductors & Semiconductor Equipment 3.2% |
|
|
|
|
| Analog Devices, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 14,000 |
| 2,068,220 |
| Applied Materials, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,405 |
| 552,751 |
| ASML Holding NV.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 3,700 |
| 1,791,529 |
| ASML Holding NV, NYRS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 2,722 |
| 1,327,574 |
| aCirrus Logic, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 202 |
| 16,604 |
| Intel Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 40,746 |
| 2,029,966 |
| KLA Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,476 |
| 382,151 |
| Lam Research Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,163 |
| 549,250 |
| Maxim Integrated Products, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,811 |
| 337,845 |
| Monolithic Power Systems, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,769 |
| 1,014,091 |
| NVIDIA Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,245 |
| 2,738,939 |
| NXP Semiconductors NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 10,322 |
| 1,641,301 |
| QUALCOMM, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,170 |
| 787,598 |
| Skyworks Solutions, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,688 |
| 716,701 |
| Taiwan Semiconductor Manufacturing Co. Ltd.. . . . . . . . . . . . . . . . | Taiwan | 60,986 |
| 1,153,414 |
| Teradyne, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,953 |
| 593,815 |
| Texas Instruments, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 39,082 |
| 6,414,529 |
| Tokyo Electron Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 3,400 |
| 1,270,114 |
| Xilinx, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,495 |
| 353,716 |
|
|
|
|
| 25,740,108 |
| Software 5.8% |
|
|
|
|
| aAdobe, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,911 |
| 2,956,209 |
| aAspen Technology, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 496 |
| 64,604 |
| aAtlassian Corp. plc, A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,300 |
| 304,031 |
| aAutodesk, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,810 |
| 1,774,025 |
| aAvalara, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,380 |
| 557,328 |
| AVEVA Group plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 35,000 |
| 1,528,162 |
FFA-22
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Software (continued) |
|
|
|
|
| aBill.com Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,200 |
| $846,300 |
| aCadence Design Systems, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 9,532 |
| 1,300,451 |
| aCheck Point Software Technologies Ltd.. . . . . . . . . . . . . . . . . . . . . | Israel | 3,000 |
| 398,730 |
| Citrix Systems, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,303 |
| 559,820 |
| aCyberArk Software Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,000 |
| 2,423,850 |
| aDuck Creek Technologies, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400 |
| 17,320 |
| aFair Isaac Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 645 |
| 329,621 |
| aFortinet, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,445 |
| 660,216 |
| Intuit, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,236 |
| 3,888,145 |
| aManhattan Associates, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,821 |
| 191,533 |
| Microsoft Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 73,272 |
| 16,297,158 |
| Oracle Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,250 |
| 663,073 |
| Oracle Corp. Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 1,300 |
| 169,461 |
| aPaycom Software, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,000 |
| 452,250 |
| aPTC, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,821 |
| 815,860 |
| Sage Group plc (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 186,468 |
| 1,480,706 |
| asalesforce.com, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,253 |
| 723,890 |
| SAP SE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 14,725 |
| 1,907,242 |
| aServiceNow, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,655 |
| 3,112,682 |
| aSynopsys, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,493 |
| 1,424,005 |
| Trend Micro, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 5,200 |
| 299,380 |
| aTyler Technologies, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,243 |
| 542,594 |
| aVMware, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 268 |
| 37,590 |
| aWorkday, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,420 |
| 1,059,076 |
| aZoom Video Communications, Inc., A. . . . . . . . . . . . . . . . . . . . . . . | United States | 188 |
| 63,416 |
|
|
|
|
| 46,848,728 |
| Specialty Retail 1.2% |
|
|
|
|
| aAutoNation, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,753 |
| 122,342 |
| aAutoZone, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 185 |
| 219,306 |
| Best Buy Co., Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,880 |
| 886,135 |
| Dick's Sporting Goods, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,961 |
| 110,228 |
| Foot Locker, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,129 |
| 45,657 |
| Home Depot, Inc. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,675 |
| 1,241,774 |
| Industria de Diseno Textil SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Spain | 7,862 |
| 249,549 |
| aKingfisher plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 78,285 |
| 289,295 |
| Lowe's Cos., Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,203 |
| 2,440,234 |
| Nitori Holdings Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 3,000 |
| 627,304 |
| aO'Reilly Automotive, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,198 |
| 542,179 |
| aParty City Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,430 |
| 27,242 |
| Ross Stores, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,887 |
| 1,705,462 |
| TJX Cos., Inc. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,163 |
| 557,451 |
| Tractor Supply Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,640 |
| 652,291 |
| Williams-Sonoma, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,033 |
| 308,881 |
|
|
|
|
| 10,025,330 |
| Technology Hardware, Storage & Peripherals 1.8% |
|
|
|
|
| Apple, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 89,187 |
| 11,834,223 |
| aDell Technologies, Inc., C.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 570 |
| 41,775 |
| HP, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 14,889 |
| 366,120 |
| Logitech International SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 4,357 |
| 423,043 |
| NetApp, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,023 |
| 134,004 |
| Samsung Electronics Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . | South Korea | 26,142 |
| 1,949,216 |
| Xerox Holdings Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 629 |
| 14,587 |
|
|
|
|
| 14,762,968 |
| Textiles, Apparel & Luxury Goods 0.6% |
|
|
|
|
| aBurberry Group plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 7,012 |
| 171,246 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Textiles, Apparel & Luxury Goods (continued) |
|
|
|
|
| Carter's, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 374 |
| $35,182 |
| Hanesbrands, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,104 |
| 30,677 |
| aLululemon Athletica, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,443 |
| 502,207 |
| NIKE, Inc., B.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,934 |
| 3,668,883 |
| Pandora A/S.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Denmark | 2,953 |
| 330,521 |
|
|
|
|
| 4,738,716 |
| Thrifts & Mortgage Finance 0.1% |
|
|
|
|
| Housing Development Finance Corp. Ltd... . . . . . . . . . . . . . . . . . . | India | 26,465 |
| 927,392 |
| MGIC Investment Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,006 |
| 125,575 |
|
|
|
|
| 1,052,967 |
| Tobacco 0.3% |
|
|
|
|
| Altria Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,004 |
| 492,164 |
| Imperial Brands plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 49,757 |
| 1,043,709 |
| Philip Morris International, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 11,238 |
| 930,394 |
|
|
|
|
| 2,466,267 |
| Trading Companies & Distributors 0.6% |
|
|
|
|
| Fastenal Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 32,015 |
| 1,563,293 |
| Ferguson plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 17,331 |
| 2,105,877 |
| MSC Industrial Direct Co., Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,719 |
| 145,066 |
| Watsco, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,232 |
| 279,110 |
| WW Grainger, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,807 |
| 1,146,210 |
|
|
|
|
| 5,239,556 |
| Transportation Infrastructure 0.0%† |
|
|
|
|
| Kamigumi Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 3,800 |
| 69,420 |
| Water Utilities 0.1% |
|
|
|
|
| American Water Works Co., Inc... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,819 |
| 586,102 |
| Wireless Telecommunication Services 0.2% |
|
|
|
|
| KDDI Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 36,000 |
| 1,067,409 |
| Vodafone Group plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 238,960 |
| 392,518 |
|
|
|
|
| 1,459,927 |
| .. . . . . . . . .Total Common Stocks (Cost $372,707,142) | . . . . . . . . . . . . . . . . . . . | . . . . . . . . . |
| 486,648,483 |
| Management Investment Companies 2.9% |
|
|
|
|
|
|
|
|
| |
| Capital Markets 2.9% |
|
|
|
|
| Schwab U.S. TIPS ETF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 248,750 |
| 15,442,400 |
| a,cTempleton Global Bond VIP Fund, Class 1. . . . . . . . . . . . . . . . . . . | United States | 539,390 |
| 7,821,152 |
|
|
|
|
| 23,263,552 |
| .. . . . . . . . . . .Total Management Investment Companies (Cost $24,028,784) | . . . . . . . . . |
| 23,263,552 | |
| Preferred Stocks 0.0% |
|
|
|
|
|
|
|
|
| |
| Chemicals 0.0%† |
|
|
|
|
| dFUCHS PETROLUB SE, 2.1%. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 2,644 |
| 149,187 |
| . . . . . . . . .Total Preferred Stocks (Cost $101,449). . . . | . . . . . . . . . . . . . . . . . . . | . . . . . . . . . |
| 149,187 |
|
|
|
|
|
|
FFA-24
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds 11.0% |
|
|
|
|
| Aerospace & Defense 0.2% |
|
|
|
|
| Lockheed Martin Corp., Senior Bond, 4.7%, 5/15/46. . . . . . . . . . . . | United States | 200,000 |
| $281,918 |
| Northrop Grumman Corp., Senior Bond, 5.25%, 5/01/50. . . . . . . . . | United States | 400,000 |
| 594,392 |
| Raytheon Technologies Corp., Senior Bond, 4.5%, 6/01/42.. . . . . . | United States | 600,000 |
| 782,437 |
|
|
|
|
| 1,658,747 |
| Air Freight & Logistics 0.2% |
|
|
|
|
| FedEx Corp., |
|
|
|
|
| Senior Bond, 5.1%, 1/15/44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 540,307 |
| Senior Bond, 4.75%, 11/15/45 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 100,000 |
| 130,147 |
| United Parcel Service, Inc., |
|
|
|
|
| Senior Bond, 3.75%, 11/15/47 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 508,088 |
| Senior Bond, 5.3%, 4/01/50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 100,000 |
| 150,964 |
|
|
|
|
| 1,329,506 |
| Airlines 0.1% |
|
|
|
|
| bDelta Air Lines, Inc. / SkyMiles IP Ltd., Senior Secured Note, 144A, |
|
|
|
|
| 4.5%, 10/20/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 525,000 |
| 561,332 |
| Banks 1.6% |
|
|
|
|
| Banco Santander SA, Sub. Note, 2.749%, 12/03/30. . . . . . . . . . . . | Spain | 200,000 |
| 206,592 |
| Bancolombia SA, Senior Note, 3%, 1/29/25.. . . . . . . . . . . . . . . . . . | Colombia | 650,000 |
| 676,618 |
| Bank of America Corp., |
|
|
|
|
| L, Sub. Bond, 4.183%, 11/25/27 . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 960,000 |
| 1,114,283 |
| Sub. Note, 4.2%, 8/26/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 448,947 |
| bBNP Paribas SA, |
|
|
|
|
| Senior Bond, 144A, 3.052% to 1/13/30, FRN thereafter, 1/13/31 . | France | 200,000 |
| 218,390 |
| Senior Note, 144A, 2.219% to 6/09/25, FRN thereafter, 6/09/26 .. | France | 200,000 |
| 209,417 |
| Citigroup, Inc., |
|
|
|
|
| Senior Bond, 2.572% to 6/03/30, FRN thereafter, 6/03/31 . . . . . . | United States | 700,000 |
| 746,311 |
| Senior Note, 3.352% to 4/24/24, FRN thereafter, 4/24/25 .. . . . . . | United States | 1,500,000 |
| 1,631,287 |
| Credit Suisse Group Funding Guernsey Ltd., Senior Note, 3.8%, |
|
|
|
|
| 9/15/22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 1,200,000 |
| 1,267,805 |
| HSBC Holdings plc, |
|
|
|
|
| Senior Bond, 2.357% to 8/18/30, FRN thereafter, 8/18/31 . . . . . . | United Kingdom | 200,000 |
| 206,890 |
| Senior Note, 1.645% to 8/18/25, FRN thereafter, 4/18/26 .. . . . . . | United Kingdom | 525,000 |
| 537,176 |
| Senior Note, 2.013% to 9/22/27, FRN thereafter, 9/22/28 .. . . . . . | United Kingdom | 300,000 |
| 307,369 |
| JPMorgan Chase & Co., |
|
|
|
|
| Senior Bond, 3.54% to 5/01/27, FRN thereafter, 5/01/28 . . . . . . . | United States | 1,200,000 |
| 1,372,648 |
| Sub. Note, 3.875%, 9/10/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 448,050 |
| bStandard Chartered plc, Senior Note, 144A, 4.05%, 4/12/26. . . . . . | United Kingdom | 470,000 |
| 532,916 |
| SVB Financial Group, Senior Note, 3.125%, 6/05/30.. . . . . . . . . . . | United States | 100,000 |
| 112,760 |
| Truist Bank, Sub. Note, 2.25%, 3/11/30.. . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 419,943 |
| Truist Financial Corp., Sub. Note, 3.875%, 3/19/29. . . . . . . . . . . . . | United States | 860,000 |
| 1,004,288 |
| US Bancorp, Sub. Note, 3%, 7/30/29. . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 335,185 |
| Wells Fargo & Co., Senior Note, 2.393% to 6/02/27, FRN thereafter, |
|
|
|
|
| 6/02/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 213,027 |
| Wells Fargo Bank NA, Senior Note, 2.082% to 9/09/21, FRN |
|
|
|
|
| thereafter, 9/09/22.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,100,000 |
| 1,112,705 |
|
|
|
|
| 13,122,607 |
| Beverages 0.1% |
|
|
|
|
| Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide, Inc., |
|
|
|
|
| Senior Bond, 4.9%, 2/01/46.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Belgium | 500,000 |
| 652,758 |
| Anheuser-Busch InBev Worldwide, Inc., |
|
|
|
|
| Senior Bond, 3.5%, 6/01/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Belgium | 100,000 |
| 115,913 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-25
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Beverages (continued) |
|
|
|
|
| Anheuser-Busch InBev Worldwide, Inc., (continued) |
|
|
|
|
| Senior Bond, 5.8%, 1/23/59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Belgium | 250,000 |
| $385,235 |
|
|
|
|
| 1,153,906 |
| Biotechnology 0.4% |
|
|
|
|
| AbbVie, Inc., |
|
|
|
|
| Senior Bond, 4.85%, 6/15/44 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 530,578 |
| Senior Bond, 4.25%, 11/21/49 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 370,000 |
| 465,401 |
| Senior Note, 3.8%, 3/15/25 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 446,569 |
| Senior Note, 3.2%, 11/21/29 .. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 224,367 |
| Amgen, Inc., |
|
|
|
|
| Senior Note, 2.2%, 2/21/27 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 100,000 |
| 107,228 |
| Senior Note, 2.45%, 2/21/30 .. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 535,982 |
| Biogen, Inc., Senior Bond, 5.2%, 9/15/45. . . . . . . . . . . . . . . . . . . . | United States | 175,000 |
| 237,641 |
| Gilead Sciences, Inc., Senior Bond, 4.8%, 4/01/44. . . . . . . . . . . . . | United States | 200,000 |
| 264,022 |
|
|
|
|
| 2,811,788 |
| Building Products 0.1% |
|
|
|
|
| Carrier Global Corp., Senior Bond, 3.577%, 4/05/50. . . . . . . . . . . . | United States | 430,000 |
| 478,098 |
| Capital Markets 0.4% |
|
|
|
|
| Goldman Sachs Group, Inc. (The), |
|
|
|
|
| Senior Note, 3.5%, 1/23/25 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 625,000 |
| 690,287 |
| Sub. Note, 4.25%, 10/21/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 458,978 |
| bMacquarie Bank Ltd., Senior Note, 144A, 2.85%, 1/15/21. . . . . . . . | Australia | 750,000 |
| 750,539 |
| Morgan Stanley, Senior Bond, 3.591% to 7/22/27, FRN thereafter, |
|
|
|
|
| 7/22/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,060,000 |
| 1,210,793 |
|
|
|
|
| 3,110,597 |
| Chemicals 0.1% |
|
|
|
|
| Air Products and Chemicals, Inc., Senior Bond, 2.7%, 5/15/40.. . . . | United States | 400,000 |
| 431,111 |
| EI du Pont de Nemours and Co., Senior Note, 1.7%, 7/15/25.. . . . . | United States | 180,000 |
| 187,661 |
| Westlake Chemical Corp., Senior Note, 3.375%, 6/15/30.. . . . . . . . | United States | 100,000 |
| 110,071 |
| bYara International ASA, Senior Note, 144A, 3.148%, 6/04/30.. . . . . | Brazil | 100,000 |
| 108,394 |
|
|
|
|
| 837,237 |
| Consumer Finance 0.2% |
|
|
|
|
| Capital One Financial Corp., Senior Note, 3.75%, 3/09/27.. . . . . . . | United States | 1,035,000 |
| 1,181,706 |
| Containers & Packaging 0.0%† |
|
|
|
|
| WRKCo, Inc., Senior Bond, 3%, 6/15/33.. . . . . . . . . . . . . . . . . . . . | United States | 235,000 |
| 258,542 |
| Diversified Financial Services 0.3% |
|
|
|
|
| bCK Hutchison International 19 Ltd., Senior Note, 144A, 3.25%, |
|
|
|
|
| 4/11/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 635,000 |
| 680,322 |
| DY9 Leasing LLC, Secured Bond, 2.372%, 3/19/27.. . . . . . . . . . . . | United States | 622,368 |
| 658,240 |
| bEDP Finance BV, Senior Note, 144A, 1.71%, 1/24/28. . . . . . . . . . . | Portugal | 700,000 |
| 700,346 |
| Shell International Finance BV, Senior Bond, 4.125%, 5/11/35.. . . . | Netherlands | 500,000 |
| 625,763 |
|
|
|
|
| 2,664,671 |
| Diversified Telecommunication Services 0.2% |
|
|
|
|
| AT&T, Inc., |
|
|
|
|
| Senior Note, 3.8%, 2/15/27 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 920,000 |
| 1,059,324 |
| Senior Note, 2.3%, 6/01/27 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 100,000 |
| 106,710 |
| Bell Canada, Inc., Senior Bond, 4.464%, 4/01/48. . . . . . . . . . . . . . | Canada | 200,000 |
| 267,505 |
FFA-26
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Diversified Telecommunication Services (continued) |
|
|
|
|
| AT&T, Inc., (continued) |
|
|
|
|
| Orange SA, Senior Bond, 8.75%, 3/01/31.. . . . . . . . . . . . . . . . . . . | France | 300,000 |
| $493,599 |
|
|
|
|
| 1,927,138 |
| Electric Utilities 0.7% |
|
|
|
|
| Commonwealth Edison Co., Senior Bond, 4%, 3/01/48. . . . . . . . . . | United States | 200,000 |
| 253,315 |
| Duke Energy Corp., Senior Bond, 3.75%, 9/01/46.. . . . . . . . . . . . . | United States | 200,000 |
| 233,108 |
| Duke Energy Florida LLC, Senior Bond, 6.4%, 6/15/38. . . . . . . . . . | United States | 200,000 |
| 310,413 |
| bEnel Finance International NV, |
|
|
|
|
| Senior Bond, 144A, 3.5%, 4/06/28 . . . . . . . . . . . . . . . . . . . . . . . | Italy | 300,000 |
| 341,965 |
| Senior Note, 144A, 4.25%, 9/14/23 .. . . . . . . . . . . . . . . . . . . . . . | Italy | 1,200,000 |
| 1,313,142 |
| Exelon Corp., Senior Bond, 4.05%, 4/15/30.. . . . . . . . . . . . . . . . . . | United States | 850,000 |
| 1,006,828 |
| Georgia Power Co., Senior Bond, 4.3%, 3/15/42.. . . . . . . . . . . . . . | United States | 700,000 |
| 888,946 |
| Southern Co. (The), A, Senior Bond, 3.7%, 4/30/30.. . . . . . . . . . . . | United States | 700,000 |
| 811,423 |
| bState Grid Overseas Investment 2016 Ltd., Senior Note, 144A, 3.5%, |
|
|
|
|
| 5/04/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 400,000 |
| 445,156 |
| bVistra Operations Co. LLC, Senior Secured Note, 144A, 3.55%, |
|
|
|
|
| 7/15/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 235,000 |
| 254,603 |
|
|
|
|
| 5,858,899 |
| Electronic Equipment, Instruments & Components 0.1% |
|
|
|
|
| Flex Ltd., Senior Note, 4.875%, 5/12/30. . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 361,204 |
| FLIR Systems, Inc., Senior Note, 2.5%, 8/01/30. . . . . . . . . . . . . . . | United States | 575,000 |
| 603,948 |
|
|
|
|
| 965,152 |
| Energy Equipment & Services 0.2% |
|
|
|
|
| Baker Hughes a GE Co. LLC / Baker Hughes Co-Obligor, Inc., |
|
|
|
|
| Senior Bond, 4.08%, 12/15/47 . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 485,000 |
| 548,041 |
| Senior Note, 3.337%, 12/15/27 .. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 448,207 |
| bSchlumberger Holdings Corp., Senior Note, 144A, 3.75%, 5/01/24. | United States | 610,000 |
| 665,496 |
|
|
|
|
| 1,661,744 |
| Entertainment 0.0%† |
|
|
|
|
| NBCUniversal Media LLC, Senior Bond, 5.95%, 4/01/41.. . . . . . . . | United States | 200,000 |
| 305,725 |
| Equity Real Estate Investment Trusts (REITs) 0.1% |
|
|
|
|
| Essex Portfolio LP, Senior Bond, 2.65%, 3/15/32.. . . . . . . . . . . . . . | United States | 360,000 |
| 386,953 |
| Simon Property Group LP, Senior Note, 3.375%, 12/01/27.. . . . . . . | United States | 595,000 |
| 665,458 |
|
|
|
|
| 1,052,411 |
| Food & Staples Retailing 0.3% |
|
|
|
|
| Kroger Co. (The), Senior Bond, 5.4%, 1/15/49.. . . . . . . . . . . . . . . . | United States | 400,000 |
| 580,798 |
| Walmart, Inc., |
|
|
|
|
| Senior Bond, 5.25%, 9/01/35 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 437,451 |
| Senior Bond, 3.95%, 6/28/38 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 350,000 |
| 446,480 |
| Senior Bond, 2.95%, 9/24/49 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 576,523 |
|
|
|
|
| 2,041,252 |
| Health Care Providers & Services 0.6% |
|
|
|
|
| Anthem, Inc., |
|
|
|
|
| Senior Bond, 5.1%, 1/15/44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 555,590 |
| Senior Note, 4.101%, 3/01/28 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 473,114 |
| Centene Corp., Senior Note, 3%, 10/15/30. . . . . . . . . . . . . . . . . . . | United States | 250,000 |
| 265,287 |
| Cigna Corp., |
|
|
|
|
| Senior Note, 3.05%, 10/15/27 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 550,000 |
| 616,835 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-27
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Health Care Providers & Services (continued) |
|
|
|
|
| Cigna Corp., (continued) |
|
|
|
|
| Senior Note, 4.375%, 10/15/28 .. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| $604,476 |
| CVS Health Corp., |
|
|
|
|
| Senior Bond, 5.3%, 12/05/43 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 677,290 |
| Senior Bond, 5.125%, 7/20/45 . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 269,283 |
| HCA, Inc., |
|
|
|
|
| Senior Secured Bond, 4.5%, 2/15/27 .. . . . . . . . . . . . . . . . . . . . . | United States | 408,000 |
| 474,786 |
| Senior Secured Note, 4.125%, 6/15/29 .. . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 348,230 |
| Quest Diagnostics, Inc., Senior Bond, 2.8%, 6/30/31.. . . . . . . . . . . | United States | 600,000 |
| 658,304 |
|
|
|
|
| 4,943,195 |
| Hotels, Restaurants & Leisure 0.1% |
|
|
|
|
| Las Vegas Sands Corp., Senior Bond, 3.9%, 8/08/29. . . . . . . . . . . | United States | 400,000 |
| 430,280 |
| Marriott International, Inc., EE, Senior Note, 5.75%, 5/01/25. . . . . . | United States | 400,000 |
| 468,063 |
|
|
|
|
| 898,343 |
| Household Durables 0.0%† |
|
|
|
|
| Mohawk Industries, Inc., Senior Note, 3.625%, 5/15/30.. . . . . . . . . | United States | 290,000 |
| 324,733 |
| Household Products 0.1% |
|
|
|
|
| bKimberly-Clark de Mexico SAB de CV, Senior Bond, 144A, 2.431%, |
|
|
|
|
| 7/01/31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Mexico | 500,000 |
| 517,228 |
| Independent Power and Renewable Electricity Producers 0.1% |
|
|
|
|
| bColbun SA, |
|
|
|
|
| Senior Note, 144A, 3.95%, 10/11/27 .. . . . . . . . . . . . . . . . . . . . . | Chile | 200,000 |
| 225,352 |
| Senior Note, 144A, 3.15%, 3/06/30 .. . . . . . . . . . . . . . . . . . . . . . | Chile | 200,000 |
| 216,000 |
|
|
|
|
| 441,352 |
| Industrial Conglomerates 0.0%† |
|
|
|
|
| Honeywell International, Inc., Senior Bond, 1.95%, 6/01/30.. . . . . . | United States | 350,000 |
| 370,810 |
| Insurance 0.9% |
|
|
|
|
| Aflac, Inc., |
|
|
|
|
| Senior Bond, 4.75%, 1/15/49 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 700,000 |
| 976,886 |
| Senior Note, 3.6%, 4/01/30 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 471,117 |
| Allstate Corp. (The), Senior Bond, 4.2%, 12/15/46.. . . . . . . . . . . . . | United States | 500,000 |
| 661,478 |
| Aon Corp., Senior Note, 2.8%, 5/15/30. . . . . . . . . . . . . . . . . . . . . . | United States | 1,000,000 |
| 1,092,150 |
| Arch Capital Group Ltd., Senior Bond, 3.635%, 6/30/50.. . . . . . . . . | United States | 800,000 |
| 932,811 |
| Athene Holding Ltd., Senior Bond, 3.5%, 1/15/31. . . . . . . . . . . . . . | United States | 400,000 |
| 423,353 |
| Marsh & McLennan Cos., Inc., Senior Bond, 4.9%, 3/15/49.. . . . . . | United States | 250,000 |
| 362,729 |
| MetLife, Inc., |
|
|
|
|
| Junior Sub. Bond, 6.4%, 12/15/36 .. . . . . . . . . . . . . . . . . . . . . . . | United States | 250,000 |
| 323,717 |
| Senior Bond, 5.7%, 6/15/35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 442,018 |
| bMetropolitan Life Global Funding I, Secured Note, 144A, 3.6%, |
|
|
|
|
| 1/11/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 940,000 |
| 1,024,426 |
| Prudential plc, Senior Note, 3.125%, 4/14/30.. . . . . . . . . . . . . . . . . | United Kingdom | 425,000 |
| 482,165 |
| Willis North America, Inc., Senior Note, 2.95%, 9/15/29.. . . . . . . . . | United States | 100,000 |
| 109,563 |
|
|
|
|
| 7,302,413 |
| Interactive Media & Services 0.1% |
|
|
|
|
| bTencent Holdings Ltd., |
|
|
|
|
| Senior Note, 144A, 3.595%, 1/19/28 .. . . . . . . . . . . . . . . . . . . . . | China | 500,000 |
| 551,935 |
| Senior Note, 144A, 2.39%, 6/03/30 .. . . . . . . . . . . . . . . . . . . . . . | China | 500,000 |
| 513,225 |
|
|
|
|
| 1,065,160 |
FFA-28
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Internet & Direct Marketing Retail 0.3% |
|
|
|
|
| Alibaba Group Holding Ltd., |
|
|
|
|
| Senior Bond, 4%, 12/06/37 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 300,000 |
| $353,835 |
| Senior Bond, 4.2%, 12/06/47 . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 800,000 |
| 1,007,258 |
| Senior Note, 3.4%, 12/06/27 .. . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 200,000 |
| 223,945 |
| Amazon.com, Inc., Senior Bond, 4.05%, 8/22/47.. . . . . . . . . . . . . . | United States | 500,000 |
| 660,256 |
|
|
|
|
| 2,245,294 |
| IT Services 0.2% |
|
|
|
|
| Fiserv, Inc., |
|
|
|
|
| Senior Bond, 2.65%, 6/01/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 216,531 |
| Senior Note, 3.5%, 7/01/29 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 870,000 |
| 994,737 |
|
|
|
|
| 1,211,268 |
| Machinery 0.1% |
|
|
|
|
| Caterpillar, Inc., |
|
|
|
|
| Senior Bond, 3.25%, 4/09/50 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 236,226 |
| Senior Note, 2.6%, 4/09/30 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 551,548 |
|
|
|
|
| 787,774 |
| Media 0.3% |
|
|
|
|
| Charter Communications Operating LLC / Charter Communications |
|
|
|
|
| Operating Capital, Senior Secured Bond, 2.8%, 4/01/31.. . . . . . . | United States | 350,000 |
| 370,214 |
| Comcast Corp., |
|
|
|
|
| Senior Bond, 4.25%, 1/15/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 376,906 |
| Senior Bond, 4.049%, 11/01/52 .. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 550,000 |
| 704,151 |
| Fox Corp., |
|
|
|
|
| Senior Bond, 5.476%, 1/25/39 . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 100,000 |
| 137,137 |
| Senior Note, 4.709%, 1/25/29 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 485,591 |
|
|
|
|
| 2,073,999 |
| Multiline Retail 0.1% |
|
|
|
|
| Dollar Tree, Inc., |
|
|
|
|
| Senior Bond, 4.2%, 5/15/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 595,210 |
| Senior Note, 4%, 5/15/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 350,000 |
| 395,304 |
|
|
|
|
| 990,514 |
| Multi-Utilities 0.3% |
|
|
|
|
| Berkshire Hathaway Energy Co., Senior Bond, 6.125%, 4/01/36. . . | United States | 200,000 |
| 296,025 |
| Dominion Energy, Inc., Senior Note, 4.25%, 6/01/28. . . . . . . . . . . . | United States | 1,050,000 |
| 1,260,490 |
| Public Service Enterprise Group, Inc., Senior Note, 2.875%, 6/15/24. | United States | 1,000,000 |
| 1,077,622 |
|
|
|
|
| 2,634,137 |
| Oil, Gas & Consumable Fuels 1.3% |
|
|
|
|
| bAker BP ASA, Senior Note, 144A, 3.75%, 1/15/30.. . . . . . . . . . . . . | Norway | 500,000 |
| 526,860 |
| BP Capital Markets America, Inc., |
|
|
|
|
| Senior Note, 3.937%, 9/21/28 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 100,000 |
| 117,325 |
| Senior Note, 4.234%, 11/06/28 .. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 478,137 |
| Canadian Natural Resources Ltd., Senior Bond, 3.9%, 2/01/25. . . . | Canada | 860,000 |
| 952,165 |
| Cheniere Corpus Christi Holdings LLC, Senior Secured Note, |
|
|
|
|
| 5.125%, 6/30/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 236,824 |
| Energy Transfer Operating LP, Senior Bond, 6.05%, 6/01/41.. . . . . | United States | 500,000 |
| 585,993 |
| Enterprise Products Operating LLC, |
|
|
|
|
| Senior Bond, 3.125%, 7/31/29 . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 443,999 |
| Senior Bond, 6.125%, 10/15/39 .. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 700,000 |
| 974,343 |
| EOG Resources, Inc., Senior Note, 4.375%, 4/15/30.. . . . . . . . . . . | United States | 50,000 |
| 60,830 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-29
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Oil, Gas & Consumable Fuels (continued) |
|
|
|
|
| Enterprise Products Operating LLC, (continued) |
|
|
|
|
| Exxon Mobil Corp., Senior Bond, 2.61%, 10/15/30.. . . . . . . . . . . . . | United States | 100,000 |
| $109,259 |
| Kinder Morgan, Inc., |
|
|
|
|
| Senior Bond, 5.55%, 6/01/45 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 385,553 |
| Senior Note, 4.3%, 3/01/28 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 469,486 |
| MPLX LP, |
|
|
|
|
| Senior Bond, 5.5%, 2/15/49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 325,000 |
| 427,982 |
| Senior Note, 4.875%, 12/01/24 .. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 459,116 |
| Senior Note, 4.875%, 6/01/25 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 100,000 |
| 115,594 |
| Reliance Industries Ltd., Senior Note, 2.06%, 1/15/26.. . . . . . . . . . | India | 687,500 |
| 712,320 |
| Total Capital International SA, Senior Note, 3.455%, 2/19/29.. . . . . | France | 445,000 |
| 515,335 |
| TransCanada PipeLines Ltd., Senior Bond, 4.25%, 5/15/28.. . . . . . | Canada | 500,000 |
| 590,697 |
| Transcontinental Gas Pipe Line Co. LLC, Senior Note, 7.85%, |
|
|
|
|
| 2/01/26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 524,766 |
| Valero Energy Corp., Senior Note, 4%, 4/01/29.. . . . . . . . . . . . . . . | United States | 935,000 |
| 1,052,128 |
| Williams Cos., Inc. (The), Senior Bond, 4.85%, 3/01/48.. . . . . . . . . | United States | 320,000 |
| 393,347 |
|
|
|
|
| 10,132,059 |
| Paper & Forest Products 0.0%† |
|
|
|
|
| Suzano Austria GmbH, Senior Bond, 3.75%, 1/15/31.. . . . . . . . . . . | Brazil | 225,000 |
| 239,006 |
| Pharmaceuticals 0.3% |
|
|
|
|
| AstraZeneca plc, |
|
|
|
|
| Senior Bond, 4%, 9/18/42 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 300,000 |
| 370,905 |
| Senior Bond, 4.375%, 11/16/45 .. . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 450,000 |
| 604,127 |
| Bristol-Myers Squibb Co., Senior Bond, 4.625%, 5/15/44.. . . . . . . . | United States | 250,000 |
| 341,365 |
| GlaxoSmithKline Capital, Inc., Senior Bond, 6.375%, 5/15/38. . . . . | United Kingdom | 300,000 |
| 473,684 |
| bRoyalty Pharma plc, Senior Note, 144A, 1.75%, 9/02/27. . . . . . . . . | United States | 100,000 |
| 102,979 |
| Takeda Pharmaceutical Co. Ltd., |
|
|
|
|
| Senior Bond, 3.175%, 7/09/50 . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 400,000 |
| 426,356 |
| Senior Note, 5%, 11/26/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 300,000 |
| 373,075 |
|
|
|
|
| 2,692,491 |
| Road & Rail 0.2% |
|
|
|
|
| bAshtead Capital, Inc., Senior Note, 144A, 4.125%, 8/15/25. . . . . . . | United Kingdom | 375,000 |
| 386,063 |
| Burlington Northern Santa Fe LLC, Senior Bond, 4.9%, 4/01/44.. . . | United States | 200,000 |
| 282,461 |
| CSX Corp., Senior Bond, 4.75%, 11/15/48. . . . . . . . . . . . . . . . . . . | United States | 525,000 |
| 720,165 |
|
|
|
|
| 1,388,689 |
| Software 0.1% |
|
|
|
|
| Microsoft Corp., Senior Note, 2.65%, 11/03/22. . . . . . . . . . . . . . . . | United States | 1,020,000 |
| 1,062,701 |
| Specialty Retail 0.1% |
|
|
|
|
| AutoNation, Inc., Senior Bond, 4.75%, 6/01/30. . . . . . . . . . . . . . . . | United States | 100,000 |
| 120,410 |
| AutoZone, Inc., |
|
|
|
|
| Senior Bond, 1.65%, 1/15/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 265,000 |
| 263,629 |
| Senior Note, 3.75%, 4/18/29 .. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 100,000 |
| 115,431 |
|
|
|
|
| 499,470 |
| Thrifts & Mortgage Finance 0.1% |
|
|
|
|
| bBPCE SA, |
|
|
|
|
| Sub. Bond, 144A, 5.15%, 7/21/24 .. . . . . . . . . . . . . . . . . . . . . . . | France | 800,000 |
| 911,760 |
| Sub. Note, 144A, 4.875%, 4/01/26 . . . . . . . . . . . . . . . . . . . . . . . | France | 200,000 |
| 235,469 |
|
|
|
|
| 1,147,229 |
FFA-30
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Tobacco 0.3% |
|
|
|
|
| BAT Capital Corp., Senior Note, 4.906%, 4/02/30. . . . . . . . . . . . . . | United Kingdom | 500,000 |
| $604,223 |
bImperial Brands Finance plc, |
|
|
|
| |
| Senior Note, 144A, 4.25%, 7/21/25 .. . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 585,000 |
| 659,366 |
| Senior Note, 144A, 3.5%, 7/26/26 .. . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 300,000 |
| 332,473 |
| Reynolds American, Inc., Senior Bond, 5.85%, 8/15/45.. . . . . . . . . | United Kingdom | 650,000 |
| 831,810 |
|
|
|
|
| 2,427,872 |
| Wireless Telecommunication Services 0.1% |
|
|
|
|
bT-Mobile USA, Inc., |
|
|
|
| |
| Senior Secured Bond, 144A, 3.3%, 2/15/51 .. . . . . . . . . . . . . . . . | United States | 200,000 |
| 206,141 |
| Senior Secured Note, 144A, 3.75%, 4/15/27 .. . . . . . . . . . . . . . . | United States | 325,000 |
| 370,435 |
|
|
|
|
| 576,576 |
| . . .Total Corporate Bonds (Cost $81,515,775).. . . . . . . | . . . . . . . . . . . . . . . . . . | . . . . . . . . . . |
| 88,953,371 |
| Foreign Government and Agency Securities 0.6% |
|
|
|
|
|
|
|
|
| |
bAfrican Export-Import Bank (The), Senior Note, 144A, 3.994%, |
|
|
|
| |
| 9/21/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Supranationale | 500,000 |
| 537,300 |
| Colombia Government Bond, Senior Bond, 5%, 6/15/45. . . . . . . . . | Colombia | 500,000 |
| 611,875 |
| Ecopetrol SA, Senior Bond, 4.125%, 1/16/25.. . . . . . . . . . . . . . . . . | Colombia | 450,000 |
| 489,942 |
bElectricite de France SA, Senior Note, 144A, 4.5%, 9/21/28. . . . . . | France | 655,000 |
| 781,979 | |
bIndonesia Government Bond, Senior Bond, 144A, 4.35%, 1/08/27.. | Indonesia | 500,000 |
| 582,953 | |
| Mexico Government Bond, Senior Note, 4.15%, 3/28/27. . . . . . . . . | Mexico | 500,000 |
| 577,813 |
| Panama Notas del Tesoro, Senior Note, 3.75%, 4/17/26. . . . . . . . . | Panama | 450,000 |
| 493,364 |
| Peru Government Bond, |
|
|
|
|
| Senior Bond, 2.783%, 1/23/31.. . . . . . . . . . . . . . . . . . . . . . . . . . | Peru | 200,000 |
| 219,952 |
| Senior Bond, 6.55%, 3/14/37.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Peru | 200,000 |
| 304,359 |
| Uruguay Government Bond, |
|
|
|
|
| Senior Bond, 4.5%, 8/14/24.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Uruguay | 300,000 |
| 332,218 |
| Senior Bond, 4.375%, 1/23/31.. . . . . . . . . . . . . . . . . . . . . . . . . . | Uruguay | 150,000 |
| 184,360 |
| . . . . .Total Foreign Government and Agency Securities (Cost $4,632,312) | . . . . . . . . . . |
| 5,116,115 | |
| U.S. Government and Agency Securities 11.0% |
|
|
|
|
|
|
|
|
| |
| Federal Agricultural Mortgage Corp., 2.9%, 1/03/22.. . . . . . . . . . . . | United States | 800,000 |
| 822,280 |
| FFCB, 3.17%, 3/07/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 800,000 |
| 932,235 |
| Tennessee Valley Authority, 5.88%, 4/01/36.. . . . . . . . . . . . . . . . . . | United States | 630,000 |
| 970,481 |
| U.S. Treasury Bonds, |
|
|
|
|
f | 2%, 1/15/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 624,114 |
f | 1.75%, 1/15/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 650,000 |
| 991,318 |
f | 3.625%, 4/15/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 170,000 |
| 376,417 |
| 3.5%, 2/15/39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 190,000 |
| 257,732 |
| 1.125%, 8/15/40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 355,000 |
| 335,641 |
| 1.375%, 11/15/40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 350,000 |
| 345,543 |
| 2.75%, 11/15/42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 210,000 |
| 259,818 |
| 2.875%, 5/15/43. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 490,000 |
| 618,548 |
| 3.625%, 2/15/44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 720,000 |
| 1,018,041 |
| 3.375%, 5/15/44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 750,000 |
| 1,024,102 |
| 3.125%, 8/15/44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 725,000 |
| 954,706 |
| 2.5%, 2/15/46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 620,000 |
| 739,471 |
| 2.5%, 5/15/46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,370,000 |
| 5,211,908 |
| 2.25%, 8/15/46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,575,000 |
| 5,213,355 |
| 3.375%, 11/15/48. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 990,000 |
| 1,388,166 |
| 3%, 2/15/49.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,480,000 |
| 1,948,859 |
| 1.25%, 5/15/50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 285,000 |
| 258,036 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-31
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| U.S. Government and Agency Securities (continued) |
|
|
|
|
| U.S. Treasury Bonds, (continued) |
|
|
|
|
| 1.375%, 8/15/50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 135,000 |
| $126,183 |
| U.S. Treasury Notes, |
|
|
|
|
| 1.75%, 4/30/22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,020,000 |
| 2,064,109 |
| 1.75%, 5/15/22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,670,000 |
| 1,707,379 |
| 1.875%, 5/31/22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,840,000 |
| 1,885,784 |
| 2.75%, 11/15/23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,320,000 |
| 1,418,227 |
| 2.125%, 11/30/23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,120,000 |
| 1,184,181 |
| 2.125%, 3/31/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 24,100,000 |
| 25,607,191 |
| 2%, 4/30/24.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,345,000 |
| 1,425,700 |
| 2.25%, 4/30/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 125,000 |
| 133,525 |
| 2.5%, 5/15/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,585,000 |
| 1,708,271 |
| 2%, 5/31/24.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,455,000 |
| 1,544,232 |
| 1.75%, 6/30/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,700,000 |
| 1,791,774 |
| 2%, 6/30/24.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,365,000 |
| 1,450,473 |
f | 0.125%, 7/15/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 800,000 |
| 939,520 |
| 1.75%, 7/31/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 595,000 |
| 627,632 |
| 2.375%, 8/15/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,640,000 |
| 1,767,869 |
| 1.25%, 8/31/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 700,000 |
| 726,195 |
| 1.5%, 10/31/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,650,000 |
| 4,873,781 |
| 2.25%, 11/15/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 600,000 |
| 646,453 |
| 1.5%, 11/30/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 320,000 |
| 335,575 |
f | 0.125%, 4/15/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 750,000 |
| 813,561 |
| 0.25%, 6/30/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 600,000 |
| 598,406 |
| 0.25%, 9/30/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,340,000 |
| 2,330,859 |
| 2.375%, 5/15/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,280,000 |
| 1,427,550 |
| 0.5%, 6/30/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,045,000 |
| 1,040,469 |
| 2.25%, 8/15/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,480,000 |
| 1,640,777 |
| 1.625%, 8/15/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 235,000 |
| 251,285 |
| 1.5%, 2/15/30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,310,000 |
| 3,500,196 |
| 0.625%, 5/15/30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 240,000 |
| 234,525 |
| 0.625%, 8/15/30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 389,813 |
| United States International Development Finance Corp., 2.12%, |
|
|
|
|
| 3/20/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 413,184 |
| .. . . . . .Total U.S. Government and Agency Securities (Cost $88,466,586) | . . . . . . . . . . . |
| 88,895,450 | |
| Asset-Backed Securities 0.4% |
|
|
|
|
|
|
|
|
| |
| Airlines 0.1% |
|
|
|
|
| American Airlines Pass-Through Trust, 2016-3, A, 3.25%, 10/15/28. | United States | 451,868 |
| 411,180 |
| United Airlines Pass-Through Trust, |
|
|
|
|
| 2016-1, A, 3.45%, 7/07/28.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 84,170 |
| 83,436 |
| 2019-2, A, 2.9%, 5/01/28.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 196,257 |
| 188,397 |
| 2020-1, A, 5.875%, 10/15/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 216,643 |
|
|
|
|
| 899,656 |
| Banks 0.1% |
|
|
|
|
| Capital One Multi-Asset Execution Trust, 2017-A6, A6, 2.29%, |
|
|
|
|
| 7/15/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 600,000 |
| 621,239 |
| Consumer Finance 0.1% |
|
|
|
|
| American Express Credit Account Master Trust, 2019-1, A, 2.87%, |
|
|
|
|
| 10/15/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 600,000 |
| 619,816 |
| Discover Card Execution Note Trust, 2019-A1, A1, 3.04%, 7/15/24. | United States | 500,000 |
| 514,849 |
|
|
|
|
| 1,134,665 |
FFA-32
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Asset-Backed Securities (continued) |
|
|
|
|
| Diversified Financial Services 0.1% |
|
|
|
|
| BA Credit Card Trust, 2018-A3, A3, 3.1%, 12/15/23.. . . . . . . . . . . . | United States | 500,000 |
| $507,679 |
| bCF Hippolyta LLC, 2020-1, A1, 144A, 1.69%, 7/15/60. . . . . . . . . . . | United States | 152,701 |
| 155,960 |
|
|
|
|
| 663,639 |
| Total Asset-Backed Securities (Cost $3,329,263).. . . . . . . | . . . . . . . . . . |
| 3,319,199 | |
| Mortgage-Backed Securities 9.7% |
|
|
|
|
|
|
|
|
| |
| Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 2.8% |
|
|
|
|
| FHLMC Pool, 15 Year, 2%, 10/01/35.. . . . . . . . . . . . . . . . . . . . . . . | United States | 396,713 |
| 416,700 |
| FHLMC Pool, 15 Year, 3%, 8/01/34.. . . . . . . . . . . . . . . . . . . . . . . . | United States | 113,139 |
| 118,674 |
| FHLMC Pool, 30 Year, 2%, 11/01/50.. . . . . . . . . . . . . . . . . . . . . . . | United States | 383,575 |
| 401,264 |
| FHLMC Pool, 30 Year, 2.5%, 8/01/50 - 10/01/50. . . . . . . . . . . . . . . | United States | 2,562,093 |
| 2,708,736 |
| FHLMC Pool, 30 Year, 3%, 3/01/50.. . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,439,532 |
| 5,803,684 |
| FHLMC Pool, 30 Year, 3%, 8/01/50.. . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,290,154 |
| 2,403,541 |
| FHLMC Pool, 30 Year, 3.5%, 2/01/47. . . . . . . . . . . . . . . . . . . . . . . | United States | 3,450,407 |
| 3,735,744 |
| FHLMC Pool, 30 Year, 3.5%, 4/01/50. . . . . . . . . . . . . . . . . . . . . . . | United States | 2,315,607 |
| 2,531,119 |
| FHLMC Pool, 30 Year, 4%, 5/01/47 - 9/01/49.. . . . . . . . . . . . . . . . . | United States | 1,730,523 |
| 1,884,609 |
| FHLMC Pool, 30 Year, 4.5%, 10/01/48 - 1/01/49. . . . . . . . . . . . . . . | United States | 2,177,925 |
| 2,417,667 |
|
|
|
|
| 22,421,738 |
| Federal National Mortgage Association (FNMA) Fixed Rate 2.8% |
|
|
|
|
| FNMA, 15 Year, 1.5%, 11/01/35. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 689,921 |
| 710,007 |
| FNMA, 15 Year, 2%, 9/01/35.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,799,991 |
| 2,947,140 |
| FNMA, 15 Year, 2%, 10/01/35 - 12/01/35.. . . . . . . . . . . . . . . . . . . . | United States | 2,452,703 |
| 2,564,907 |
| FNMA, 15 Year, 2.5%, 10/01/35. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,650,549 |
| 1,728,199 |
| FNMA, 30 Year, 2%, 10/01/50.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 992,296 |
| 1,031,033 |
| FNMA, 30 Year, 2.5%, 8/01/50 - 10/01/50. . . . . . . . . . . . . . . . . . . . | United States | 5,575,288 |
| 5,918,146 |
| FNMA, 30 Year, 3%, 8/01/50.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,220,950 |
| 3,377,845 |
| FNMA, 30 Year, 3%, 10/01/50.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 808,793 |
| 850,536 |
| FNMA, 30 Year, 4%, 8/01/49.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,349,365 |
| 1,478,771 |
| FNMA, 30 Year, 4.5%, 2/01/50. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,640,313 |
| 1,809,121 |
|
|
|
|
| 22,415,705 |
| Government National Mortgage Association (GNMA) Fixed Rate 4.1% |
|
|
|
|
| GNMA II, Single-family, 30 Year, 2%, 11/20/50.. . . . . . . . . . . . . . . . | United States | 6,203,503 |
| 6,492,757 |
| GNMA II, Single-family, 30 Year, 2%, 10/20/50.. . . . . . . . . . . . . . . . | United States | 397,662 |
| 415,997 |
| GNMA II, Single-family, 30 Year, 2.5%, 7/20/50.. . . . . . . . . . . . . . . | United States | 3,495,186 |
| 3,702,562 |
| GNMA II, Single-family, 30 Year, 2.5%, 11/20/50. . . . . . . . . . . . . . . | United States | 6,187,071 |
| 6,556,103 |
| GNMA II, Single-family, 30 Year, 2.5%, 8/20/50 - 10/20/50.. . . . . . . | United States | 3,191,511 |
| 3,381,546 |
| GNMA II, Single-family, 30 Year, 3%, 6/20/50. . . . . . . . . . . . . . . . . | United States | 2,517,102 |
| 2,634,924 |
| GNMA II, Single-family, 30 Year, 3%, 7/20/50. . . . . . . . . . . . . . . . . | United States | 2,753,247 |
| 2,889,768 |
| GNMA II, Single-family, 30 Year, 3%, 9/20/47 - 9/20/50. . . . . . . . . . | United States | 2,870,867 |
| 3,034,156 |
| GNMA II, Single-family, 30 Year, 3.5%, 6/20/50.. . . . . . . . . . . . . . . | United States | 3,813,541 |
| 4,044,498 |
|
|
|
|
| 33,152,311 |
| Total Mortgage-Backed Securities (Cost $77,715,658). . . | . . . . . . . . . . |
| 77,989,754 | |
| Municipal Bonds 0.6% |
|
|
|
|
|
|
|
|
| |
| Arizona 0.1% |
|
|
|
|
| Maricopa County Union High School District No. 210-Phoenix, GO, |
|
|
|
|
| 2020 C, 5%, 7/01/31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 265,590 |
| California 0.1% |
|
|
|
|
| California Health Facilities Financing Authority, |
|
|
|
|
| State of California Personal Income Tax, Revenue, Senior Lien, |
|
|
|
|
| 2019, 2.934%, 6/01/32.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 65,000 |
| 70,053 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-33
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Municipal Bonds (continued) |
|
|
|
|
| California (continued) |
|
|
|
|
| California Health Facilities Financing Authority, (continued) |
|
|
|
|
| State of California Personal Income Tax, Revenue, Senior Lien, |
|
|
|
|
| 2019, 2.984%, 6/01/33.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 55,000 |
| $58,981 |
| State of California Personal Income Tax, Revenue, Senior Lien, |
|
|
|
|
| 2019, 3.034%, 6/01/34.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 40,000 |
| 42,729 |
| Foothill-Eastern Transportation Corridor Agency, Revenue, 2019A, |
|
|
|
|
| Refunding, 4.094%, 1/15/49.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 35,000 |
| 37,670 |
| Gilroy Unified School District, GO, 2019, Refunding, 3.364%, 8/01/47. | United States | 140,000 |
| 147,472 |
| State of California, GO, 2.5%, 10/01/29.. . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 550,745 |
|
|
|
|
| 907,650 |
| Colorado 0.0%† |
|
|
|
|
| Metro Wastewater Reclamation District, Revenue, 2019 B, |
|
|
|
|
| Refunding, 3.158%, 4/01/41.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 220,000 |
| 235,008 |
| Florida 0.1% |
|
|
|
|
| County of Broward, Airport System, Revenue, 2019C, Refunding, |
|
|
|
|
| 3.477%, 10/01/43. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 70,000 |
| 73,067 |
| County of Sarasota, Revenue, 2020, 5%, 10/01/34. . . . . . . . . . . . . | United States | 500,000 |
| 672,890 |
|
|
|
|
| 745,957 |
| Illinois 0.0%† |
|
|
|
|
| State of Illinois, GO, 2003, 5.1%, 6/01/33. . . . . . . . . . . . . . . . . . . . | United States | 125,000 |
| 134,621 |
| Massachusetts 0.0%† |
|
|
|
|
| Massachusetts State College Building Authority, Revenue, 2019 C, |
|
|
|
|
| Refunding, 3.373%, 5/01/43.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 230,000 |
| 235,163 |
| Missouri 0.0%† |
|
|
|
|
| Metropolitan St. Louis Sewer District, Revenue, 2019 C, Refunding, |
|
|
|
|
| 3.259%, 5/01/45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 150,000 |
| 161,652 |
| New Jersey 0.0%† |
|
|
|
|
| State of New Jersey, GO, 2020 A, 3%, 6/01/32. . . . . . . . . . . . . . . . | United States | 110,000 |
| 124,592 |
| New York 0.0%† |
|
|
|
|
| Metropolitan Transportation Authority, Revenue, 2020 E, Refunding, |
|
|
|
|
| 4%, 11/15/45.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 95,000 |
| 105,540 |
| Ohio 0.0%† |
|
|
|
|
| Greenville City School District, GO, 2019, Refunding, 3.541%, |
|
|
|
|
| 1/01/51. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 160,000 |
| 163,694 |
| Pennsylvania 0.1% |
|
|
|
|
| University of Pittsburgh-of the Commonwealth System of Higher |
|
|
|
|
| Education, Revenue, 2017 C, Refunding, 3.005%, 9/15/41.. . . . . | United States | 250,000 |
| 269,853 |
| Texas 0.2% |
|
|
|
|
| City of Austin, Electric Utility, Revenue, 2008, Refunding, AGMC |
|
|
|
|
| Insured, 6.262%, 11/15/32.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 355,000 |
| 462,661 |
| Grand Parkway Transportation Corp., Revenue, 2020B, Refunding, |
|
|
|
|
| 3.236%, 10/01/52. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 255,000 |
| 266,896 |
| State of Texas, GO, 2019, Refunding, 3.211%, 4/01/44. . . . . . . . . . | United States | 765,000 |
| 836,428 |
|
|
|
|
| 1,565,985 |
| . .Total Municipal Bonds (Cost $4,652,155).. . . . . . . . . . . | . . . . . . . . . . . . . . . . . | . . . . . . . . . |
| 4,915,305 |
| Total Long Term Investments (Cost $657,149,124).. . . |
|
|
|
|
| . . . . . . . . . . . . . . . . . | . . . . . . . . . |
| 779,250,416 | |
|
|
|
|
|
|
FFA-34
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Allocation VIP Fund (continued)
Short Term Investments 3.0%
a | a | Country | Shares | a |
| a |
|
|
|
Value
Money Market Funds 3.0%
c,gInstitutional Fiduciary Trust - Money Market Portfolio, 0%. . . . . . . . | United States | 24,011,384 | $24,011,384 |
Total Money Market Funds (Cost $24,011,384). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Short Term Investments (Cost $24,011,384). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Investments (Cost $681,160,508) 99.3%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities 0.7%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24,011,384
24,011,384
$803,261,800 5,556,758
$808,818,558
*The principal amount is stated in U.S. dollars unless otherwise indicated.
† Rounds to less than 0.1% of net assets. a Non-income producing.
b Security was purchased pursuant to Rule 144A or Regulation S under the Securities Act of 1933. 144A securities may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. Regulation S securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At December 31, 2020, the aggregate value of these securities was $24,084,549, representing 3.0% of net assets.
c See Note 3(e) regarding investments in affiliated management investment companies. d Variable rate security. The rate shown represents the yield at period end.
eA supranational organization is an entity formed by two or more central governments through international treaties.
fPrincipal amount of security is adjusted for inflation. See Note 1(f).
gThe rate shown is the annualized seven-day effective yield at period end.
At December 31, 2020, the Fund had the following futures contracts outstanding. See Note 1(c).
Futures Contracts
|
|
|
|
| Value/ |
|
|
|
|
| Unrealized |
|
| Number of | Notional | Expiration | Appreciation |
Description | Type | Contracts | Amount* | Date | (Depreciation) |
Equity contracts | Long | 81 | $15,182,640 | 3/19/21 | $251,109 |
S&P 500 E-Mini Index.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Interest rate contracts |
|
|
|
|
|
U.S. Treasury 10 Year Notes.. . . . . . . . . . . . . . . . . . . . | Short | 35 | 12,565,110 | 3/22/21 | 2,162 |
U.S. Treasury 10 Year Ultra Notes.. . . . . . . . . . . . . . . . | Short | 32 | 5,003,500 | 3/22/21 | 12,748 |
U.S. Treasury 5 Year Notes.. . . . . . . . . . . . . . . . . . . . . | Long | 5 | 630,820 | 3/31/21 | 189 |
Total Futures Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $266,208 |
*As of period end.
See Abbreviations on page FFA-53.
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-35
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Franklin |
| Allocation VIP |
| Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $648,420,331 |
Cost - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 32,740,177 |
Value - Unaffiliated issuers .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $771,429,264 |
Value - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 31,832,536 |
Cash.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,113 |
Foreign currency, at value (cost $2,498,074). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,521,658 |
Receivables: |
|
Investment securities sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,802,065 |
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 923,920 |
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,892,664 |
Deposits with brokers for: |
|
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,044,685 |
Variation margin on futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 89,036 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 50,805 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 813,590,746 |
Liabilities: |
|
Payables: |
|
Investment securities purchased.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,757,260 |
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 318,833 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 295,428 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 191,445 |
Deferred tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 48,504 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 160,718 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,772,188 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $808,818,558 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $685,596,935 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 123,221,623 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $808,818,558 |
FFA-36
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (continued)
December 31, 2020
| Franklin |
| Allocation VIP |
| Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $810,739 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 147,741 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $5.49 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $398,620,076 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 73,385,652 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $5.43 |
Class 4: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $409,387,743 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 72,848,186 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $5.62 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-37
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the year ended December 31, 2020
Franklin
Allocation VIP
Fund
Investment income:
Dividends: (net of foreign taxes of $259,531)
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest: (net of foreign taxes of $1,340)
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution fees: (Note 3c)
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expense reductions (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses waived/paid by affiliates (Note 3e and 3f).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments: (net of foreign taxes of $194)
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlled affiliates (Note 3e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Written options.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized gain distributions from REITs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Futures contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swap contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlled affiliates (Note 3e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation of other assets and liabilities denominated in foreign currencies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Futures contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swap contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in deferred taxes on unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in unrealized appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$8,107,425 2,531,675
7,167,264
17,806,364
4,191,570
942,301
1,346,179
37,899
99,183
94,808
4,458
112,798
6,829,196
(15,121)
(369,964)
6,444,111
11,362,253
(5,750,855)
(6,470,900)
74,209
167,289
140,847
(300,280)
3,546,087
(1,016,283)
(9,609,886)
79,814,810
1,839,832
22,905
66,035
476,544
81,070
(48,272)
82,252,924
72,643,038
$84,005,291
FFA-38
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin Allocation VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $11,362,253 | $10,197,177 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (9,609,886) | 239,840,198 |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | 82,252,924 | (103,898,058) |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | 84,005,291 | 146,139,317 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (227,036) | (114,944) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (106,811,345) | (41,503,915) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (104,689,179) | (39,405,922) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (211,727,560) | (81,024,781) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 104,749 | (205,346) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 61,121,480 | (18,907,288) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 64,739,571 | (20,095,745) |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 125,965,800 | (39,208,379) |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | (1,756,469) | 25,906,157 |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 810,575,027 | 784,668,870 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $808,818,558 | $810,575,027 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FFA-39
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Notes to Financial Statements
Franklin Allocation VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Allocation VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust's Board
of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities, exchange traded funds and derivative financial instruments listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the- counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade
in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund's pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.
Investments in open-end mutual funds are valued at the closing NAV.
Certain derivative financial instruments are centrally cleared or trade in the OTC market. The Fund's pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund's net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of
FFA-40
Annual Report
Franklin Allocation VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
a. Financial Instrument Valuation (continued)
such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Events can occur between the time at which trading in a foreign security
is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund's portfolio securities as determined at the foreign market close and the latest indications of value at
4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund's securities to the latest indications of fair value at 4 p.m Eastern time. At December 31, 2020, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy. See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result in differences between the value of the Fund's portfolio securities on the last business day and the last calendar day of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally,
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Derivative Financial Instruments
The Fund invested in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including
the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.
Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements
with certain counterparties. These agreements contain
Annual Report
FFA-41
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Allocation VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
c. Derivative Financial Instruments (continued)
various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure
of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets
and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.
Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund's custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund's investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.
The Fund entered into exchange traded futures contracts primarily to manage and/or gain exposure to interest rate and equity price risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities.
The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.
The Fund entered into credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-the- counter market (OTC credit default swaps) or may be executed in a multilateral trade facility platform, such as
a registered exchange (centrally cleared credit default swaps). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, a basket of issuers or indices, or a tranche of a credit index or basket of issuers or indices. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other
FFA-42
Annual Report
Franklin Allocation VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
c. Derivative Financial Instruments (continued)
relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Statement of Operations.
The Fund entered into OTC cross currency swap contracts primarily to manage and/or gain exposure to certain foreign currencies. A cross currency swap is an agreement between the Fund and a counterparty to exchange cash flows (determined using either a fixed or floating rate) based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the opening of the contract. Cross currency swaps may require the exchange of notional amounts at the opening and/or closing of the contract. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Statement of Assets and Liabilities and represent compensating factors between stated terms of the cross currency swap contract and prevailing market conditions (interest rate spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Statement of Operations.
The Fund entered into inflation index swap contracts primarily to manage and/or gain exposure to inflation risk. An inflation index swap is an agreement between the Fund and a counterparty to exchange cash flows whereby one party makes payments based on the percentage change in an index that serves as a measure of inflation and the other party makes a regular payment based on a compounded fixed rate, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC inflation index swap) or may be executed on a registered exchange (centrally cleared inflation index swap). For centrally cleared inflation index swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable
or receivable. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
appreciation until the payments are made, at which time they are realized. Typically, an inflation index swap has payment obligations netted and exchanged upon maturity.
The Fund entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is
an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional amount. These agreements may be privately negotiated in the over-the- counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps). For centrally cleared interest rate swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized.
The Fund entered into OTC total return swap contracts primarily to manage and/or gain exposure to credit and market risk of an underlying instrument such as a stock, bond, index or basket of securities or indices. A total return swap is an agreement between the Fund and a counterparty to exchange a return linked to an underlying instrument for a floating or fixed rate payment, both based upon a notional amount. Over the term of the contract, contractually required payments to be paid or received are accrued daily and recorded as unrealized appreciation or depreciation until the payments are made, at which time they are recognized as realized gain or loss.
See Note 10 regarding other derivative information.
d. Mortgage Dollar Rolls
The Fund enters into mortgage dollar rolls, typically on a TBA basis. Mortgage dollar rolls are agreements between the Fund and a financial institution where the Fund sells (or buys) mortgage-backed securities for delivery on a specified date and simultaneously contracts to repurchase (or sell) substantially similar (same type, coupon, and maturity) securities at a future date and at a predetermined price. Gains or losses are realized on the initial sale, and the difference between the repurchase price and the sale price is recorded as an unrealized gain or loss to the Fund upon entering into the mortgage dollar roll. In addition, the
Annual Report
FFA-43
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Allocation VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
d. Mortgage Dollar Rolls (continued)
Fund may invest the cash proceeds that are received from the initial sale. During the period between the sale and repurchase, the Fund is not entitled to principal and interest paid on the mortgage backed securities. Transactions in mortgage dollar rolls are accounted for as purchases and sales and may result in an increase to the Fund's portfolio turnover rate. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill its obligations.
e. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
f. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Paydown gains and losses are recorded as an adjustment to interest income. Dividend income, capital gain distributions are recorded on the ex- dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
Inflation-indexed bonds are adjusted for inflation through periodic increases or decreases in the security's interest accruals, face amount, or principal redemption value, by amounts corresponding to the rate of inflation as measured by an index. Any increase or decrease in the face amount or principal redemption value will be included as interest income in the Statement of Operations.
FFA-44
Annual Report
Franklin Allocation VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
g. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
h. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
| Year Ended | Year Ended | ||
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,931 | $46,123 | 12,786 | $87,589 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 47,596 | 227,036 | 18,101 | 114,944 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (30,469) | (168,410) | (62,639) | (407,879) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 25,058 | $104,749 | (31,752) | $(205,346) |
Class 2 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 4 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
3,511,007 | $20,473,913 | 2,057,930 | $13,832,099 |
22,581,680 | 106,811,345 | 6,577,483 | 41,503,915 |
(11,902,724) | (66,163,778) | (11,168,839) | (74,243,302) |
14,189,963 | $61,121,480 | (2,533,426) | $(18,907,288) |
2,339,473 | $13,610,746 | 973,482 | $6,631,528 |
21,365,139 | 104,689,179 | 6,099,988 | 39,405,922 |
(9,182,946) | (53,560,354) | (9,669,394) | (66,133,195) |
14,521,666 | $64,739,571 | (2,595,924) | $(20,095,745) |
Annual Report
FFA-45
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Allocation VIP Fund (continued)
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Advisers, Inc. (Advisers) | Investment manager |
Templeton Global Advisors Limited (Global Advisors) | Investment manager |
|
|
Franklin Templeton Institutional, LLC (FT Institutional) | Investment manager |
|
|
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
|
|
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
a. Management Fees
The Fund pays an investment management fee to Advisers of 0.55% per year of the average daily net assets of the Fund.
Under a subadvisory agreement, Global Advisors and FT Institutional, affiliates of Advisers, provide subadvisory services to the Fund. The subadvisory fee is paid by Advisers based on Fund's average daily net assets, and is not an additional expense of the Fund.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
FFA-46
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Allocation VIP Fund (continued)
3. Transactions with Affiliates (continued)
e. Investments in Affiliated Management Investment Companies (continued)
|
|
|
|
| Net Change in |
| Number of |
|
| Value at |
|
|
| Unrealized | Value | Shares Held |
|
| Beginning |
|
| Realized Gain | Appreciation | at End | at End | Investment |
| of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Franklin Allocation VIP Fund |
|
|
|
|
|
|
|
|
Non-Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividends |
Franklin LibertyQ U.S. Equity ETF. | $— | $4,446,394 | $(4,056,817) | $(389,577) | $— | $—a |
| $10,093 |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
|
Market Portfolio, 0%.. . . . . . . . . | $21,473,752 | $256,101,815 | $(253,564,183) | $— | $— | $24,011,384 | 24,011,384 | $72,101 |
Templeton Global Bond VIP Fund, |
|
|
|
|
|
|
|
|
Class 1. . . . . . . . . . . . . . . . . . | $33,013,162 | $4,449,481 | $(25,400,000) | $(6,081,323) | $1,839,832 | $7,821,152 | 539,390 | $2,449,481 |
Total Affiliated Securities. . . . . | $54,486,914 | $264,997,690 | $(283,021,000) | $(6,470,900) | $1,839,832 | $31,832,536 |
| $2,531,675 |
aAs of December 31, 2020, no longer held by the fund.
f. Waiver and Expense Reimbursements
Advisers has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the operating expenses (excluding distribution fees and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) and acquired fund fees and expenses for each class of the Fund do not exceed 0.57%, based on the average net assets of each class until April 30, 2021. Total expenses waived or paid are not subject to recapture subsequent to the Fund's fiscal year end.
g. Interfund Transactions
The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended December 31, 2020, these purchase and sale transactions aggregated $871,070 and $0, respectively.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains.
At December 31, 2020, the capital loss carryforwards were as follows:
Capital loss carryforwards not subject to expiration: |
|
Short term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $5,645,804 |
Annual Report
FFA-47
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Allocation VIP Fund (continued)
5. Income Taxes (continued)
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows:
| 2020 | 2019 |
Distributions paid from: |
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $13,451,147 | $28,495,590 |
Long term capital gain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 198,276,413 | 52,529,191 |
| $211,727,560 | $81,024,781 |
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$687,233,495
$128,909,549 (12,615,036)
$116,294,513
$12,588,730
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of passive foreign investment company shares, bond discounts and premiums, foreign currency transactions and wash sales.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $735,379,665 and $821,689,604, respectively.
7. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
8. Other Derivative Information
At December 31, 2020, investments in derivative contracts are reflected in the Statement of Assets and Liabilities as follows:
|
|
| Asset Derivatives |
|
| Liability Derivatives |
|
|
Derivative Contracts | Statement of |
|
| Statement of |
|
| ||
Not Accounted for as | Assets and Liabilities |
|
| Assets and Liabilities |
|
| ||
Hedging Instruments | Location | Fair Value | Location | Fair Value | ||||
Franklin Allocation VIP Fund |
|
|
|
|
|
| ||
Interest rate contracts.. . . . . . . |
|
|
|
|
|
| ||
|
|
| Variation margin on futures | $15,485a | Variation margin on futures | $386a | ||
|
|
| contracts |
|
| contracts |
|
|
Equity contracts. . . . . . . . . . . . |
|
|
|
|
|
| ||
|
|
|
|
|
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FFA-48 |
| Annual Report |
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Allocation VIP Fund (continued)
8. Other Derivative Information (continued)
| Asset Derivatives |
|
| Liability Derivatives |
| ||
Derivative Contracts | Statement of |
|
| Statement of |
| ||
Not Accounted for as | Assets and Liabilities |
|
| Assets and Liabilities |
| ||
Hedging Instruments | Location | Fair Value |
| Location | Fair Value | ||
Franklin Allocation VIP Fund (continued) |
|
|
|
|
| ||
| Variation margin on futures | $251,109a |
| Variation margin on futures | $— | ||
| contracts |
|
| contracts |
| ||
Total.. . . . . . . . . . . . . . . . . . . . |
|
| $266,594 |
|
|
| $386 |
aThis amount reflects the cumulative appreciation (depreciation) of futures contracts as reported in the Statement of Investments. Only the variation margin receivable/ payable at year end is separately reported within the Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.
For the year ended December 31, 2020, the effect of derivative contracts in the Statement of Operations was as follows:
|
|
|
|
| Net Change in |
|
|
|
|
| Unrealized |
Derivative Contracts |
| Net Realized |
| Appreciation | |
Not Accounted for as | Statement of | Gain (Loss) for | Statement of | (Depreciation) | |
Hedging Instruments | Operations Location | the Year | Operations Location | for the Year | |
| Net realized gain (loss) from: |
|
| Net change in unrealized |
|
|
|
|
| appreciation (depreciation) on: |
|
Franklin Allocation VIP Fund |
|
|
|
|
|
Interest rate contracts.. . . . . . . |
|
|
|
|
|
| Investments | $(149,096)a | Investments | $— | |
| Written options | 59,737 |
| Written options | — |
| Futures contracts | 1,465,258 |
| Futures contracts | 272,157 |
| Swap contracts | (312,687) |
| Swap contracts | 815 |
Foreign exchange contracts. . . |
|
|
|
|
|
| Investments | 27,482a | Investments | — | |
| Swaps contracts | 57,003 |
| Swap contracts | 72,438 |
| Forward exchange contracts | (300,280) |
| Forward exchange contracts | 66,035 |
Credit contracts. . . . . . . . . . . . |
|
|
|
|
|
| Written options | 6,663 |
| Written options | — |
| Swaps contracts | (760,599) |
| Swap contracts | 7,817 |
Equity Contracts.. . . . . . . . . . . |
|
|
|
|
|
| Written options | 7,809 |
| Written options | — |
| Futures contracts | 2,080,829 |
| Futures contracts | 204,387 |
Total.. . . . . . . . . . . . . . . . . . . . |
| $2,182,119 |
|
| $623,649 |
aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Statement of Operations.
Annual Report
FFA-49
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Allocation VIP Fund (continued)
8. Other Derivative Information (continued)
For the year ended December 31, 2020, the average month end notional amount of futures contracts, swap contracts and options, and the average month end contract value for forward exchange contracts were as follows:
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . | $38,605,311 |
|
Swap contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . | $8,619,206 |
|
Forward exchange contracts.. . . . . . . . . . . . . . . . . | $12,093,679 |
|
Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,430,923 | shares |
See Note 1(c) regarding derivative financial instruments.
9. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
10. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
A summary of inputs used as of December 31, 2020, in valuing the Fund's assets and liabilities carried at fair value, is as follows:
FFA-50
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Allocation VIP Fund (continued)
10. Fair Value Measurements (continued)
| Level 1 | Level 2 | Level 3 | Total |
Franklin Allocation VIP Fund |
|
|
|
|
Assets: |
|
|
|
|
Investments in Securities: |
|
|
|
|
Common Stocks: |
|
|
|
|
Aerospace & Defense .. . . . . . . . . . . . . . . . . . . | $8,235,140 | $2,957,762 | $— | $11,192,902 |
Air Freight & Logistics .. . . . . . . . . . . . . . . . . . . | 3,069,989 | 2,435,309 | — | 5,505,298 |
Airlines .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 391,484 | — | 391,484 |
Auto Components .. . . . . . . . . . . . . . . . . . . . . . | 529,576 | 724,690 | — | 1,254,266 |
Automobiles .. . . . . . . . . . . . . . . . . . . . . . . . . . | 483,384 | 2,594,762 | — | 3,078,146 |
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,901,268 | 8,709,945 | — | 10,611,213 |
Beverages .. . . . . . . . . . . . . . . . . . . . . . . . . . . | 6,707,709 | 628,959 | — | 7,336,668 |
Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . | 9,305,643 | 4,167,094 | — | 13,472,737 |
Building Products .. . . . . . . . . . . . . . . . . . . . . . | 3,541,622 | 1,003,256 | — | 4,544,878 |
Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . | 14,861,212 | 7,250,569 | — | 22,111,781 |
Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 11,266,732 | 7,076,133 | — | 18,342,865 |
Commercial Services & Supplies . . . . . . . . . . . | 2,671,180 | 241,176 | — | 2,912,356 |
Communications Equipment .. . . . . . . . . . . . . . | 961,973 | — | — | 961,973 |
Construction & Engineering . . . . . . . . . . . . . . . | 115,520 | 1,092,450 | — | 1,207,970 |
Construction Materials . . . . . . . . . . . . . . . . . . . | 642,624 | 57,613 | — | 700,237 |
Consumer Finance .. . . . . . . . . . . . . . . . . . . . . | 152,333 | — | — | 152,333 |
Containers & Packaging .. . . . . . . . . . . . . . . . . | 251,638 | — | — | 251,638 |
Distributors .. . . . . . . . . . . . . . . . . . . . . . . . . . . | 555,025 | — | — | 555,025 |
Diversified Consumer Services .. . . . . . . . . . . . | 2,084,108 | — | — | 2,084,108 |
Diversified Financial Services .. . . . . . . . . . . . . | 817,415 | 2,582,816 | — | 3,400,231 |
Diversified Telecommunication Services . . . . . . | 2,927,267 | 1,783,847 | — | 4,711,114 |
Electric Utilities .. . . . . . . . . . . . . . . . . . . . . . . . | 3,174,331 | 474,950 | — | 3,649,281 |
Electrical Equipment .. . . . . . . . . . . . . . . . . . . . | 2,333,443 | 2,094,874 | — | 4,428,317 |
Electronic Equipment, Instruments & |
|
|
|
|
Components .. . . . . . . . . . . . . . . . . . . . . . . . | 4,157,868 | 1,134,151 | — | 5,292,019 |
Energy Equipment & Services . . . . . . . . . . . . . | — | 820,854 | — | 820,854 |
Entertainment .. . . . . . . . . . . . . . . . . . . . . . . . . | 4,395,736 | 2,493,349 | — | 6,889,085 |
Equity Real Estate Investment Trusts (REITs) .. | 5,562,397 | 886,419 | — | 6,448,816 |
Food & Staples Retailing . . . . . . . . . . . . . . . . . | 4,003,831 | 2,688,879 | — | 6,692,710 |
Food Products . . . . . . . . . . . . . . . . . . . . . . . . . | 2,984,203 | 1,294,968 | — | 4,279,171 |
Gas Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . | 327,505 | 813,216 | — | 1,140,721 |
Health Care Equipment & Supplies .. . . . . . . . . | 20,355,487 | 7,180,885 | — | 27,536,372 |
Health Care Providers & Services .. . . . . . . . . . | 4,516,434 | 1,027,783 | — | 5,544,217 |
Health Care Technology .. . . . . . . . . . . . . . . . . | 1,937,433 | 75,574 | — | 2,013,007 |
Hotels, Restaurants & Leisure . . . . . . . . . . . . . | 3,700,533 | — | — | 3,700,533 |
Household Durables .. . . . . . . . . . . . . . . . . . . . | 963,998 | 2,419,540 | — | 3,383,538 |
Household Products .. . . . . . . . . . . . . . . . . . . . | 6,905,413 | 53,655 | — | 6,959,068 |
Independent Power and Renewable Electricity |
|
|
|
|
Producers .. . . . . . . . . . . . . . . . . . . . . . . . . . | 289,906 | — | — | 289,906 |
Industrial Conglomerates . . . . . . . . . . . . . . . . . | 7,073,384 | 1,036,803 | — | 8,110,187 |
Insurance .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,143,214 | 2,413,318 | — | 6,556,532 |
Interactive Media & Services .. . . . . . . . . . . . . . | 14,664,683 | 451,232 | — | 15,115,915 |
Internet & Direct Marketing Retail .. . . . . . . . . . | 13,411,536 | 2,913,428 | — | 16,324,964 |
IT Services .. . . . . . . . . . . . . . . . . . . . . . . . . . . | 18,492,479 | 8,431,464 | — | 26,923,943 |
Leisure Products . . . . . . . . . . . . . . . . . . . . . . . | 338,662 | — | — | 338,662 |
Life Sciences Tools & Services .. . . . . . . . . . . . | 8,106,868 | 696,221 | — | 8,803,089 |
Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,846,176 | 3,603,864 | — | 13,450,040 |
Marine .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 456,787 | — | 456,787 |
Media .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,957,740 | 4,184,044 | — | 6,141,784 |
Metals & Mining .. . . . . . . . . . . . . . . . . . . . . . . | 1,625,837 | 5,140,611 | — | 6,766,448 |
Multiline Retail . . . . . . . . . . . . . . . . . . . . . . . . . | 3,447,258 | 774,109 | — | 4,221,367 |
Multi-Utilities .. . . . . . . . . . . . . . . . . . . . . . . . . . | 1,995,104 | 1,237,697 | — | 3,232,801 |
Oil, Gas & Consumable Fuels .. . . . . . . . . . . . . | 4,810,502 | 3,912,310 | — | 8,722,812 |
Personal Products . . . . . . . . . . . . . . . . . . . . . . | 1,303,048 | 397,355 | — | 1,700,403 |
Annual Report
FFA-51
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Allocation VIP Fund (continued)
10. Fair Value Measurements (continued)
| Level 1 | Level 2 | Level 3 | Total |
Franklin Allocation VIP Fund (continued) |
|
|
|
|
Assets: (continued) |
|
|
|
|
Investments in Securities: |
|
|
|
|
Common Stocks: |
|
|
|
|
Pharmaceuticals .. . . . . . . . . . . . . . . . . . . . . . . | $14,397,613 | $8,436,737 | $— | $22,834,350 |
Professional Services .. . . . . . . . . . . . . . . . . . . | 5,390,926 | 3,855,150 | — | 9,246,076 |
Real Estate Management & Development .. . . . | 171,602 | 2,540,451 | — | 2,712,053 |
Road & Rail . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8,153,343 | — | — | 8,153,343 |
Semiconductors & Semiconductor Equipment .. | 21,525,051 | 4,215,057 | — | 25,740,108 |
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 41,463,777 | 5,384,951 | — | 46,848,728 |
Specialty Retail . . . . . . . . . . . . . . . . . . . . . . . . | 8,859,182 | 1,166,148 | — | 10,025,330 |
Technology Hardware, Storage & Peripherals .. | 12,390,709 | 2,372,259 | — | 14,762,968 |
Textiles, Apparel & Luxury Goods .. . . . . . . . . . | 4,236,949 | 501,767 | — | 4,738,716 |
Thrifts & Mortgage Finance .. . . . . . . . . . . . . . . | 125,575 | 927,392 | — | 1,052,967 |
Tobacco .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,422,558 | 1,043,709 | — | 2,466,267 |
Trading Companies & Distributors .. . . . . . . . . . | 3,133,679 | 2,105,877 | — | 5,239,556 |
Transportation Infrastructure .. . . . . . . . . . . . . . | — | 69,420 | — | 69,420 |
Water Utilities .. . . . . . . . . . . . . . . . . . . . . . . . . | 586,102 | — | — | 586,102 |
Wireless Telecommunication Services .. . . . . . . | — | 1,459,927 | — | 1,459,927 |
Management Investment Companies .. . . . . . . . . | 23,263,552 | — | — | 23,263,552 |
Preferred Stocks .. . . . . . . . . . . . . . . . . . . . . . . . | — | 149,187 | — | 149,187 |
Corporate Bonds .. . . . . . . . . . . . . . . . . . . . . . . . | — | 88,953,371 | — | 88,953,371 |
Foreign Government and Agency Securities. . . . . | — | 5,116,115 | — | 5,116,115 |
U.S. Government and Agency Securities.. . . . . . . | — | 88,895,450 | — | 88,895,450 |
Asset-Backed Securities . . . . . . . . . . . . . . . . . . . | — | 3,319,199 | — | 3,319,199 |
Mortgage-Backed Securities.. . . . . . . . . . . . . . . . | — | 77,989,754 | — | 77,989,754 |
Municipal Bonds.. . . . . . . . . . . . . . . . . . . . . . . . . | — | 4,915,305 | — | 4,915,305 |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | 24,011,384 | — | — | 24,011,384 |
Total Investments in Securities.. . . . . . . . . . . | $397,038,369 | $406,223,431 | $— | $803,261,800 |
Other Financial Instruments: |
|
|
|
|
Futures contracts .. . . . . . . . . . . . . . . . . . . . . . . . | $266,594 | $— | $— | $266,594 |
.. . . . . . . . .Total Other Financial Instruments | $266,594 | $— | $— | $266,594 |
Liabilities: |
|
|
|
|
Other Financial Instruments: |
|
|
|
|
Futures contracts.. . . . . . . . . . . . . . . . . . . . . . . . | $386 | $— | $— | $386 |
|
|
|
|
|
11. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020- 04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of LIBOR and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
12. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
FFA-52
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Allocation VIP Fund (continued)
Abbreviations
Currency |
|
| Selected Portfolio | |
CAD | Canadian Dollar |
| ADR | American Depositary Receipt |
GBP | British Pound |
| AGMC | Assured Guaranty Municipal Corp. |
USD | United States Dollar |
| ETF | Exchange-Traded Fund |
|
|
| FFCB | Federal Farm Credit Banks Funding Corp. |
|
|
| FHLMC | Federal Home Loan Mortgage Corp. |
|
|
| FNMA | Federal National Mortgage Association |
|
|
| FRN | Floating Rate Note |
|
|
| GNMA | Government National Mortgage Association |
|
|
| GO | General Obligation |
|
|
| NYRS | New York Registry Shares |
Annual Report
FFA-53
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Franklin Allocation VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Franklin Allocation VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
FFA-54
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Franklin Allocation VIP Fund
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $198,276,413 as a long term capital gain dividend for the fiscal year ended December 31, 2020.
Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 35.48% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2020.
Annual Report
FFA-55
Franklin Global Real Estate VIP Fund
This annual report for Franklin Global Real Estate VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares* represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | -5.17% |
5-Year | +3.95% |
10-Year | +5.74% |
*The Fund has an expense reduction contractually guaranteed through 4/30/21. Fund investment results reflect the expense reduction; without this reduction, the results would have been lower.
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Annual Report
FGR-1
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the FTSE® EPRA®/NAREIT® Developed Index. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.
$22,000 |
|
|
|
|
|
$20,000 |
|
|
|
|
|
$18,000 |
|
|
|
| $18,466 |
|
|
|
| $17,478 | |
$16,000 |
|
|
|
| |
|
|
|
|
| |
$14,000 |
|
|
|
|
|
$12,000 |
|
|
|
|
|
$10,000 |
|
|
|
|
|
$8,000 |
|
|
|
|
|
1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
| Franklin Global Real Estate | FTSE EPRA/NAREIT Developed |
| ||
| VIP Fund |
| Index** |
|
|
**Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
FGR-2
Annual Report
Franklin Global Real Estate VIP Fund
Fund Goal and Main Investments
The Fund seeks high total return. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of companies located anywhere in the world that operate in the real estate sector, including: real estate investment trusts (REITs) and similar REIT-like entities domiciled outside the U.S.; companies qualifying under U.S. federal tax law as REITs; and companies that derive at least half of their assets or revenues from the ownership, management, development or sale of residential or commercial real estate (such as real estate operating or service companies).
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. The Fund concentrates in real estate securities, which involve special risks, such as declines in the value of real estate and increased susceptibility to adverse economic or regulatory developments affecting the sector. The Fund’s investments in REITs involve additional risks; since REITs typically are invested in a limited number of projects or in a particular market segment, they are more susceptible to adverse developments affecting a single project or market segment than more broadly diversified investments. Foreign investing, especially in emerging markets, involves additional risks such as currency and market volatility, as well as political and social instability. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. In comparison, the FTSE EPRA/ NAREIT Developed Index posted a -8.18% total return for the same period.1
Portfolio Composition 12/31/20
| % of Total |
| Net Assets |
Equity Real Estate Investment Trusts (REITs) | 77.1% |
Real Estate Management & Development | 20.4% |
Other | 0.9% |
Short-Term Investments & Other Net Assets | 1.6% |
Economic and Market Overview
Global developed and emerging market equities, as measured by the MSCI All Country World Index (USD), posted a +16.82% total return for the 12 months ended December 31, 2020.1 Stocks fell sharply in early 2020 as many investors sold equities amid fears of a global economic slowdown due to the novel coronavirus (COVID-19) pandemic. Global equities began to rebound in late March 2020 amid optimism about easing lockdown restrictions, vaccine and treatment development and economic stimulus measures. Despite declines in September and October due to geopolitical tensions and rising infection rates, markets rebounded in November and December, as positive sentiment about successful trials of COVID-19 vaccines, the beginning of vaccination programs in some countries and apparent resolution of political uncertainty supported markets.
In the U.S., pandemic-related restrictions caused stiff economic headwinds, including mass layoffs that drove the unemployment rate to 14.8% in April 2020.2 According to the National Bureau of Economic Research, the longest U.S. economic expansion in history ended in February, and the country slipped into a deep recession. Equities began to rebound in the spring amid the government’s fiscal and monetary stimulus, declining jobless claims, rising retail sales and optimism about treatments and potential vaccines for COVID-19. Following a record annualized decline in second-quarter gross domestic product (GDP), resilient consumer spending helped drive third-quarter GDP to expand at a record annualized rate, although growth slowed in the fourth quarter. Equities continued to rise during the summer but declined in the fall due to concerns about possible new restrictions amid rising COVID-19 infection rates and uncertainties about additional fiscal stimulus and the U.S. presidential election. Despite signs that the economic recovery was stalling as the unemployment
rate remained relatively high (6.7% at period-end) and
1.Source: Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
2.Source: U.S. Bureau of Labor Statistics.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
Annual Report
FGR-3
FRANKLIN GLOBAL REAL ESTATE VIP FUND
consumer spending declined, stocks rallied in November and December, buoyed by the outcome of the U.S. presidential election, the start of COVID-19 vaccination programs and the passage of a new U.S. stimulus bill.2
In an effort to support the economy, the U.S. Federal Reserve (Fed) lowered the federal funds target rate to a range of 0.00%–0.25% in March 2020. The Fed also enacted quantitative easing measures aimed at ensuring credit flows to borrowers and supporting credit markets with open- ended bond purchasing. Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded its 2% target.
In the eurozone, the economy contracted again in the fourth quarter of 2020, following quarter-on-quarter expansion in the third quarter and contractions in the first and second quarters. After several months of gains due to easing restrictions and robust stimulus measures, European developed market equities, as measured by the MSCI Europe Index (USD), declined in September and October as rising infection rates heightened investor concerns that the nascent economic revival could stall. Nevertheless, successful vaccine development and a Brexit resolution supported European developed market equities, as measured by the MSCI Europe Index (USD), to post a +5.93% total return for the period.1
Asian developed and emerging market equities, as measured by the MSCI All Country Asia Index (USD), posted a +21.30% total return for the 12 months under review.1 Although pandemic-related lockdowns derailed economic growth in early 2020, sharp market declines were followed by rebounds as China’s economy, a key driver of the region’s economic activity, recovered from the contraction in the first quarter and expanded during the rest of 2020. Asian stocks rose as the region’s economies reopened, aided by robust stimulus measures and optimism that economic revitalization would be further spurred by COVID-19 vaccines.
Global emerging market stocks, as measured by the MSCI Emerging Markets Index (USD), posted a +18.69% total return for the period, despite steep pandemic-related declines in early 2020, benefiting from improving economic activity, stabilizing oil prices and U.S. dollar weakness.1 In spite of higher COVID-19 cases in some countries, emerging market stocks rallied near the end of 2020, bolstered by easing political uncertainty, commencement of COVID-19 vaccinations and rising commodity prices.
Top 10 Countries 12/31/20
| % of Total |
| Net Assets |
United States | 53.6% |
|
|
Japan | 10.9% |
|
|
Germany | 7.2% |
|
|
United Kingdom | 6.3% |
|
|
Hong Kong | 4.7% |
|
|
Australia | 4.3% |
|
|
Singapore | 3.4% |
|
|
Canada | 2.4% |
|
|
Spain | 1.9% |
|
|
Sweden | 1.6% |
|
|
Investment Strategy
We seek to limit price volatility by investing across markets and property types. When selecting investments for the Fund’s portfolio, we apply a “bottom-up” stock selection process that incorporates macro-level views in the evaluation process. Our portfolio construction process combines bottom-up analysis of individual stock and real estate market fundamentals and top-down macro overlays to provide country/regional, property type, and company size perspectives in identifying international/local cyclical and thematic trends that highlight investment opportunities.
Manager’s Discussion
During the 12 months under review, key detractors from the Fund’s performance relative to the FTSE EPRA/ NAREIT Developed Index included stock selection and an underweighting in the healthcare property sector and an underweighting in the storage property sector. Stock selection in manufactured homes and an overweighting in triple-net leasing also hurt results. The negative effects from these sectors came almost exclusively from a lack of exposure to stocks that performed relatively well in a declining market.
Elsewhere, Ryman Hospitality Properties was the most significant individual relative detractor during the period. Ryman is an owner of group-oriented, destination hotel assets in urban and resort markets, which are managed by Marriott International (not a Fund holding) under the Gaylord Hotels brand. Hotel REITs were significantly impacted
by COVID-19, as occupancy fell precipitously, leading to closure of hotels across the country. With respect to Ryman, the specific focus on group-oriented hotels and relatively few assets made the company particularly vulnerable to the impacts of the pandemic. However, the company was
FGR-4
Annual Report
fortunate to have raised equity capital just prior to the outbreak of COVID-19, mitigating longer-term damages of the downturn.
U.S.-based Regency Centers also hampered relative results. Regency is an owner of mostly grocery-anchored shopping centers located in affluent and densely populated trade areas across the U.S. Weak trends in fundamentals have persisted for retail landlords for some time amid the increasing percentage of online spending, but Regency had fared rather well due to the relatively internet-resistant nature and superior quality of its assets compared to peers. However, the advent of COVID-19 impacted all retail landlords, including Regency, as the ability to collect rent was meaningfully affected due to the extended closure of a substantial number of stores. As a consequence, financial results for 2020 have seen significant impairment amid continuing uncertainty.
Although the residential sector was an overall relative contributor during the period, U.S.-based AvalonBay Communities detracted from relative performance. AvalonBay is an owner and developer of apartment communities, mostly in coastal locations across the U.S. Leasing conditions for apartment landlords weakened considerably due to the macroeconomic effects of COVID-19, with rents facing significant pressure. This was particularly true in coastal markets such as New York, San Francisco and Boston, which saw a population exodus. Longer-term, we remain constructive on the company’s business due to its diversified product mix (both Class A and Class B properties), suburban exposure and proven track record of value creation from its development business.
Conversely, an overweighting and stock selection in the industrial property sector contributed to relative performance. Performance in the sector was led higher by Australian REIT Goodman Group, Japanese REIT GLP J-REIT, U.S.-based Prologis and U.K-based Segro. GLP J-REIT is an owner and operator of industrial warehouses and logistics facilities in Japan. Adoption of e-commerce has driven strong demand, and limited availability of land has curtailed new supply development. As a result vacancy in key markets like Tokyo are at record lows. We remain favorably biased to industrial real estate globally given strong secular trends favoring demand growth and limiting supply availability.
Stock selection in the office space sector also enhanced results, with performance in the sector led by U.S.-based medical office landlord Alexandria Real Estate Equities.
Alexandria is a developer, owner and operator of life science office and lab clusters. This specific focus on life science minimized concern about risks to occupancy due to adoption
FRANKLIN GLOBAL REAL ESTATE VIP FUND
Top 10 Holdings 12/31/20
Company | % of Total |
Industry, Country | Net Assets |
Prologis, Inc. | 6.3% |
Equity Real Estate Investment Trusts (REITs), |
|
United States |
|
Vonovia SE | 4.2% |
Real Estate Management & Development, |
|
Germany |
|
Alexandria Real Estate Equities, Inc. | 3.2% |
Equity Real Estate Investment Trusts (REITs), |
|
United States |
|
Extra Space Storage, Inc. | 2.6% |
Equity Real Estate Investment Trusts (REITs), |
|
United States |
|
Segro plc | 2.6% |
Equity Real Estate Investment Trusts (REITs), |
|
United Kingdom |
|
Healthpeak Properties, Inc. | 2.5% |
Equity Real Estate Investment Trusts (REITs), |
|
United States |
|
Realty Income Corp. | 2.5% |
Equity Real Estate Investment Trusts (REITs), |
|
United States |
|
AvalonBay Communities, Inc. | 2.3% |
Equity Real Estate Investment Trusts (REITs), |
|
United States |
|
Mitsui Fudosan Co. Ltd. | 2.2% |
Real Estate Management & Development, |
|
Japan |
|
Goodman Group | 2.2% |
Equity Real Estate Investment Trusts (REITs), |
|
Australia
of the work-from-home model that has weighed on the outlook for traditional office peers. We maintain a favorable bias toward Alexandria, as we believe the company’s unique cluster model minimizes competitive supply risk, leading to stable occupancy and industry-leading leasing economics which drives sustainable cash flow growth.
Other individual contributors to relative performance included German residential landlord Vonovia, an owner of apartment communities in Germany, Sweden and Austria. The company outperformed peers in 2020 amid unprecedented economic and market uncertainty due to its robust underlying market fundamentals, immaterial impact from COVID-19 and downside protection with respect to its German exposure due to the federal government’s rent subsidies. We have continued to favor Vonovia for the persistent under-supply of apartment properties across its markets, external growth prospects and valuation upside due to the likelihood for further yield compression amidst capital market support for the asset class.
It is important to recognize the effect of currency movements on the Fund’s performance. In general, if the value of the U.S. dollar goes up compared with a foreign currency, an investment traded in that foreign currency will go down in
Annual Report
FGR-5
FRANKLIN GLOBAL REAL ESTATE VIP FUND
value because it will be worth fewer U.S. dollars. This can have a negative effect on Fund performance. Conversely, when the U.S. dollar weakens in relation to a foreign currency, an investment traded in that foreign currency will increase in value, which can contribute to Fund performance. For the 12 months ended December 31, 2020, the U.S. dollar declined in value relative to most currencies. As a result, the Fund’s performance was positively affected by the portfolio’s significant investment in securities with non-U.S. currency exposure. However, one cannot expect the same result in future periods.
Thank you for your participation in Franklin Global Real Estate VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
FGR-6
Annual Report
FRANKLIN GLOBAL REAL ESTATE VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
|
|
| Actual |
| Hypothetical |
|
| ||
|
|
| (actual return after expenses) |
| (5% annual return before expenses) |
|
| ||
|
|
|
| Fund-Level |
|
| Fund-Level |
|
|
|
|
|
| Expenses |
|
| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201,2 |
| Value 12/31/20 | 7/1/20–12/31/201,2 | a | Ratio2 |
1 | $1,000 |
| $1,148.00 | $5.02 | $1,020.46 | $4.72 |
| 0.93% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.
Annual Report
FGR-7
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Franklin Global Real Estate VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $17.99 | $15.41 | $16.96 | $15.83 | $15.93 |
Income from investment operationsa: | 0.39 | 0.29 | 0.33 | 0.17 | 0.30c |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (1.59) | 3.15 | (1.41) | 1.52 | (0.16) |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (1.20) | 3.44 | (1.08) | 1.69 | 0.14 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.54) | (0.50) | (0.47) | (0.56) | (0.24) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.59) | (0.36) | — | — | — |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2.13) | (0.86) | (0.47) | (0.56) | (0.24) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $14.66 | $17.99 | $15.41 | $16.96 | $15.83 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (5.17)% | 22.62% | (6.52)% | 10.76% | 0.81% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.24% | 1.14% | 1.15% | 1.14% | 1.11% |
Expenses net of waiver and payments by affiliates. . . . . . . | 1.00%e | 1.04%e | 1.15%e | 1.14%f | 1.11%f |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 2.73% | 1.66% | 1.92% | 1.04% | 1.99%c |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $966 | $1,057 | $878 | $819 | $821 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 23.01% | 28.34% | 17.78% | 22.18% | 28.53%g |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.59%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gExcludes the value of portfolio securities delivered as a result of a redemption in-kind.
FGR-8
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Global Real Estate VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $17.50 | $15.00 | $16.52 | $15.42 | $15.52 |
Income from investment operationsa: | 0.35 | 0.24 | 0.27 | 0.13 | 0.28c |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (1.56) | 3.08 | (1.36) | 1.47 | (0.19) |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (1.21) | 3.32 | (1.09) | 1.60 | 0.09 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.49) | (0.46) | (0.43) | (0.50) | (0.19) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.59) | (0.36) | — | — | — |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2.08) | (0.82) | (0.43) | (0.50) | (0.19) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $14.21 | $17.50 | $15.00 | $16.52 | $15.42 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (5.39)% | 22.37% | (6.77)% | 10.47% | 0.54% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.48% | 1.39% | 1.40% | 1.39% | 1.36% |
Expenses net of waiver and payments by affiliates. . . . . . . | 1.25%e | 1.29%e | 1.40%e | 1.39%f | 1.36%f |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 2.47% | 1.41% | 1.67% | 0.79% | 1.74%c |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $134,051 | $159,153 | $146,408 | $183,532 | $193,707 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 23.01% | 28.34% | 17.78% | 22.18% | 28.53%g |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.34%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gExcludes the value of portfolio securities delivered as a result of a redemption in-kind.
The accompanying notes are an integral part of these financial statements.
Annual Report
FGR-9
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Franklin Global Real Estate VIP Fund
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks 98.4% |
|
|
|
|
| Diversified Telecommunication Services 0.9% |
|
|
|
|
| aCellnex Telecom SA, 144A, Reg S. . . . . . . . . . . . . . . . . . . . . . . . . | Spain | 20,913 |
| $1,255,939 |
| Equity Real Estate Investment Trusts (REITs) 77.1% |
|
|
|
|
| Alexandria Real Estate Equities, Inc... . . . . . . . . . . . . . . . . . . . . . . | United States | 24,121 |
| 4,298,845 |
| American Homes 4 Rent, A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 89,275 |
| 2,678,250 |
| bAmericold Realty Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 45,490 |
| 1,698,142 |
| AvalonBay Communities, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 19,395 |
| 3,111,540 |
| Boston Properties, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,952 |
| 1,224,353 |
| Broadstone Net Lease, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 51,791 |
| 1,014,068 |
| Camden Property Trust.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 28,734 |
| 2,871,101 |
| Canadian Apartment Properties REIT. . . . . . . . . . . . . . . . . . . . . . . | Canada | 58,793 |
| 2,310,402 |
| CapitaLand Integrated Commercial Trust. . . . . . . . . . . . . . . . . . . . | Singapore | 851,632 |
| 1,393,679 |
| City Office REIT, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 257 |
| 2,511 |
| Cousins Properties, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 66,946 |
| 2,242,691 |
| Derwent London plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 41,834 |
| 1,778,038 |
| Dexus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 245,730 |
| 1,782,262 |
| Equinix, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,796 |
| 2,711,027 |
| Equity LifeStyle Properties, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 40,524 |
| 2,567,601 |
| Extra Space Storage, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 30,341 |
| 3,515,308 |
| Gecina SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 13,385 |
| 2,081,454 |
| GLP J-Reit.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 1,385 |
| 2,185,547 |
| Goodman Group.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 202,191 |
| 2,955,521 |
| GPT Group (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 291,976 |
| 1,015,589 |
| Healthcare Realty Trust, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 42,682 |
| 1,263,387 |
| Healthpeak Properties, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 112,617 |
| 3,404,412 |
| Host Hotels & Resorts, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 104,095 |
| 1,522,910 |
| Hulic Reit, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 763 |
| 1,139,198 |
| Ichigo Office REIT Investment Corp... . . . . . . . . . . . . . . . . . . . . . . | Japan | 965 |
| 697,021 |
| Inmobiliaria Colonial Socimi SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Spain | 129,802 |
| 1,281,784 |
| Kenedix Office Investment Corp... . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 233 |
| 1,581,929 |
| Kilroy Realty Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 26,033 |
| 1,494,294 |
| Life Storage, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,681 |
| 917,035 |
| Link REIT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 133,810 |
| 1,215,232 |
| Mapletree Logistics Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Singapore | 1,010,324 |
| 1,538,668 |
| MGM Growth Properties LLC, A. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 46,164 |
| 1,444,933 |
| Orix JREIT, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 755 |
| 1,249,018 |
| Premier Investment Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 862 |
| 1,066,292 |
| Prologis, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 85,074 |
| 8,478,475 |
| bQTS Realty Trust, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 32,164 |
| 1,990,308 |
| Realty Income Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 54,039 |
| 3,359,605 |
| Regency Centers Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 38,702 |
| 1,764,424 |
| Retail Properties of America, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . | United States | 101,885 |
| 872,136 |
| Rexford Industrial Realty, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 53,556 |
| 2,630,135 |
| Ryman Hospitality Properties, Inc... . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,735 |
| 524,124 |
| SBA Communications Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,608 |
| 1,582,185 |
| Segro plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 269,628 |
| 3,498,881 |
| Simon Property Group, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 19,465 |
| 1,659,975 |
| SmartCentres Real Estate Investment Trust. . . . . . . . . . . . . . . . . . | Canada | 54,722 |
| 992,834 |
| Spirit Realty Capital, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 55,960 |
| 2,247,913 |
| Summit Hotel Properties, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 51,902 |
| 467,637 |
| Terreno Realty Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,486 |
| 1,491,186 |
| UDR, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 72,526 |
| 2,787,174 |
| cUNITE Group plc (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 134,844 |
| 1,926,420 |
| VEREIT, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 44,351 |
| 1,676,024 |
| Welltower, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 44,809 |
| 2,895,558 |
|
|
|
|
| 104,099,036 |
FGR-10
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Global Real Estate VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Real Estate Management & Development 20.4% |
|
|
|
|
| Aroundtown SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 162,438 |
| $1,211,177 |
| CapitaLand Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Singapore | 681,689 |
| 1,692,543 |
| CK Asset Holdings Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 165,235 |
| 845,491 |
| Deutsche Wohnen SE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 52,975 |
| 2,826,585 |
| Fabege AB.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Sweden | 68,124 |
| 1,076,434 |
| cFastighets AB Balder, B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Sweden | 22,038 |
| 1,150,853 |
| Grainger plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 320,845 |
| 1,248,087 |
| Hang Lung Properties Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 364,000 |
| 959,235 |
| Mitsubishi Estate Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 173,879 |
| 2,794,729 |
| Mitsui Fudosan Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 141,544 |
| 2,963,870 |
| New World Development Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 227,038 |
| 1,056,274 |
| Nomura Real Estate Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 47,646 |
| 1,056,485 |
| Shurgard Self Storage SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Belgium | 16,119 |
| 698,202 |
| Sun Hung Kai Properties Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 178,157 |
| 2,278,446 |
| Vonovia SE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 76,904 |
| 5,616,843 |
|
|
|
|
| 27,475,254 |
| . .Total Common Stocks (Cost $95,307,792).. . . . . . . . | . . . . . . . . . . . . . . . . . . . | . . . . . . . . . |
| 132,830,229 |
|
|
|
|
|
|
Short Term Investments 0.5%
|
| Principal |
|
a | a | Amount* | a |
Value
a | a | a | a | a | a |
| Repurchase Agreements 0.4% |
|
|
|
|
| dJoint Repurchase Agreement, 0.054%, 1/04/21 (Maturity Value |
|
|
|
|
| $509,241) |
|
|
|
|
| BNP Paribas Securities Corp. (Maturity Value $325,324) |
|
|
|
|
| Deutsche Bank Securities, Inc. (Maturity Value $97,163) |
|
|
|
|
| HSBC Securities (USA), Inc. (Maturity Value $86,754) |
|
|
|
|
| Collateralized by U.S. Government Agency Securities, 4% - 5%, |
|
|
|
|
| 2/20/49 - 5/20/49; and U.S. Treasury Notes, 0.13% - 2.63%, |
|
|
|
|
| 1/31/21 - 12/31/25 (valued at $519,485).. . . . . . . . . . . . . . . . . . . |
| 509,238 |
| 509,238 |
| Total Repurchase Agreements (Cost $509,238). . . . . | . . . . . . . . . . . . . . . . . . . . | . . . . . . | . . . | 509,238 |
| eInvestments from Cash Collateral Received for |
|
|
|
|
|
|
|
|
| |
| Loaned Securities 0.1% | Country | Shares |
|
|
|
|
|
| ||
| Money Market Funds 0.1% |
|
|
|
|
| f,gInstitutional Fiduciary Trust - Money Market Portfolio, 0%. . . . . . . . | United States | 163,000 |
| 163,000 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FGR-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Global Real Estate VIP Fund (continued)
Short Term Investments (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Repurchase Agreements 0.0%† |
|
|
|
|
| dJoint Repurchase Agreement, BofA Securities, Inc., 0.06%, 1/04/21 |
|
|
|
|
| (Maturity Value $40,914) |
|
|
|
|
| Collateralized by U.S. Treasury Note, 1.5%, 11/30/24 (valued at |
|
|
|
|
| $41,732).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| 40,914 |
| $40,914 |
Total Investments from Cash Collateral Received for Loaned Securities
(Cost $203,914). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Short Term Investments (Cost $713,152).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Investments (Cost $96,020,944) 98.9%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities 1.1%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
203,914
713,152
$133,543,381 1,473,870
$135,017,251
See Abbreviations on page FGR-24 .
*The principal amount is stated in U.S. dollars unless otherwise indicated.
† Rounds to less than 0.1% of net assets.
a Security was purchased pursuant to Rule 144A or Regulation S under the Securities Act of 1933. 144A securities may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. Regulation S securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At December 31, 2020, the value of this security was $1,255,939, representing 0.9% of net assets.
bA portion or all of the security is on loan at December 31, 2020. See Note 1(d).
cNon-income producing.
dSee Note 1(c) regarding joint repurchase agreement.
eSee Note 1(d) regarding securities on loan.
fSee Note 3(e) regarding investments in affiliated management investment companies.
gThe rate shown is the annualized seven-day effective yield at period end.
FGR-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Franklin Global |
| Real Estate VIP |
| Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $95,307,792 |
Cost - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 163,000 |
Cost - Unaffiliated repurchase agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 550,152 |
Value - Unaffiliated issuers (Includes securities loaned of $196,794).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $132,830,229 |
Value - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 163,000 |
Value - Unaffiliated repurchase agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 550,152 |
Foreign currency, at value (cost $1,597).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,592 |
Receivables: |
|
Investment securities sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 85,946 |
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 40,488 |
Dividends.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 577,125 |
European Union tax reclaims (Note 1e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,292,108 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 21 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 135,540,661 |
Liabilities: |
|
Payables: |
|
Investment securities purchased.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,629 |
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 21,273 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 86,401 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 28,043 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 31,310 |
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 54,350 |
Payable upon return of securities loaned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 203,914 |
Accrued contingent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 90,130 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,360 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 523,410 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $135,017,251 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $98,060,474 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 36,956,777 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $135,017,251 |
| Franklin Global |
| Real Estate VIP |
| Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $965,938 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 65,884 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $14.66 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $134,051,313 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 9,436,602 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $14.21 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FGR-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the year ended December 31, 2020
| Franklin Global |
| Real Estate VIP |
| Fund |
Investment income: |
|
Dividends: (net of foreign taxes of $168,741) |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $3,780,007 |
Interest: |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,299 |
Income from securities loaned: |
|
Unaffiliated entities (net of fees and rebates).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,509 |
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 53 |
Other income (Note 1e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,137,323 |
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,928,191 |
Expenses: |
|
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,392,522 |
Distribution fees: (Note 3c) |
|
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 329,333 |
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,194 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 33,950 |
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 96,365 |
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 808 |
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 102,095 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Total expenses | 1,964,267 |
Expense reductions (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (5) |
Expenses waived/paid by affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (309,285) |
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,654,977 |
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,273,214 |
Realized and unrealized gains (losses): |
|
Net realized gain (loss) from: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,238,660 |
Realized gain distributions from REITs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 284,024 |
Foreign currency transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (20,350) |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,502,334 |
Net change in unrealized appreciation (depreciation) on: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (18,883,982) |
Translation of other assets and liabilities denominated in foreign currencies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 57,794 |
Net change in unrealized appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (18,826,188) |
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (13,323,854) |
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $(10,050,640) |
FGR-14
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin Global Real Estate VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $3,273,214 | $2,258,113 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,502,334 | 14,467,280 |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | (18,826,188) | 15,008,279 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | (10,050,640) | 31,733,672 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (122,579) | (48,761) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (18,130,603) | (7,479,667) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (18,253,182) | (7,528,428) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 91,462 | 29,075 |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,019,898 | (11,311,091) |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,111,360 | (11,282,016) |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | (25,192,462) | 12,923,228 |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 160,209,713 | 147,286,485 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $135,017,251 | $160,209,713 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FGR-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Notes to Financial Statements
Franklin Global Real Estate VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Global Real Estate VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At December 31, 2020, 82.8% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively.
Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter
(OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Investments in open-end mutual funds are valued at the closing NAV. Investments in repurchase agreements are valued at cost, which approximates fair value.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Events can occur between the time at which trading in a foreign security
is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund's portfolio securities as determined at the foreign market close and the latest indications of value at
4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund's securities to the latest indications of fair value at 4 p.m. Eastern time. At December 31, 2020, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy. See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result
FGR-16
Annual Report
Franklin Global Real Estate VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
a. Financial Instrument Valuation (continued)
in differences between the value of the Fund's portfolio securities on the last business day and the last calendar day of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
c. Joint Repurchase Agreement
The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund's custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non- defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at year end, as indicated in the Statement of Investments, had been entered into on December 31, 2020.
d. Securities Lending
The Fund participates in an agency based securities lending program to earn additional income. The Fund receives collateral in the form of cash and/or U.S. Government
and Agency securities against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. Any cash collateral received is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund. The Fund may receive income from the investment of cash collateral, in addition to lending fees
Annual Report
FGR-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Global Real Estate VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
d. Securities Lending (continued)
and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/ or third-party vendor, is reported separately in the Statement of Operations. The Fund bears the market risk with respect to any cash collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.
e. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected
as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities.
When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts
are reflected in the financial statements. For U.S. income tax purposes, when EU reclaims are received by the Fund and the Fund previously passed foreign tax credit on to its shareholders, the Fund will enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund’s shareholders.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
f. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions
to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
FGR-18
Annual Report
Franklin Global Real Estate VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
f. Security Transactions, Investment Income, Expenses and Distributions (continued)
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
Distributions received by the Fund from certain securities may be a return of capital (ROC). Such distributions reduce the cost basis of the securities, and any distributions in excess of the cost basis are recognized as capital gains. For U.S. Real Estate Investment Trust (REIT) securities, the Fund records ROC estimates, if any, on the ex-dividend date and are adjusted once actual tax designations are known.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
g. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
h. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust
on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
|
| Year Ended |
| Year Ended |
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 2 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
2,518 | $33,827 | 1,935 | $34,241 |
9,436 | 122,579 | 2,856 | 48,761 |
(4,809) | (64,944) | (3,061) | (53,927) |
7,145 | $91,462 | 1,730 | $29,075 |
236,639 | $3,343,255 | 244,773 | $4,187,098 |
1,438,937 | 18,130,603 | 449,770 | 7,479,667 |
(1,332,313) | (18,453,960) | (1,360,628) | (22,977,856) |
343,263 | $3,019,898 | (666,085) | $(11,311,091) |
Annual Report
FGR-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Global Real Estate VIP Fund (continued)
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Templeton Institutional, LLC (FT Institutional) | Investment manager |
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
|
|
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
|
|
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
a. Management Fees
The Fund pays an investment management fee to FT Institutional based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
1.050% | Up to and including $500 million |
|
|
0.950% | Over $500 million, up to and including $1 billion |
0.900% | Over $1 billion, up to and including $1.5 billion |
|
|
0.850% | Over $1.5 billion, up to and including $6.5 billion |
0.830% | Over $6.5 billion, up to and including $11.5 billion |
|
|
0.810% | Over $11.5 billion, up to and including $16.5 billion |
0.790% | Over $16.5 billion, up to and including $19 billion |
|
|
0.780% | Over $19 billion, up to and including $21.5 billion |
|
|
0.770% | In excess of $21.5 billion |
b. Administrative Fees
Under an agreement with FT Institutional, FT Services provides administrative services to the Fund. The fee is paid by FT Institutional based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted a distribution plan for Class 2 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plan, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.35% per year of its average daily net assets. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
FGR-20
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Global Real Estate VIP Fund (continued)
3. Transactions with Affiliates (continued)
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
|
|
|
|
|
| Net Change in |
| Number of |
|
|
| Value at |
|
|
| Unrealized | Value | Shares Held |
|
|
| Beginning |
|
| Realized Gain | Appreciation | at End | at End | Investment |
|
| of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Franklin Global Real Estate VIP Fund |
|
|
|
|
|
|
|
| |
Non-Controlled Affiliates |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Income from |
|
|
|
|
|
|
|
|
| securities |
|
|
|
|
|
|
|
|
| loaned |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
| |
Market Portfolio, 0%.. . . . . . . . . | $— | $7,063,000 | $(6,900,000) | $— | $— | $163,000 | 163,000 | $53 | |
Total Affiliated Securities. . . . . |
| $— | $7,063,000 | $(6,900,000) | $— | $— | $163,000 |
| $53 |
f. Waiver and Expense Reimbursements
FT Institutional has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the operating expenses (excluding distribution fees and acquired fund fees and expenses and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) for each class of the Fund do not exceed 1.00% based on the average net assets of each class until April 30, 2021. Total expenses waived or paid are not subject to recapture subsequent to the Fund's fiscal year end.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows:
| 2020 | 2019 |
Distributions paid from: |
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $4,362,274 | $4,226,148 |
Long term capital gain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 13,890,908 | 3,302,280 |
| $18,253,182 | $7,528,428 |
Annual Report
FGR-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Global Real Estate VIP Fund (continued)
5. Income Taxes (continued)
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed long term capital gains.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total distributable earnings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$102,406,954
$39,767,490 (8,631,063)
$31,136,427
$1,640,987 $2,971,918
$4,612,905
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, EU reclaims, passive foreign investment company shares and wash sales.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $30,363,645 and $43,144,585, respectively.
At December 31, 2020, in connection with securities lending transactions, the Fund loaned equity investments and received $203,914 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.
7. Concentration of Risk
The Fund invests a large percentage of its total assets in REIT securities. Such concentration may subject the Fund to special risks associated with real estate securities. These securities may be more sensitive to economic or regulatory developments due to a variety of factors such as local, regional, national and global economic conditions, interest rates and tax considerations.
8. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
9. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers, renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
FGR-22
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Global Real Estate VIP Fund (continued)
9. Credit Facility (continued)
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
10. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
A summary of inputs used as of December 31, 2020, in valuing the Fund's assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total |
Franklin Global Real Estate VIP Fund |
|
|
|
|
Assets: |
|
|
|
|
Investments in Securities: |
|
|
|
|
Common Stocks: |
|
|
|
|
Diversified Telecommunication Services . . . . . . | $— | $1,255,939 | $— | $1,255,939 |
Equity Real Estate Investment Trusts (REITs) .. | 75,712,503 | 28,386,533 | — | 104,099,036 |
Real Estate Management & Development .. . . . | — | 27,475,254 | — | 27,475,254 |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | 163,000 | 550,152 | — | 713,152 |
Total Investments in Securities.. . . . . . . . . . . | $75,875,503 | $57,667,878 | $— | $133,543,381 |
11. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020- 04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
12. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Annual Report
FGR-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Global Real Estate VIP Fund (continued)
Abbreviations
Selected Portfolio
REIT | Real Estate Investment Trust |
FGR-24
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Franklin Global Real Estate VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Franklin Global Real Estate VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
Annual Report
FGR-25
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Franklin Global Real Estate VIP Fund
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $13,890,909 as a long term capital gain dividend for the fiscal year ended December 31, 2020.
FGR-26
Annual Report
Franklin Growth and Income VIP Fund
This annual report for Franklin Growth and Income VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares* represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | +5.81% |
5-Year | +10.63% |
10-Year | +10.46% |
*The Fund has an expense reduction contractually guaranteed through 4/30/21. Fund investment results reflect the expense reduction; without this reduction, the results would have been lower.
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Annual Report
FGI-1
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Fund’s new primary benchmark, the Russell 1000® Value Index, and the Fund’s former primary benchmark and new secondary benchmark, the Standard & Poor’s® 500 Index (S&P 500®). The investment manager believes that the Russell 1000® Value Index more accurately reflects the Fund’s investment strategy. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund
Summaries.
$40,000
$35,000 |
|
|
|
| $36,700 |
|
|
|
|
| |
$30,000 |
|
|
|
| $27,148 |
|
|
|
|
| |
$25,000 |
|
|
|
| $27,041 |
$20,000 |
|
|
|
|
|
$15,000 |
|
|
|
|
|
$10,000 |
|
|
|
|
|
$5,000 |
|
|
|
|
|
1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
| Franklin Growth and Income | Russell 1000 Value Index** | S&P 500** |
| |
| VIP Fund |
|
|
|
|
**Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
FGI-2
Annual Report
Franklin Growth and Income VIP Fund
Fund Goal and Main Investments
The Fund seeks capital appreciation with current income as a secondary goal. Under normal market conditions, the Fund invests predominantly in equity securities, including common stock, preferred stock and securities convertible into common stocks, with the remainder of its net assets in other equity-related instruments such as convertible securities and equity-linked notes (ELNs). The Fund may invest up to 25% of its net assets in foreign securities, including developing or emerging markets.
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Value securities may not increase in price as anticipated
or may decline further if other investors fail to recognize the company’s value or favor investing in faster growing companies. Growth stock prices reflect projections of future earnings or revenues, and can, therefore, fall dramatically if the company fails to meet those projections. Because the Fund can only distribute what it earns, the Fund’s distributions to shareholders may decline when prevailing interest rates fall, when dividend income from investments in stocks decline, or when the Fund experiences defaults on debt securities it holds. To the extent the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject
to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Special risks are associated with foreign investing, including currency exchange rates and policies, country or government specific issues, less favorable trading practices or regulation and greater price volatility; investments in emerging markets typically involve heightened risks related to the same factors. Common stocks with higher dividend yields can be sensitive to interest-rate movements. The Fund is actively managed but there is no guarantee that the manager’s investment
Portfolio Composition 12/31/20
| % of Total |
| Net Assets |
Banks | 11.8% |
Electric Utilities | 8.2% |
Capital Markets | 6.9% |
Health Care Equipment & Supplies | 6.6% |
Pharmaceuticals | 5.9% |
Beverages | 4.6% |
Semiconductors & Semiconductor Equipment | 4.3% |
Oil, Gas & Consumable Fuels | 4.0% |
Aerospace & Defense | 3.8% |
Multiline Retail | 3.2% |
Machinery | 3.2% |
Chemicals | 3.0% |
Software | 2.8% |
Household Products | 2.8% |
Diversified Telecommunication Services | 2.6% |
Other | 26.5% |
Short-Term Investments & Other Net Assets | (0.2)% |
decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Fund’s new primary benchmark, the Russell 1000® Value Index, posted a +2.80% total return.1 Also for comparison, the Fund’s former primary and new secondary benchmark, the Standard & Poor’s 500 Index (S&P 500) posted a +18.40% total return.1 The investment manager believes that the Russell 1000® Value Index more accurately reflects the Fund’s investment strategy.
Economic and Market Overview
U.S. equities, as measured by the S&P 500, advanced strongly during the 12 months ended December 31, 2020. Although equities began the year with gains, a sharp selloff began in late February 2020 amid investor fears of a global economic slowdown due to the novel coronavirus (COVID-19) pandemic. Such fears drove many investors to sell equities and buy government bonds, cash equivalents and other investments perceived as safe. Nevertheless, equities began to advance in late March, as monetary
1.Source: Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
Annual Report
FGI-3
FRANKLIN GROWTH AND INCOME VIP FUND
and fiscal stimulus drove stocks sharply higher. Following declines in September and October, equities, as measured by the S&P 500, advanced to all-time price highs in December.
Pandemic-related restrictions severely curtailed economic activity, resulting in mass layoffs that drove the unemployment rate to 14.8% in April 2020.2 The longest U.S. economic expansion in history ended in February, according to the National Bureau of Economic Research, and the country slipped into a deep recession with second- quarter 2020 gross domestic product (GDP) posting a record annualized decline.
In an effort to support the economy, the U.S. Federal Reserve (Fed) lowered the federal funds target rate to a range of 0.00%–0.25% in March 2020. The Fed also enacted quantitative easing measures aimed at ensuring credit flows to borrowers and supporting credit markets with open- ended bond purchasing. Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded its 2% target.
Equities began to rebound in late March 2020, benefiting from fiscal and monetary stimulus, a gradual lifting of restrictions and development of COVID-19 vaccines and treatments. Rising retail sales and rebounding economic activity led third-quarter GDP to expand at a record annualized pace, although growth slowed in the fourth quarter. Concerns about possible new restrictions amid rising COVID-19 infection rates and uncertainties about additional fiscal stimulus and the U.S. presidential election drove stocks lower in September and October. Despite signs that the economic recovery was stalling, as the unemployment rate remained relatively high (6.7% at period-end) and consumer spending declined, stocks rallied in November and December, buoyed by the outcome of the U.S. presidential election, the start of COVID-19 vaccination programs and the passage of a new stimulus bill.2
Investment Strategy
We seek to invest in a broadly diversified portfolio of equity securities that we consider to be financially strong, with
a focus on blue chip companies. We apply a bottom-up approach to investing in individual securities. We will assess the market price of a company’s securities relative to our evaluation of the company’s long-term earnings, cash flow potential and balance sheet strength. We also consider
a company’s price/earnings ratio, return on capital, profit margins and asset value. We consider dividend yield and
2. Source: Bureau of Labor Statistics
Top 10 Holdings 12/31/20
Company | % of Total |
Industry, Country | Net Assets |
JPMorgan Chase & Co. | 4.3% |
Banks, United States |
|
Morgan Stanley | 3.6% |
Capital Markets, United States |
|
Johnson & Johnson | 3.2% |
Pharmaceuticals, United States |
|
Duke Energy Corp. | 2.8% |
Electric Utilities, United States |
|
Bank of America Corp. | 2.8% |
Banks, United States |
|
Procter & Gamble Co. (The) | 2.8% |
Household Products, United States |
|
Raytheon Technologies Corp. | 2.8% |
Aerospace & Defense, United States |
|
Medtronic plc | 2.7% |
Health Care Equipment & Supplies, United |
|
States |
|
NextEra Energy, Inc. | 2.6% |
Electric Utilities, United States |
|
Target Corp. | 2.5% |
Multiline Retail, United States |
|
the opportunity for dividend growth in selecting stocks for the Fund because we believe that, over time, dividend income can contribute significantly to total return and can be a more consistent source of investment return than capital appreciation. We seek to take advantage of price dislocations that result from the market’s short-term focus and choose to invest in those companies that, in our opinion, offer the best trade-off between growth opportunity, business and financial risk, and valuation.
Manager’s Discussion
During the annual period under review, the information technology (IT), consumer discretionary and health care sectors contributed most to the Fund’s absolute performance.
The IT sector benefited from software and services firm Microsoft, whose business became even more relevant during the COVID-19 pandemic and the broader digital transformation opportunity. Personal computing device manufacturer and services provider Apple further boosted Fund performance. The company’s supply chain has remained intact during the pandemic and the company has seen continued strong demand for its various products, including newer wearable technology.
In the consumer discretionary sector, Target was a leading contributor. The big box retailer has demonstrated a business with strong momentum from a growing
FGI-4
Annual Report
FRANKLIN GROWTH AND INCOME VIP FUND
customer base and differentiated digital capabilities. Home improvement retailer Lowe’s and online retailer and cloud services provider Amazon.com (held through an equity- linked security) also contributed to results.
Within health care, life sciences company Danaher aided Fund performance.
Other notable contributors to absolute performance included our positions in investment bank Morgan Stanley and electric utility company NextEra Energy. Morgan Stanley has increased its reliance on its profile and less volatile asset management and investment management segments, while making several acquisitions to broaden its capabilities with online brokerage, digital banking and wealth management. NextEra Energy saw healthy growth in its renewable power business over the period, which bolstered the Fund’s returns.
In contrast, the energy, real estate and financials sectors were leading detractors from the Fund’s absolute performance.
Within energy, oil companies faced headwinds brought on by pandemic disruptions, pricing pressures and demand weakness. Our investments in Canada-based Suncor Energy, Chevron and Netherlands-based Royal Dutch Shell detracted from Fund performance.
In the real estate sector, our position in real estate investment trust Equity Residential (not held at period-end), which acquires, develops and manages rental apartment properties primarily in more urban markets, hindered results.
In the financials sector, low interest rates and softer levels of economic activity pressured our investment in insurer MetLife (not held at period-end). Our positions in financial services firms Bank of America and Wells Fargo & Co. (not held at period-end) also hurt performance.
Elsewhere, our position in Raytheon Technologies (formed following the merger of Raytheon with United Technologies in April 2020) hurt Fund performance, as declining aviation demand has pressured the aerospace industry.
Thank you for your participation in Franklin Growth and Income VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, state, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
Annual Report
FGI-5
FRANKLIN GROWTH AND INCOME VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
|
|
| Actual |
| Hypothetical |
|
| ||
|
|
| (actual return after expenses) |
| (5% annual return before expenses) |
|
| ||
|
|
|
| Fund-Level |
|
| Fund-Level |
|
|
|
|
|
| Expenses |
|
| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201,2 |
| Value 12/31/20 | 7/1/20–12/31/201,2 | a | Ratio2 |
1 | $1,000 |
| $1,200.70 | $3.27 | $1,022.17 | $3.00 |
| 0.59% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.
FGI-6
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Franklin Growth and Income VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $17.20 | $14.80 | $16.32 | $15.97 | $15.94 |
Income from investment operationsa: | 0.31 | 0.41 | 0.31 | 0.35 | 0.40 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (0.13) | 3.28 | (0.97) | 2.04 | 1.33 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.18 | 3.69 | (0.66) | 2.39 | 1.73 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.63) | (0.41) | (0.43) | (1.03) | (0.46) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (3.42) | (0.88) | (0.43) | (1.01) | (1.24) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (4.05) | (1.29) | (0.86) | (2.04) | (1.70) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $13.33 | $17.20 | $14.80 | $16.32 | $15.97 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5.81% | 26.05% | (4.37)% | 16.15% | 11.86% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 0.83% | 0.72% | 0.73% | 0.72% | 0.59% |
Expenses net of waiver and payments by affiliatesd.. . . . . . | 0.59% | 0.59% | 0.59% | 0.59% | 0.59%e |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 2.31% | 2.07% | 1.96% | 2.21% | 2.38% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $3,206 | $3,539 | $31,479 | $35,865 | $29,829 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 33.46% | 25.20% | 24.29% | 33.91% | 40.59%f |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind.
The accompanying notes are an integral part of these financial statements.
Annual Report
FGI-7
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Growth and Income VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $16.84 | $14.51 | $16.02 | $15.69 | $15.68 |
Income from investment operationsa: | 0.27 | 0.25 | 0.27 | 0.31 | 0.30 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (0.14) | 3.33 | (0.96) | 2.00 | 1.37 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.13 | 3.58 | (0.69) | 2.31 | 1.67 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.58) | (0.37) | (0.39) | (0.97) | (0.42) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (3.42) | (0.88) | (0.43) | (1.01) | (1.24) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (4.00) | (1.25) | (0.82) | (1.98) | (1.66) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $12.97 | $16.84 | $14.51 | $16.02 | $15.69 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5.52% | 25.66% | (4.58)% | 15.85% | 11.62% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.08% | 0.97% | 0.98% | 0.97% | 0.84% |
Expenses net of waiver and payments by affiliatesd.. . . . . . | 0.84% | 0.84% | 0.84% | 0.84% | 0.84%e |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 2.07% | 1.82% | 1.71% | 1.96% | 2.13% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $64,455 | $69,635 | $61,855 | $74,105 | $69,474 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 33.46% | 25.20% | 24.29% | 33.91% | 40.59%f |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind.
FGI-8
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Franklin Growth and Income VIP Fund
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks 83.1% |
|
|
|
|
| Aerospace & Defense 3.8% |
|
|
|
|
| Lockheed Martin Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,990 |
| $706,410 |
| Raytheon Technologies Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 26,245 |
| 1,876,780 |
|
|
|
|
| 2,583,190 |
| Air Freight & Logistics 1.8% |
|
|
|
|
| United Parcel Service, Inc., B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,350 |
| 1,237,740 |
| Banks 10.9% |
|
|
|
|
| Bank of America Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 62,830 |
| 1,904,378 |
| Citigroup, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 21,450 |
| 1,322,607 |
| JPMorgan Chase & Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 22,830 |
| 2,901,008 |
| Truist Financial Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 26,325 |
| 1,261,757 |
|
|
|
|
| 7,389,750 |
| Beverages 4.6% |
|
|
|
|
| Coca-Cola Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 29,285 |
| 1,605,989 |
| PepsiCo, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,130 |
| 1,502,279 |
|
|
|
|
| 3,108,268 |
| Capital Markets 6.9% |
|
|
|
|
| Apollo Global Management, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 14,625 |
| 716,332 |
| Ares Management Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 14,075 |
| 662,229 |
| BlackRock, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,210 |
| 873,063 |
| Morgan Stanley. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 35,235 |
| 2,414,655 |
|
|
|
|
| 4,666,279 |
| Chemicals 1.4% |
|
|
|
|
| BASF SE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 6,350 |
| 501,942 |
| Linde plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 1,600 |
| 421,616 |
|
|
|
|
| 923,558 |
| Commercial Services & Supplies 1.6% |
|
|
|
|
| Republic Services, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 11,315 |
| 1,089,635 |
| Communications Equipment 0.5% |
|
|
|
|
| Cisco Systems, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,250 |
| 369,187 |
| Diversified Telecommunication Services 2.6% |
|
|
|
|
| TELUS Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 15,700 |
| 311,137 |
| Verizon Communications, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,250 |
| 1,483,437 |
|
|
|
|
| 1,794,574 |
| Electric Utilities 8.2% |
|
|
|
|
| Duke Energy Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 20,950 |
| 1,918,182 |
| Entergy Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,885 |
| 687,398 |
| NextEra Energy, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 22,925 |
| 1,768,664 |
| Xcel Energy, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 17,300 |
| 1,153,391 |
|
|
|
|
| 5,527,635 |
| Electrical Equipment 1.1% |
|
|
|
|
| Eaton Corp. plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,400 |
| 168,196 |
| Emerson Electric Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,265 |
| 583,888 |
|
|
|
|
| 752,084 |
| Equity Real Estate Investment Trusts (REITs) 1.3% |
|
|
|
|
| Prologis, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,845 |
| 582,513 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FGI-9
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Growth and Income VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Equity Real Estate Investment Trusts (REITs) (continued) |
|
|
|
|
| Public Storage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,240 |
| $286,353 |
|
|
|
|
| 868,866 |
| Food & Staples Retailing 1.9% |
|
|
|
|
| Walmart, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,800 |
| 1,268,520 |
| Food Products 0.5% |
|
|
|
|
| Nestle SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 2,910 |
| 343,995 |
| Health Care Equipment & Supplies 3.3% |
|
|
|
|
| Baxter International, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,735 |
| 379,936 |
| Medtronic plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,570 |
| 1,823,870 |
|
|
|
|
| 2,203,806 |
| Health Care Providers & Services 1.9% |
|
|
|
|
| HCA Healthcare, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,801 |
| 296,192 |
| UnitedHealth Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,920 |
| 1,023,986 |
|
|
|
|
| 1,320,178 |
| Hotels, Restaurants & Leisure 1.7% |
|
|
|
|
| McDonald's Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,475 |
| 1,174,825 |
| Household Products 2.8% |
|
|
|
|
| Procter & Gamble Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,625 |
| 1,895,783 |
| Insurance 0.6% |
|
|
|
|
| Arthur J Gallagher & Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,500 |
| 432,985 |
| Machinery 0.8% |
|
|
|
|
| Illinois Tool Works, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,475 |
| 300,723 |
| Stanley Black & Decker, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,200 |
| 214,272 |
|
|
|
|
| 514,995 |
| Media 2.0% |
|
|
|
|
| Comcast Corp., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,420 |
| 1,332,008 |
| Multiline Retail 2.5% |
|
|
|
|
| Target Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 9,525 |
| 1,681,448 |
| Oil, Gas & Consumable Fuels 4.0% |
|
|
|
|
| Canadian Natural Resources Ltd... . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 17,600 |
| 423,280 |
| Chevron Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 14,880 |
| 1,256,616 |
| Royal Dutch Shell plc, ADR, A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 18,800 |
| 660,632 |
| Suncor Energy, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 20,450 |
| 343,151 |
|
|
|
|
| 2,683,679 |
| Personal Products 0.7% |
|
|
|
|
| Unilever plc, ADR.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 7,460 |
| 450,286 |
| Pharmaceuticals 5.9% |
|
|
|
|
| Johnson & Johnson. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,570 |
| 2,135,646 |
| Merck & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,350 |
| 846,630 |
| Pfizer, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 27,780 |
| 1,022,582 |
|
|
|
|
| 4,004,858 |
| Road & Rail 2.0% |
|
|
|
|
| Norfolk Southern Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,850 |
| 1,390,019 |
| Semiconductors & Semiconductor Equipment 2.9% |
|
|
|
|
| Analog Devices, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,050 |
| 598,306 |
FGI-10
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Growth and Income VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Semiconductors & Semiconductor Equipment (continued) |
|
|
|
|
| Broadcom, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 970 |
| $424,715 |
| Texas Instruments, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,600 |
| 919,128 |
|
|
|
|
| 1,942,149 |
| Software 1.8% |
|
|
|
|
| Microsoft Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,000 |
| 1,112,100 |
| Oracle Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,680 |
| 108,679 |
|
|
|
|
| 1,220,779 |
| Specialty Retail 1.8% |
|
|
|
|
| Lowe's Cos., Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,470 |
| 877,990 |
| TJX Cos., Inc. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,900 |
| 334,621 |
|
|
|
|
| 1,212,611 |
| Technology Hardware, Storage & Peripherals 1.1% |
|
|
|
|
| Apple, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,600 |
| 743,064 |
| Trading Companies & Distributors 0.2% |
|
|
|
|
| Fastenal Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,750 |
| 134,282 |
| .Total Common Stocks (Cost $34,778,829).. . . . . . . . . | . . . . . . . . . . . . . . . . . . . . | . . . . . . . . |
| 56,261,036 |
| aEquity-Linked Securities 9.7% |
|
|
|
|
|
|
|
|
| |
| Banks 0.9% |
|
|
|
|
| bRoyal Bank of Canada into Bank of America Corp., 144A, 7.75%, |
|
|
|
|
| 11/01/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 23,000 |
| 639,155 |
| Chemicals 1.6% |
|
|
|
|
| bCitigroup Global Markets Holdings, Inc. into Sherwin-Williams Co. |
|
|
|
|
| (The), Senior Unsecured Note, 144A, 6.5%, 7/09/21. . . . . . . . . . | United States | 800 |
| 529,712 |
| bGoldman Sachs International Bank into Linde plc, 144A, 6.5%, |
|
|
|
|
| 10/25/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 2,037 |
| 522,490 |
|
|
|
|
| 1,052,202 |
| Electrical Equipment 0.5% |
|
|
|
|
| bRoyal Bank of Canada into Eaton Corp. plc, 144A, 7%, 8/30/21.. . . | United States | 2,900 |
| 347,098 |
| Equity Real Estate Investment Trusts (REITs) 0.7% |
|
|
|
|
| bRoyal Bank of Canada into Healthpeak Properties, Inc., 144A, 9.5%, |
|
|
|
|
| 12/01/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 16,000 |
| 485,731 |
| Food & Staples Retailing 0.7% |
|
|
|
|
| bCitigroup Global Markets Holdings, Inc. into Tesco plc, Senior |
|
|
|
|
| Unsecured Note, 144A, 6.5%, 1/10/22.. . . . . . . . . . . . . . . . . . . . | United Kingdom | 3,150 |
| 437,316 |
| Health Care Providers & Services 0.7% |
|
|
|
|
| bRoyal Bank of Canada into HCA Healthcare, Inc., 144A, 7%, 6/30/21. | United States | 2,900 |
| 473,019 |
| Internet & Direct Marketing Retail 1.3% |
|
|
|
|
| bWells Fargo Bank NA into Amazon.com, Inc., 144A, 6%, 4/05/21.. . | United States | 380 |
| 902,098 |
| Machinery 0.8% |
|
|
|
|
| bGoldman Sachs International Bank into Stanley Black & Decker, Inc., |
|
|
|
|
| 144A, 7%, 2/24/21.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,000 |
| 523,858 |
| Multiline Retail 0.7% |
|
|
|
|
| bBarclays Bank plc into Dollar Tree, Inc., 144A, 5.5%, 1/14/22. . . . . | United States | 4,100 |
| 444,425 |
| Software 1.0% |
|
|
|
|
| bBarclays Bank plc into Oracle Corp., 144A, 6.5%, 1/22/21.. . . . . . . | United States | 11,500 |
| 690,357 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FGI-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Growth and Income VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| aEquity-Linked Securities (continued) |
|
|
|
|
| Specialty Retail 0.8% |
|
|
|
|
| bCitigroup Global Markets Holdings, Inc. into TJX Cos., Inc. (The), |
|
|
|
|
| Senior Unsecured Note, 144A, 6.5%, 9/14/21.. . . . . . . . . . . . . . . | United States | 8,808 |
| $547,301 |
| . .Total Equity-Linked Securities (Cost $6,013,070).. . . . | . . . . . . . . . . . . . . . . . . | . . . . . . . . |
| 6,542,560 |
| Convertible Preferred Stocks 7.4% |
|
|
|
|
|
|
|
|
| |
| Health Care Equipment & Supplies 3.3% |
|
|
|
|
| Becton Dickinson and Co., 6%, B. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 16,150 |
| 890,350 |
| Boston Scientific Corp., 5.5%, A. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,730 |
| 299,126 |
| Danaher Corp., 4.75%, A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 605 |
| 918,172 |
| cDanaher Corp., 5%, B.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 121 |
| 157,433 |
|
|
|
|
| 2,265,081 |
| Machinery 1.6% |
|
|
|
|
| Fortive Corp., 5%, A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,080 |
| 1,083,856 |
| Semiconductors & Semiconductor Equipment 1.4% |
|
|
|
|
| Broadcom, Inc., 8%, A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 650 |
| 924,605 |
| Water Utilities 1.1% |
|
|
|
|
| Essential Utilities, Inc., 6%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 11,700 |
| 725,634 |
| .. .Total Convertible Preferred Stocks (Cost $4,233,203) | . . . . . . . . . . . . . . . . . . | . . . . . . . . |
| 4,999,176 |
| Total Long Term Investments (Cost $45,025,102).. . . . |
|
|
|
|
| . . . . . . . . . . . . . . . . . . | . . . . . . . . |
| 67,802,772 | |
| Short Term Investments 0.7% |
|
|
|
|
|
|
|
|
|
|
| Principal |
|
a | a | Amount* | a |
Value
a | a | a | a | a | a |
| Repurchase Agreements 0.5% |
|
|
|
|
| dJoint Repurchase Agreement, 0.054%, 1/04/21 (Maturity Value |
|
|
|
|
| $351,415) |
|
|
|
|
| BNP Paribas Securities Corp. (Maturity Value $224,498) |
|
|
|
|
| Deutsche Bank Securities, Inc. (Maturity Value $67,050) |
|
|
|
|
| HSBC Securities (USA), Inc. (Maturity Value $59,867) |
|
|
|
|
| Collateralized by U.S. Government Agency Securities, 4% - 5%, |
|
|
|
|
| 2/20/49 - 5/20/49; and U.S. Treasury Notes, 0.13% - 2.63%, |
|
|
|
|
| 1/31/21 - 12/31/25 (valued at $358,484).. . . . . . . . . . . . . . . . . . . |
| 351,413 |
| 351,413 |
| Total Repurchase Agreements (Cost $351,413). . . . . | . . . . . . . . . . . . . . . . . . . . | . . . . . . | . . . | 351,413 |
| eInvestments from Cash Collateral Received for |
|
|
|
|
|
|
|
|
| |
| Loaned Securities 0.2% | Country | Shares |
|
|
|
|
|
| ||
| Money Market Funds 0.2% |
|
|
|
|
| f,gInstitutional Fiduciary Trust - Money Market Portfolio, 0%. . . . . . . . | United States | 114,000 |
| 114,000 |
FGI-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Growth and Income VIP Fund (continued)
Short Term Investments (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Repurchase Agreements 0.0%† |
|
|
|
|
| dJoint Repurchase Agreement, BofA Securities, Inc., 0.06%, 1/04/21 |
|
|
|
|
| (Maturity Value $28,672) |
|
|
|
|
| Collateralized by U.S. Treasury Note, 1.5%, 11/30/24 (valued at |
|
|
|
|
| $29,245).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| 28,672 |
| $28,672 |
Total Investments from Cash Collateral Received for Loaned Securities
(Cost $142,672). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Short Term Investments (Cost $494,085).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Investments (Cost $45,519,187) 100.9%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities (0.9)%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
142,672
494,085
$68,296,857 (636,328)
$67,660,529
See Abbreviations on page FGI-25.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
† Rounds to less than 0.1% of net assets.
a See Note 1(d) regarding equity-linked securities.
b Security was purchased pursuant to Rule 144A or Regulation S under the Securities Act of 1933. 144A securities may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. Regulation S securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At December 31, 2020, the aggregate value of these securities was $6,542,560, representing 9.7% of net assets.
cA portion or all of the security is on loan at December 31, 2020. See Note 1(e).
dSee Note 1(c) regarding joint repurchase agreement.
eSee Note 1(e) regarding securities on loan.
fSee Note 3(e) regarding investments in affiliated management investment companies.
gThe rate shown is the annualized seven-day effective yield at period end.
The accompanying notes are an integral part of these financial statements.
Annual Report
FGI-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Franklin Growth |
| and Income VIP |
| Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $45,025,102 |
Cost - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 114,000 |
Cost - Unaffiliated repurchase agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 380,085 |
Value - Unaffiliated issuers (Includes securities loaned of $139,141).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $67,802,772 |
Value - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 114,000 |
Value - Unaffiliated repurchase agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 380,085 |
Cash.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 18,245 |
Receivables: |
|
Investment securities sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 426,197 |
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 136,349 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 68,877,656 |
Liabilities: |
|
Payables: |
|
Investment securities purchased.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 909,330 |
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 59,946 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 14,615 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 13,548 |
Payable upon return of securities loaned (Note 1e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 142,672 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 77,016 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,217,127 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $67,660,529 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $38,494,445 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 29,166,084 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $67,660,529 |
| Franklin Growth |
| and Income VIP |
| Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $3,205,593 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 240,398 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $13.33 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $64,454,936 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 4,970,000 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $12.97 |
FGI-14
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations |
|
for the year ended December 31, 2020 |
|
| Franklin Growth |
| and Income VIP |
| Fund |
Investment income: |
|
Dividends: (net of foreign taxes of $25,232) |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,776,401 |
Interest: |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 82,079 |
Income from securities loaned: |
|
Unaffiliated entities (net of fees and rebates).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,971 |
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 182 |
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,860,633 |
Expenses: |
|
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 399,632 |
Distribution fees: (Note 3c) |
|
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 152,659 |
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 925 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 50,300 |
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 63,494 |
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 386 |
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 18,257 |
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 685,653 |
Expense reductions (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,461) |
Expenses waived/paid by affiliates (Note 3e and 3f).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (154,255) |
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 529,937 |
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,330,696 |
Realized and unrealized gains (losses): |
|
Net realized gain (loss) from: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,087,371 |
Foreign currency transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 290 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,087,661 |
Net change in unrealized appreciation (depreciation) on: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (3,257,738) |
Translation of other assets and liabilities denominated in foreign currencies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 528 |
Net change in unrealized appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (3,257,210) |
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,830,451 |
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $3,161,147 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FGI-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin Growth and Income VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,330,696 | $1,871,636 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,087,661 | 14,692,471 |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | (3,257,210) | 5,405,338 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | 3,161,147 | 21,969,445 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (726,968) | (2,665,418) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (15,849,541) | (5,148,061) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (16,576,509) | (7,813,479) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 235,202 | (32,096,096) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,666,739 | (2,220,352) |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,901,941 | (34,316,448) |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | (5,513,421) | (20,160,482) |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 73,173,950 | 93,334,432 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $67,660,529 | $73,173,950 |
FGI-16
Annual Report
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
Franklin Growth and Income VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Growth and Income VIP Fund (Fund) is included
in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At December 31, 2020, 41.6% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust's Board
of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively.
Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
(OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Investments in open-end mutual funds are valued at the closing NAV. Investments in repurchase agreements are valued at cost, which approximates fair value.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Events can occur between the time at which trading in a foreign security
is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund's portfolio securities as determined at the foreign market close and the latest indications of value at
4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund's securities to the latest indications of fair value at 4 p.m. Eastern time. At December 31, 2020, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy. See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result
Annual Report
FGI-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Growth and Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
a. Financial Instrument Valuation (continued)
in differences between the value of the Fund's portfolio securities on the last business day and the last calendar day of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Joint Repurchase Agreement
The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund's custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non- defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at year end, as indicated in the Statement of Investments, had been entered into on December 31, 2020.
d. Equity-Linked Securities
The Fund invests in equity-linked securities. Equity-linked securities are hybrid financial instruments that generally combine both debt and equity characteristics into a single note form. Income received from equity-linked securities is recorded as realized gains in the Statement of Operations and may be based on the performance of an underlying equity security, an equity index, or an option position.
The risks of investing in equity-linked securities include unfavorable price movements in the underlying security and the credit risk of the issuing financial institution. There may be no guarantee of a return of principal with equity-linked securities and the appreciation potential may be limited. Equity-linked securities may be more volatile and less liquid than other investments held by the Fund.
FGI-18
Annual Report
Franklin Growth and Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
e. Securities Lending
The Fund participates in an agency based securities lending program to earn additional income. The Fund receives collateral in the form of cash and/or U.S. Government
and Agency securities against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. Any cash collateral received is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor,
is reported separately in the Statement of Operations. The Fund bears the market risk with respect to any cash collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.
f. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
g. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Dividend income and capital gain distributions are recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the
Annual Report
FGI-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Growth and Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
g. Security Transactions, Investment Income, Expenses and Distributions (continued)
relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
h. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
i. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust,
on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
| Year Ended | Year Ended | ||
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 15,478 | $202,485 | 75,104 | $1,198,235 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 65,434 | 726,968 | 172,296 | 2,665,418 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (46,293) | (694,251) | (2,169,192) | (35,959,749) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 34,619 | $235,202 | (1,921,792) | $(32,096,096) |
Class 2 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 249,299 | $3,313,867 | 202,473 | $3,223,711 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 1,464,837 | 15,849,541 | 339,358 | 5,148,061 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (879,658) | (11,496,669) | (669,637) | (10,592,124) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 834,478 | $7,666,739 | (127,806) | $(2,220,352) |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Advisers, Inc. (Advisers) | Investment manager |
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
|
|
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
|
|
FGI-20
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Growth and Income VIP Fund (continued)
3. Transactions with Affiliates (continued)
a. Management Fees
The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
0.625% | Up to and including $100 million |
0.500% | Over $100 million, up to and including $250 million |
|
|
0.450% | Over $250 million, up to and including $7.5 billion |
0.440% | Over $7.5 billion, up to and including $10 billion |
|
|
0.430% | Over $10 billion, up to and including $12.5 billion |
0.420% | Over $112.5 billion, up to and including $15 billion |
|
|
0.400% | In excess of $15 billion |
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted a distribution plan for Class 2 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plan, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.35% per year of its average daily net assets. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rate, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
Annual Report
FGI-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Growth and Income VIP Fund (continued)
3. Transactions with Affiliates (continued)
e. Investments in Affiliated Management Investment Companies (continued)
|
|
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|
|
| Net Change in |
| Number of |
|
|
| Value at |
|
|
| Unrealized | Value | Shares Held |
|
|
| Beginning |
|
| Realized Gain | Appreciation | at End | at End | Investment |
|
| of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Franklin Growth and Income VIP Fund |
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| |
Non-Controlled Affiliates |
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| |
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| Income from |
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| securities |
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| loaned |
Institutional Fiduciary Trust - Money |
|
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| |
Market Portfolio, 0%.. . . . . . . . . |
| $— | $4,824,000 | $(4,710,000) | $— | $— | $114,000 | 114,000 | $182 |
Total Affiliated Securities. . . . . |
| $— | $4,824,000 | $(4,710,000) | $— | $— | $114,000 |
| $182 |
f. Waiver and Expense Reimbursements
Advisers has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the operating expenses (excluding distribution fees, acquired fund fees and expenses and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) for each class of the Fund do not exceed 0.59% based on the average net assets of each class April 30, 2021. Total expenses waived or paid are not subject to recapture subsequent to the Fund's fiscal year end.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows:
| 2020 | 2019 |
Distributions paid from: |
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,770,624 | $2,375,917 |
Long term capital gain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 13,805,885 | 5,437,562 |
| $16,576,509 | $7,813,479 |
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$45,674,561
$23,374,378 (752,082)
$22,622,296
FGI-22
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Growth and Income VIP Fund (continued)
5. Income Taxes (continued)
Distributable earnings: |
|
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,686,996 |
Undistributed long term capital gains.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $4,856,037 |
Total distributable earnings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $6,543,033 |
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of bond discounts and premiums, equity-linked securities and wash sales.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $21,345,596 and $26,757,103, respectively.
At December 31, 2020, in connection with securities lending transactions, the Fund loaned equity investments and received $142,672 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.
7. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
8. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
9. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
Annual Report
FGI-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Growth and Income VIP Fund (continued)
9.Fair Value Measurements (continued)
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
A summary of inputs used as of December 31, 2020, in valuing the Fund's assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total |
Franklin Growth and Income VIP Fund |
|
|
|
|
Assets: |
|
|
|
|
Investments in Securities: |
|
|
|
|
Common Stocks: |
|
|
|
|
Aerospace & Defense .. . . . . . . . . . . . . . . . . . . | $2,583,190 | $— | $— | $2,583,190 |
Air Freight & Logistics .. . . . . . . . . . . . . . . . . . . | 1,237,740 | — | — | 1,237,740 |
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,389,750 | — | — | 7,389,750 |
Beverages .. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,108,268 | — | — | 3,108,268 |
Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . | 4,666,279 | — | — | 4,666,279 |
Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 421,616 | 501,942 | — | 923,558 |
Commercial Services & Supplies . . . . . . . . . . . | 1,089,635 | — | — | 1,089,635 |
Communications Equipment .. . . . . . . . . . . . . . | 369,187 | — | — | 369,187 |
Diversified Telecommunication Services . . . . . . | 1,794,574 | — | — | 1,794,574 |
Electric Utilities .. . . . . . . . . . . . . . . . . . . . . . . . | 5,527,635 | — | — | 5,527,635 |
Electrical Equipment .. . . . . . . . . . . . . . . . . . . . | 752,084 | — | — | 752,084 |
Equity Real Estate Investment Trusts (REITs) .. | 868,866 | — | — | 868,866 |
Food & Staples Retailing . . . . . . . . . . . . . . . . . | 1,268,520 | — | — | 1,268,520 |
Food Products . . . . . . . . . . . . . . . . . . . . . . . . . | — | 343,995 | — | 343,995 |
Health Care Equipment & Supplies .. . . . . . . . . | 2,203,806 | — | — | 2,203,806 |
Health Care Providers & Services .. . . . . . . . . . | 1,320,178 | — | — | 1,320,178 |
Hotels, Restaurants & Leisure . . . . . . . . . . . . . | 1,174,825 | — | — | 1,174,825 |
Household Products .. . . . . . . . . . . . . . . . . . . . | 1,895,783 | — | — | 1,895,783 |
Insurance .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 432,985 | — | — | 432,985 |
Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 514,995 | — | — | 514,995 |
Media .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,332,008 | — | — | 1,332,008 |
Multiline Retail . . . . . . . . . . . . . . . . . . . . . . . . . | 1,681,448 | — | — | 1,681,448 |
Oil, Gas & Consumable Fuels .. . . . . . . . . . . . . | 2,683,679 | — | — | 2,683,679 |
Personal Products . . . . . . . . . . . . . . . . . . . . . . | 450,286 | — | — | 450,286 |
Pharmaceuticals .. . . . . . . . . . . . . . . . . . . . . . . | 4,004,858 | — | — | 4,004,858 |
Road & Rail . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,390,019 | — | — | 1,390,019 |
Semiconductors & Semiconductor Equipment .. | 1,942,149 | — | — | 1,942,149 |
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,220,779 | — | — | 1,220,779 |
Specialty Retail . . . . . . . . . . . . . . . . . . . . . . . . | 1,212,611 | — | — | 1,212,611 |
Technology Hardware, Storage & Peripherals .. | 743,064 | — | — | 743,064 |
Trading Companies & Distributors .. . . . . . . . . . | 134,282 | — | — | 134,282 |
Equity-Linked Securities . . . . . . . . . . . . . . . . . . . | — | 6,542,560 | — | 6,542,560 |
Convertible Preferred Stocks .. . . . . . . . . . . . . . . | 4,999,176 | — | — | 4,999,176 |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | 114,000 | 380,085 | — | 494,085 |
Total Investments in Securities.. . . . . . . . . . . | $60,528,275 | $7,768,582 | $— | $68,296,857 |
10. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020- 04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract
FGI-24
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Growth and Income VIP Fund (continued)
10. New Accounting Pronouncements (continued)
modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
11. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure, other than those already disclosed in the financial statements.
Abbreviations
Selected Portfolio
ADR | American Depositary Receipt |
Annual Report
FGI-25
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Franklin Growth and Income VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Franklin Growth and Income VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
FGI-26
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Franklin Growth And Income VIP Fund
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $13,805,884 as a long term capital gain dividend for the fiscal year ended December 31, 2020.
Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 53.29% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2020.
Annual Report
FGI-27
Franklin Income VIP Fund
This annual report for Franklin Income VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares* represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | +0.97% |
5-Year | +7.22% |
10-Year | +6.26% |
*The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/21. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Annual Report
FI-1
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Standard & Poor’s® 500 Index (S&P 500®) and the Fund’s Blended Benchmark. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the
Fund Summaries.
$40,000
$35,000 |
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|
|
| $36,700 |
|
|
|
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| |
$30,000 |
|
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$25,000 |
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| $23,302 |
$20,000 |
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| |
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| $18,344 | |
$15,000 |
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| |
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$10,000 |
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$5,000 |
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|
1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
| Franklin Income VIP Fund | S&P 500** |
| Blended Benchmark*** |
**Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
***Source: FactSet. The Fund’s Blended Benchmark was calculated internally and was composed of 50% MSCI USA High Dividend Yield Index + 25% Bloomberg Barclays U.S. High Yield Very Liquid Index + 25% Bloomberg Barclays U.S. Aggregate Bond Index. Please see Index Descriptions following the Fund Summaries.
FI-2
Annual Report
Franklin Income VIP Fund
Fund Goal and Main Investments
The Fund seeks to maximize income, while maintaining prospects for capital appreciation. Under normal market conditions, the Fund invests in a diversified portfolio of debt and equity securities.
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. High-yield debt securities are generally considered predominantly speculative by the applicable rating agencies as their issuers are more likely to encounter financial difficulties because they may be more highly leveraged, or because of other considerations. The Fund’s share price and yield will be affected by interest rate movements. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. Foreign investing typically involves more risks than investing in U.S. securities, including risks related to currency exchange rates and policies, country or government specific issues, less favorable trading practices or regulation and great price volatility. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Fund’s primary benchmark, the Standard & Poor’s® 500 Index, posted a +18.40% total return.1 The Fund’s secondary benchmark, the Blended Benchmark, posted a +4.64% total return.2
1. Source: Morningstar.
Portfolio Composition 12/31/20
| % of Total |
| Net Assets |
Health Care Providers & Services | 9.9% |
Banks | 9.3% |
Pharmaceuticals | 9.1% |
Diversified Financial Services | 7.0% |
Electric Utilities | 6.5% |
Oil, Gas & Consumable Fuels | 6.3% |
Semiconductors & Semiconductor Equipment | 5.6% |
Multi-Utilities | 3.6% |
Beverages | 3.0% |
Media | 2.9% |
Diversified Telecommunication Services | 2.5% |
Aerospace & Defense | 2.5% |
Capital Markets | 1.8% |
Metals & Mining | 1.6% |
Wireless Telecommunication Services | 1.6% |
Other | 23.3% |
Short-Term Investments & Other Net Assets | 3.5% |
Economic and Market Overview
The U.S. bond market, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, advanced during the 12 months ended December 31, 2020. The period was defined by the economic and social disruption that began in the wake of the novel coronavirus (COVID-19) pandemic, which caused significant volatility in U.S. bond markets. In late February, the U.S. bond market began to anticipate the adverse economic impact of business shutdowns and social distancing measures. Higher-quality, longer-term bonds rallied, with the 10-year U.S. Treasury yield (which moves inversely to price) falling in February and March, while riskier, lower-rated corporate bonds declined sharply. U.S. Federal Reserve (Fed) action led to a recovery in the corporate bond market beginning in late March, which accelerated in subsequent months as many businesses reopened. Corporate bonds, particularly high-yield bonds, also benefited from the resolution of the U.S. election and several promising vaccine results late in the reporting period.
The Fed enacted two emergency rate cuts in March 2020, lowering the federal funds target rate to a range of 0.00%– 0.25%. In addition, the Fed announced unlimited, open- ended purchasing of government-backed and corporate
2.Source: FactSet. The Fund’s Blended Benchmark was calculated internally and was composed of 50% MSCI USA High Dividend Yield Index + 25% Bloomberg Barclays U.S. High Yield Very Liquid Index + 25% Bloomberg Barclays U.S. Aggregate Bond Index.
One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
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FRANKLIN INCOME VIP FUND
bonds as necessary to help keep markets functioning. Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded the Fed’s 2% target for some time.
U.S. Treasury bonds, as measured by the Bloomberg Barclays U.S. Treasury Index, posted positive total returns during the period. The 10-year U.S. Treasury yield declined significantly during the reporting period, reaching a new record closing low in early August 2020. Bond purchasing by the Fed and robust demand for investments perceived as safe drove the U.S. Treasury market. Mortgage-backed securities (MBS), as measured by the Bloomberg Barclays MBS Index, posted positive total returns for the period amid Fed support, though lower interest rates accelerated prepayments from mortgage refinancing, restricting further gains.
U.S. corporate bond performance varied somewhat based on credit rating, as many investors became concerned about the potential credit downgrades of some companies. Total returns for investment-grade corporate bonds, as represented by the Bloomberg Barclays U.S. Corporate Bond Index, exceeded total returns for high-yield corporate bonds, as represented by the Bloomberg Barclays U.S. Corporate High Yield Bond Index.
Investment Strategy
We search for undervalued or out-of-favor securities we believe offer opportunities for income today and significant growth tomorrow. In analyzing corporate debt and equity securities, we consider such factors as a security’s relative value based on such factors as anticipated cash flow, interest or dividend coverage, asset coverage and earnings prospects; the experience and strength of the company’s management; changing financial condition and market recognition of the change; sensitivity to changes in interest rates and business conditions; and debt maturity schedules and borrowing requirements. When choosing investments for the Fund, we apply a bottom-up, value oriented, long- term approach, focusing on the market price of a company’s securities relative to our evaluation of the company’s long- term earnings, asset value and cash flow potential. Our investment process generally includes an assessment of the potential impacts of any material environmental, social and governance (ESG) factors on the long-term risk and return profile of a company.
Top Five Equity Holdings 12/31/20
Company | % of Total |
Industry, Country | Net Assets |
JPMorgan Chase & Co. | 3.0% |
Banks, United States |
|
Southern Co. (The) | 2.2% |
Electric Utilities, United States |
|
Chevron Corp. | 2.0% |
Oil, Gas & Consumable Fuels, United States |
|
Exxon Mobil Corp. | 1.8% |
Oil, Gas & Consumable Fuels, United States |
|
Bank of America Corp. | 1.7% |
Banks, United States |
|
Manager’s Discussion
The Fund underperformed during the 12-month period, driven by weak performance across fixed income holdings relative to the Fund’s benchmark. Although high dividend paying stocks underperformed the broader equity market over the course of the year, the Fund’s equity positions outperformed the benchmark, with the largest driver of fixed income returns in the market coming from the historic decline in U.S. Treasury yields, as evidenced by 10-year yields moving from 1.92% at the start of the period to 0.93% at period-end, with a low of 0.52% in August 2020.
Fixed income holdings benefited from the sharp decline in interest rates during the period and, while credit spreads widened materially during the immediate response to the global pandemic, the historic accommodation in the form of monetary and fiscal policy intervention calmed markets and led to substantial spread tightening by period-end. This trend was most apparent in the corporate credit markets.
Health care and communication services bonds were the largest positive sector contributors relative to the Fund’s benchmark during the period. In health care, hospital and outpatient service providers Community Health Systems and Tenet Healthcare led fixed income returns in the portfolio, with bonds of pharmaceutical companies Endo International and Bausch Health also providing strong contributions. On the communication services side, T-Mobile/Sprint bonds were meaningful contributors that benefited from the consummation of their corporate combination.
Energy sector corporate bond holdings were weak, especially the holdings of Chesapeake Energy and HighPoint Resources, which were impacted by global commodity oversupply and weak demand as a result of the pandemic. Outside of the energy sector, health care company Mallinckrodt was a meaningful detractor, as the company navigated through ongoing litigation. Additionally,
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Annual Report
24 Hour Fitness in the consumer discretionary sector was a notable detractor due to its business model being impacted by the pandemic.
Although our U.S. Treasury and securitized holdings benefited absolute performance during periods of elevated market volatility, the generally shorter duration of our positioning lagged the broader market move amid the sharp decline in longer-term interest rates.
Top contributors to performance relative to our benchmark within the equity asset class included holdings in the information technology (IT), communication services, industrials and materials sectors.
Top IT sector contributors to performance during the period included semiconductor companies Texas Instruments and Broadcom. Honeywell International and United Parcel Services in the industrials sector and Rio Tinto in the materials sector also helped pace equity returns during the period. The Fund used equity index put options during the period, which also generated gains.
The energy and financials sectors were the leading detractors on the equity side of the portfolio during the reporting period. Energy detractors included producers Occidental Petroleum and Royal Dutch Shell as well as oil field service players Halliburton and Weatherford International, which were negatively impacted by weak commodity prices. Wells Fargo was a key detractor in the financials portion of the equity portfolio.
FRANKLIN INCOME VIP FUND
Top Five Fixed Income Holdings 12/31/20
Company | % of Total |
Industry, Country | Net Assets |
CHS/Community Health Systems Inc | 4.8% |
Health Care Providers & Services, United States |
|
U.S. Treasury Notes | 4.1% |
Diversified Financial Services, United States |
|
GNMA II, Single-family, 30 Year | 2.5% |
Diversified Financial Services, United States |
|
Tenet Healthcare Corp | 2.4% |
Health Care Providers & Services, United States |
|
DISH DBS Corp | 1.3% |
Media, United States |
|
Thank you for your participation in Franklin Income VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN INCOME VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
|
|
| Actual |
| Hypothetical |
|
| ||
|
|
| (actual return after expenses) |
| (5% annual return before expenses) |
|
| ||
|
|
|
| Fund-Level |
|
| Fund-Level |
|
|
|
|
|
| Expenses |
|
| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201,2 |
| Value 12/31/20 | 7/1/20–12/31/201,2 | a | Ratio2 |
1 | $1,000 |
| $1,137.40 | $2.49 | $1,022.80 | $2.36 |
| 0.46% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Franklin Income VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $16.52 | $15.26 | $16.72 | $15.87 | $14.64 |
Income from investment operationsa: | 0.59 | 0.75 | 0.71 | 0.69 | 0.67 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (0.54) | 1.68 | (1.35) | 0.87 | 1.34 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.05 | 2.43 | (0.64) | 1.56 | 2.01 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.91) | (0.91) | (0.82) | (0.71) | (0.78) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.01) | (0.26) | — | — | — |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.92) | (1.17) | (0.82) | (0.71) | (0.78) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $15.65 | $16.52 | $15.26 | $16.72 | $15.87 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.97% | 16.42% | (4.09)% | 9.94% | 14.33% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 0.47% | 0.46% | 0.47% | 0.47% | 0.47% |
Expenses net of waiver and payments by affiliatesd.. . . . . . | 0.46% | 0.45% | 0.45% | 0.45% | 0.44% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.96% | 4.38% | 4.33% | 4.22% | 4.47% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $306,641 | $309,330 | $612,657 | $735,149 | $696,227 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 45.93% | 25.16% | 43.22% | 20.96% | 39.03% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Income VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $15.91 | $14.74 | $16.17 | $15.38 | $14.20 |
Income from investment operationsa: | 0.53 | 0.64 | 0.65 | 0.63 | 0.61 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (0.53) | 1.66 | (1.30) | 0.83 | 1.31 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | — | 2.30 | (0.65) | 1.46 | 1.92 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.86) | (0.87) | (0.78) | (0.67) | (0.74) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.01) | (0.26) | — | — | — |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.87) | (1.13) | (0.78) | (0.67) | (0.74) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $15.04 | $15.91 | $14.74 | $16.17 | $15.38 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.69% | 16.06% | (4.30)% | 9.67% | 14.02% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 0.72% | 0.71% | 0.72% | 0.72% | 0.72% |
Expenses net of waiver and payments by affiliatesd.. . . . . . | 0.71% | 0.70% | 0.70% | 0.70% | 0.69% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.73% | 4.13% | 4.08% | 3.97% | 4.22% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $3,852,709 | $4,318,156 | $4,086,652 | $5,041,498 | $5,088,556 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 45.93% | 25.16% | 43.22% | 20.96% | 39.03% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
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Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Income VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 4
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $16.32 | $15.08 | $16.53 | $15.71 | $14.49 |
Income from investment operationsa: | 0.53 | 0.64 | 0.64 | 0.62 | 0.61 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (0.54) | 1.71 | (1.33) | 0.85 | 1.33 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (0.01) | 2.35 | (0.69) | 1.47 | 1.94 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.85) | (0.85) | (0.76) | (0.65) | (0.72) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.01) | (0.26) | — | — | — |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.86) | (1.11) | (0.76) | (0.65) | (0.72) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $15.45 | $16.32 | $15.08 | $16.53 | $15.71 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.58% | 16.05% | (4.42)% | 9.55% | 13.87% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 0.82% | 0.81% | 0.82% | 0.82% | 0.82% |
Expenses net of waiver and payments by affiliatesd.. . . . . . | 0.81% | 0.80% | 0.80% | 0.80% | 0.79% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.62% | 4.03% | 3.98% | 3.87% | 4.12% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $302,474 | $323,582 | $294,700 | $335,217 | $309,935 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 45.93% | 25.16% | 43.22% | 20.96% | 39.03% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Annual Report
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Franklin Income VIP Fund
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks 48.2% |
|
|
|
|
| Aerospace & Defense 1.2% |
|
|
|
|
| Lockheed Martin Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 90,000 |
| $31,948,200 |
| Raytheon Technologies Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 21,453,000 |
|
|
|
|
| 53,401,200 |
| Air Freight & Logistics 0.8% |
|
|
|
|
| United Parcel Service, Inc., B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 217,700 |
| 36,660,680 |
| Automobiles 0.6% |
|
|
|
|
| General Motors Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 600,000 |
| 24,984,000 |
| Banks 7.4% |
|
|
|
|
| Bank of America Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,549,110 |
| 77,263,525 |
| aBarclays plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 12,500,000 |
| 25,078,006 |
| Citigroup, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 30,830,000 |
| JPMorgan Chase & Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 975,000 |
| 123,893,250 |
| Truist Financial Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 755,000 |
| 36,187,150 |
| US Bancorp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 800,000 |
| 37,272,000 |
|
|
|
|
| 330,523,931 |
| Beverages 3.0% |
|
|
|
|
| Coca-Cola Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,060,000 |
| 58,130,400 |
| PepsiCo, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 74,150,000 |
|
|
|
|
| 132,280,400 |
| Capital Markets 1.3% |
|
|
|
|
| Morgan Stanley. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 830,000 |
| 56,879,900 |
| Chemicals 1.0% |
|
|
|
|
| Air Products and Chemicals, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 70,000 |
| 19,125,400 |
| BASF SE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 325,000 |
| 25,689,921 |
|
|
|
|
| 44,815,321 |
| Diversified Telecommunication Services 2.0% |
|
|
|
|
| BCE, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 466,000 |
| 19,938,983 |
| Verizon Communications, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,200,000 |
| 70,500,000 |
|
|
|
|
| 90,438,983 |
| Electric Utilities 4.7% |
|
|
|
|
| American Electric Power Co., Inc... . . . . . . . . . . . . . . . . . . . . . . . . | United States | 450,000 |
| 37,471,500 |
| Duke Energy Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 710,000 |
| 65,007,600 |
| Edison International. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 550,000 |
| 34,551,000 |
| Southern Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,200,000 |
| 73,716,000 |
|
|
|
|
| 210,746,100 |
| Energy Equipment & Services 0.1% |
|
|
|
|
| aWeatherford International plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 750,000 |
| 4,500,000 |
| Equity Real Estate Investment Trusts (REITs) 0.3% |
|
|
|
|
| Host Hotels & Resorts, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,000,000 |
| 14,630,000 |
| Health Care Providers & Services 1.6% |
|
|
|
|
| aCommunity Health Systems, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,000,000 |
| 7,430,000 |
| CVS Health Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 920,000 |
| 62,836,000 |
|
|
|
|
| 70,266,000 |
| Household Products 1.6% |
|
|
|
|
| Procter & Gamble Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 69,570,000 |
| Industrial Conglomerates 1.4% |
|
|
|
|
| Honeywell International, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 63,810,000 |
FI-10
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Income VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
Common Stocks (continued)
Insurance 1.4% |
|
|
MetLife, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,335,108 |
IT Services 0.3% |
|
|
International Business Machines Corp... . . . . . . . . . . . . . . . . . . . . | United States | 100,000 |
Machinery 0.5% |
|
|
Cummins, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 100,000 |
Media 0.6% |
|
|
Comcast Corp., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
Metals & Mining 1.3% |
|
|
Rio Tinto plc, ADR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 800,000 |
Multi-Utilities 2.6% |
|
|
Dominion Energy, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 906,638 |
DTE Energy Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 100,000 |
Sempra Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 275,000 |
Oil, Gas & Consumable Fuels 4.9% |
|
|
BP plc, ADR.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 550,000 |
Chevron Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,050,000 |
Exxon Mobil Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,000,000 |
bRoyal Dutch Shell plc, ADR, A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 450,000 |
bTOTAL SE, ADR.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 500,000 |
Personal Products 0.3% |
|
|
Unilever plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 250,000 |
Pharmaceuticals 5.2% |
|
|
AstraZeneca plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 455,000 |
Bristol-Myers Squibb Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,100,000 |
Johnson & Johnson. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
Merck & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 675,000 |
Road & Rail 0.8% |
|
|
Union Pacific Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 180,000 |
Semiconductors & Semiconductor Equipment 2.4% |
|
|
Analog Devices, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 100,000 |
Intel Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
Texas Instruments, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
Software 0.1% |
|
|
Oracle Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 38,400 |
Specialty Retail 0.2% |
|
|
Home Depot, Inc. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 32,000 |
Tobacco 0.6% |
|
|
Philip Morris International, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 350,000 |
Total Common Stocks (Cost $1,693,704,437). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
cEquity-Linked Securities 8.5%
Aerospace & Defense 0.9% |
|
|
dSociete Generale SA into Raytheon Technologies Corp., 144A, 8%, |
|
|
6/01/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 548,000 |
$62,683,321
12,588,000
22,710,000
26,200,000
60,176,000
68,179,178
12,141,000
35,037,750
115,357,928
11,286,000
88,672,500
82,440,000
15,813,000
20,955,000
219,166,500
14,994,515
45,372,857
68,233,000
62,952,000
55,215,000
231,772,857
37,479,600
14,773,000
24,910,000
65,652,000
105,335,000
2,484,096
8,499,840
28,976,500
2,151,930,672
38,581,521
The accompanying notes are an integral part of these financial statements.
Annual Report
FI-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Income VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| cEquity-Linked Securities (continued) |
|
|
|
|
| Biotechnology 0.8% |
|
|
|
|
| dGoldman Sachs International Bank into AbbVie, Inc., 144A, 10%, |
|
|
|
|
| 7/22/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 348,000 |
| $36,661,189 |
| Communications Equipment 0.5% |
|
|
|
|
| dCredit Suisse AG into Cisco Systems, Inc., 144A, 10%, 6/01/21.. . . | United States | 508,000 |
| 22,641,279 |
| Energy Equipment & Services 0.2% |
|
|
|
|
| dSociete Generale SA into Schlumberger Ltd., 144A, 9%, 2/01/21.. . | United States | 429,000 |
| 9,755,134 |
| Internet & Direct Marketing Retail 0.6% |
|
|
|
|
| dJPMorgan Chase Bank NA into Amazon.com, Inc., 144A, Reg S, |
|
|
|
|
| 9.5%, 12/07/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,000 |
| 25,625,259 |
| IT Services 0.5% |
|
|
|
|
| dCredit Suisse AG into International Business Machines Corp., 144A, |
|
|
|
|
| 7.5%, 2/22/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 160,000 |
| 20,319,414 |
| Media 0.4% |
|
|
|
|
| dBarclays Bank plc into Comcast Corp., 144A, 9%, 4/28/21.. . . . . . . | United States | 408,000 |
| 17,866,089 |
| Pharmaceuticals 1.3% |
|
|
|
|
| dCredit Suisse AG into Pfizer, Inc., 144A, 8%, 8/27/21.. . . . . . . . . . . | United States | 1,642,000 |
| 60,389,989 |
| Semiconductors & Semiconductor Equipment 1.6% |
|
|
|
|
| dRoyal Bank of Canada into Analog Devices, Inc., 144A, 8.5%, |
|
|
|
|
| 9/10/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 270,000 |
| 35,838,301 |
| dRoyal Bank of Canada into Intel Corp., 144A, 8.5%, 12/14/21. . . . . | United States | 782,000 |
| 37,725,539 |
|
|
|
|
| 73,563,840 |
| Software 0.4% |
|
|
|
|
| dCitigroup Global Markets Holdings, Inc. into Microsoft Corp., 144A, |
|
|
|
|
| 8%, 9/24/21.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 80,000 |
| 17,792,589 |
| Specialty Retail 0.8% |
|
|
|
|
| dRoyal Bank of Canada into Home Depot, Inc. (The), 144A, 8.5%, |
|
|
|
|
| 4/07/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 151,500 |
| 36,325,481 |
| Technology Hardware, Storage & Peripherals 0.5% |
|
|
|
|
| dBNP Paribas Issuance BV into Apple, Inc., 144A, 10%, 12/22/21.. . | United States | 164,000 |
| 21,280,673 |
| . . .Total Equity-Linked Securities (Cost $368,655,861).. | . . . . . . . . . . . . . . . . | . . . . . . . . . . |
| 380,802,457 |
| Convertible Preferred Stocks 4.8% |
|
|
|
|
|
|
|
|
| |
| Capital Markets 0.1% |
|
|
|
|
| bKKR & Co., Inc., 6%, C.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 85,000 |
| 5,123,800 |
| Electric Utilities 1.8% |
|
|
|
|
| American Electric Power Co., Inc., 6.125%. . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 20,040,000 |
| NextEra Energy, Inc., 5.279%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 20,336,000 |
| NextEra Energy, Inc., 6.219%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 230,200 |
| 11,825,374 |
| Southern Co. (The), 6.75%, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 25,950,000 |
|
|
|
|
| 78,151,374 |
| Multi-Utilities 1.0% |
|
|
|
|
| DTE Energy Co., 6.25%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 24,070,000 |
| bSempra Energy, 6.75%, B.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 20,746,000 |
|
|
|
|
| 44,816,000 |
| Semiconductors & Semiconductor Equipment 1.6% |
|
|
|
|
| Broadcom, Inc., 8%, A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 50,000 |
| 71,123,500 |
FI-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Income VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a | ||
| Convertible Preferred Stocks (continued) |
|
|
|
|
|
|
| Thrifts & Mortgage Finance 0.3% |
|
|
|
|
|
|
aFNMA, 5.375%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 475 |
|
| $14,843,750 | ||
| Total Convertible Preferred Stocks (Cost $208,919,128) | .. . . . . . . . . . . . . . . | . . . . . . . . | . . . |
| 214,058,424 | |
| Preferred Stocks 0.2% |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Banks 0.2% |
|
|
|
|
|
|
| JPMorgan Chase & Co., 6%, EE.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 261,924 |
|
| 7,459,596 | |
| Total Preferred Stocks (Cost $6,548,100).. . . . . . . . . . . . . | . . . . . . . . . . . . . . . | . . . . . . . . | . . . |
| 7,459,596 | |
|
|
|
| Principal |
|
| |
|
|
|
|
|
| ||
|
|
|
| Amount* |
|
| |
| Convertible Bonds 0.3% |
|
|
|
|
|
|
| Airlines 0.3% |
|
|
|
|
|
|
| Southwest Airlines Co., Senior Note, 1.25%, 5/01/25.. . . . . . . . . . . | United States | 8,500,000 |
|
| 12,388,750 | |
| Total Convertible Bonds (Cost $7,960,937). . . . . . . . . . . . | . . . . . . . . . . . . . . . | . . . . . . . . | . . . |
| 12,388,750 | |
| Corporate Bonds 27.1% |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Aerospace & Defense 0.4% |
|
|
|
|
|
|
| Raytheon Technologies Corp., Senior Note, 3.95%, 8/16/25. . . . . . | United States | 15,000,000 |
|
| 17,207,509 | |
| Automobiles 0.8% |
|
|
|
|
|
|
| Ford Motor Co., Senior Note, 4.346%, 12/08/26. . . . . . . . . . . . . . . | United States | 13,500,000 |
| 14,396,940 | ||
| General Motors Co., Senior Bond, 5.15%, 4/01/38.. . . . . . . . . . . . . | United States | 16,000,000 |
| 19,238,189 | ||
|
|
|
|
|
|
| 33,635,129 |
| Banks 1.7% |
|
|
|
|
|
|
| Bank of America Corp., |
|
|
|
|
|
|
e | AA, Junior Sub. Bond, 6.1% to 3/17/25, FRN thereafter, Perpetual . | United States | 8,000,000 |
|
| 9,069,960 | |
e | X, Junior Sub. Bond, 6.25% to 9/05/24, FRN thereafter, Perpetual . | United States | 6,000,000 |
|
| 6,659,575 | |
| Senior Bond, 3.419% to 12/20/27, FRN thereafter, 12/20/28 . . . . | United States | 10,000,000 |
| 11,313,617 | ||
| Citigroup, Inc., Sub. Bond, 4.125%, 7/25/28. . . . . . . . . . . . . . . . . . | United States | 18,500,000 |
| 21,647,222 | ||
eJPMorgan Chase & Co., |
|
|
|
|
|
| |
f | I, Junior Sub. Bond, FRN, 3.684%, (3-month USD LIBOR + |
|
|
|
|
|
|
| 3.47%), Perpetual .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 19,559,000 |
|
| 19,424,630 | |
| R, Junior Sub. Bond, 6% to 8/01/23, FRN thereafter, Perpetual .. | United States | 3,200,000 |
| 3,393,214 | ||
eWells Fargo & Co., S, Junior Sub. Bond, 5.9% to 6/15/24, FRN |
|
|
|
|
|
| |
| thereafter, Perpetual. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,000,000 |
|
| 3,194,426 | |
|
|
|
|
|
|
| 74,702,644 |
| Biotechnology 0.4% |
|
|
|
|
|
|
| AbbVie, Inc., Senior Note, 3.8%, 3/15/25.. . . . . . . . . . . . . . . . . . . . | United States | 17,000,000 |
|
| 18,979,197 | |
| Capital Markets 0.4% |
|
|
|
|
|
|
| Goldman Sachs Group, Inc. (The), Senior Note, 3.272% to 9/29/24, |
|
|
|
|
|
|
| FRN thereafter, 9/29/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,500,000 |
|
| 16,992,443 | |
| Consumer Finance 0.9% |
|
|
|
|
|
|
| Capital One Financial Corp., Sub. Note, 4.2%, 10/29/25. . . . . . . . . | United States | 15,500,000 |
|
| 17,697,287 | |
| Ford Motor Credit Co. LLC, Senior Note, 5.125%, 6/16/25.. . . . . . . | United States | 20,000,000 |
|
| 21,771,000 | |
|
|
|
|
|
|
| 39,468,287 |
| Containers & Packaging 0.8% |
|
|
|
|
|
|
dMauser Packaging Solutions Holding Co., |
|
|
|
|
|
| |
| Senior Note, 144A, 7.25%, 4/15/25 .. . . . . . . . . . . . . . . . . . . . . . | United States | 23,000,000 |
|
| 23,258,750 | |
| Senior Secured Note, 144A, 5.5%, 4/15/24 .. . . . . . . . . . . . . . . . | United States | 10,000,000 |
|
| 10,211,900 | |
|
|
|
|
|
|
| 33,470,650 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FI-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Diversified Financial Services 0.4% |
|
|
|
|
dMPH Acquisition Holdings LLC, Senior Note, 144A, 5.75%, 11/01/28. | United States | 20,000,000 |
| $19,575,000 | |
| Diversified Telecommunication Services 0.5% |
|
|
|
|
| AT&T, Inc., Senior Bond, 4.125%, 2/17/26.. . . . . . . . . . . . . . . . . . . | United States | 12,000,000 |
| 13,893,578 |
dCCO Holdings LLC / CCO Holdings Capital Corp., Senior Bond, |
|
|
|
| |
| 144A, 5.5%, 5/01/26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,000,000 |
| 10,376,550 |
|
|
|
|
| 24,270,128 |
| Energy Equipment & Services 0.8% |
|
|
|
|
dWeatherford International Ltd., |
|
|
|
| |
| 144A, 8.75%, 9/01/24 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,250,000 |
| 10,288,437 |
| Senior Note, 144A, 11%, 12/01/24 . . . . . . . . . . . . . . . . . . . . . . . | United States | 33,000,000 |
| 25,822,500 |
|
|
|
|
| 36,110,937 |
| Entertainment 0.6% |
|
|
|
|
| Netflix, Inc., Senior Bond, 4.875%, 4/15/28. . . . . . . . . . . . . . . . . . . | United States | 22,000,000 |
| 24,845,260 |
| Equity Real Estate Investment Trusts (REITs) 0.3% |
|
|
|
|
| Equinix, Inc., Senior Bond, 5.375%, 5/15/27. . . . . . . . . . . . . . . . . . | United States | 11,000,000 |
| 11,993,533 |
| Food Products 0.4% |
|
|
|
|
| Kraft Heinz Foods Co., Senior Bond, 4.625%, 1/30/29.. . . . . . . . . . | United States | 10,600,000 |
| 12,131,613 |
dPost Holdings, Inc., Senior Bond, 144A, 5%, 8/15/26.. . . . . . . . . . . | United States | 7,500,000 |
| 7,756,762 | |
|
|
|
|
| 19,888,375 |
| Health Care Providers & Services 8.3% |
|
|
|
|
dCHS/Community Health Systems, Inc., |
|
|
|
| |
| Secured Note, 144A, 11%, 6/30/23 .. . . . . . . . . . . . . . . . . . . . . . | United States | 77,201,000 |
| 81,438,949 |
| Secured Note, 144A, 8.125%, 6/30/24 . . . . . . . . . . . . . . . . . . . . | United States | 50,144,000 |
| 52,024,400 |
| Senior Note, 144A, 6.875%, 4/01/28 .. . . . . . . . . . . . . . . . . . . . . | United States | 20,000,000 |
| 16,117,900 |
| Senior Secured Note, 144A, 6.625%, 2/15/25 .. . . . . . . . . . . . . . | United States | 27,600,000 |
| 29,100,198 |
| Senior Secured Note, 144A, 8%, 3/15/26 . . . . . . . . . . . . . . . . . . | United States | 12,500,000 |
| 13,481,250 |
| Senior Secured Note, 144A, 8%, 12/15/27 . . . . . . . . . . . . . . . . . | United States | 20,000,000 |
| 21,750,000 |
| Cigna Corp., Senior Note, 3.75%, 7/15/23.. . . . . . . . . . . . . . . . . . . | United States | 13,292,000 |
| 14,372,071 |
| CVS Health Corp., |
|
|
|
|
| Senior Bond, 4.3%, 3/25/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,000,000 |
| 9,528,196 |
| Senior Bond, 5.05%, 3/25/48 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,900,000 |
| 5,286,045 |
| Senior Note, 4.1%, 3/25/25 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,225,000 |
| 1,387,525 |
| HCA, Inc., |
|
|
|
|
| Senior Bond, 5.875%, 5/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,500,000 |
| 8,251,537 |
| Senior Secured Note, 5%, 3/15/24 . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,400,000 |
| 11,703,287 |
| Tenet Healthcare Corp., |
|
|
|
|
| Secured Note, 5.125%, 5/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,000,000 |
| 2,041,480 |
d | Secured Note, 144A, 6.25%, 2/01/27 . . . . . . . . . . . . . . . . . . . . . | United States | 29,000,000 |
| 30,780,455 |
| Senior Note, 6.75%, 6/15/23 .. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 58,200,000 |
| 62,669,760 |
d | Senior Note, 144A, 6.125%, 10/01/28 .. . . . . . . . . . . . . . . . . . . . | United States | 9,000,000 |
| 9,409,770 |
|
|
|
|
| 369,342,823 |
| Hotels, Restaurants & Leisure 1.0% |
|
|
|
|
dCaesars Entertainment, Inc., Senior Secured Note, 144A, 6.25%, |
|
|
|
| |
| 7/01/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 18,000,000 |
| 19,192,590 |
dWynn Las Vegas LLC / Wynn Las Vegas Capital Corp., |
|
|
|
| |
| Senior Bond, 144A, 5.5%, 3/01/25 . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,200,000 |
| 13,816,044 |
| Senior Note, 144A, 5.25%, 5/15/27 .. . . . . . . . . . . . . . . . . . . . . . | United States | 10,000,000 |
| 10,326,250 |
|
|
|
|
| 43,334,884 |
| Media 1.9% |
|
|
|
|
dDiamond Sports Group LLC / Diamond Sports Finance Co., Senior |
|
|
|
| |
| Secured Note, 144A, 5.375%, 8/15/26.. . . . . . . . . . . . . . . . . . . . | United States | 10,000,000 |
| 8,143,750 |
FI-14
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Media (continued) |
|
|
|
|
| DISH DBS Corp., |
|
|
|
|
| Senior Note, 5.875%, 7/15/22 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 27,000,000 |
| $28,242,000 |
| Senior Note, 5%, 3/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 21,000,000 |
| 21,708,750 |
| Senior Note, 5.875%, 11/15/24 .. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 9,400,000 |
| 9,870,000 |
dUnivision Communications, Inc., |
|
|
|
| |
| Senior Secured Note, 144A, 5.125%, 2/15/25 .. . . . . . . . . . . . . . | United States | 7,140,000 |
| 7,206,938 |
| Senior Secured Note, 144A, 6.625%, 6/01/27 .. . . . . . . . . . . . . . | United States | 8,500,000 |
| 9,144,087 |
|
|
|
|
| 84,315,525 |
| Metals & Mining 0.3% |
|
|
|
|
dCleveland-Cliffs, Inc., Senior Secured Note, 144A, 6.75%, 3/15/26. | United States | 5,000,000 |
| 5,406,250 | |
dFMG Resources August 2006 Pty. Ltd., Senior Note, 144A, 5.125%, |
|
|
|
| |
| 5/15/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 6,700,000 |
| 7,282,062 |
|
|
|
|
| 12,688,312 |
| Oil, Gas & Consumable Fuels 1.4% |
|
|
|
|
| Calumet Specialty Products Partners LP / Calumet Finance Corp., |
|
|
|
|
| Senior Note, 7.625%, 1/15/22 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,815,000 |
| 2,796,745 |
| Senior Note, 7.75%, 4/15/23 .. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,000,000 |
| 1,957,290 |
d | Senior Note, 144A, 11%, 4/15/25 . . . . . . . . . . . . . . . . . . . . . . . . | United States | 23,500,000 |
| 23,793,515 |
d | Senior Secured Note, 144A, 9.25%, 7/15/24 .. . . . . . . . . . . . . . . | United States | 5,185,000 |
| 5,807,200 |
| HighPoint Operating Corp., |
|
|
|
|
| Senior Bond, 7%, 10/15/22 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 17,937,000 |
| 7,058,478 |
| Senior Note, 8.75%, 6/15/25 .. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 26,600,000 |
| 10,507,000 |
| Occidental Petroleum Corp., |
|
|
|
|
| Senior Note, 8%, 7/15/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,000,000 |
| 5,704,375 |
| Senior Note, 6.625%, 9/01/30 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,000,000 |
| 6,523,500 |
|
|
|
|
| 64,148,103 |
| Pharmaceuticals 2.6% |
|
|
|
|
dBausch Health Cos., Inc., |
|
|
|
| |
| Senior Bond, 144A, 6.125%, 4/15/25 .. . . . . . . . . . . . . . . . . . . . . | United States | 9,400,000 |
| 9,697,604 |
| Senior Note, 144A, 9%, 12/15/25 . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,000,000 |
| 5,539,775 |
| Senior Note, 144A, 5%, 2/15/29 . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,000,000 |
| 5,150,375 |
| Senior Secured Note, 144A, 7%, 3/15/24 . . . . . . . . . . . . . . . . . . | United States | 4,500,000 |
| 4,633,875 |
| Senior Secured Note, 144A, 5.5%, 11/01/25 . . . . . . . . . . . . . . . . | United States | 31,000,000 |
| 32,155,990 |
dBayer US Finance II LLC, Senior Note, 144A, 4.25%, 12/15/25.. . . | Germany | 15,000,000 |
| 17,165,127 | |
| Bristol-Myers Squibb Co., Senior Note, 3.4%, 7/26/29.. . . . . . . . . . | United States | 8,000,000 |
| 9,316,300 |
dEndo Dac / Endo Finance LLC / Endo Finco, Inc., |
|
|
|
| |
| Secured Note, 144A, 9.5%, 7/31/27 . . . . . . . . . . . . . . . . . . . . . . | United States | 5,273,000 |
| 5,895,873 |
| Senior Note, 144A, 6%, 6/30/28 . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,094,000 |
| 6,036,994 |
dPar Pharmaceutical, Inc., Senior Secured Note, 144A, 7.5%, 4/01/27. | United States | 8,429,000 |
| 9,156,507 | |
| Utah Acquisition Sub, Inc., Senior Note, 3.95%, 6/15/26. . . . . . . . . | United States | 10,000,000 |
| 11,446,846 |
|
|
|
|
| 116,195,266 |
| Road & Rail 0.1% |
|
|
|
|
dAshtead Capital, Inc., Senior Note, 144A, 4.25%, 11/01/29. . . . . . . | United Kingdom | 4,500,000 |
| 4,938,030 | |
| Tobacco 0.7% |
|
|
|
|
| BAT Capital Corp., |
|
|
|
|
| Senior Note, 3.222%, 8/15/24 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 10,000,000 |
| 10,831,379 |
| Senior Note, 3.557%, 8/15/27 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 20,000,000 |
| 22,273,854 |
|
|
|
|
| 33,105,233 |
| Trading Companies & Distributors 0.8% |
|
|
|
|
| United Rentals North America, Inc., Senior Bond, 4.875%, 1/15/28. | United States | 18,000,000 |
| 19,192,500 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FI-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a | ||
| Corporate Bonds (continued) |
|
|
|
|
|
|
| Trading Companies & Distributors (continued) |
|
|
|
|
|
|
| dWESCO Distribution, Inc., Senior Note, 144A, 7.125%, 6/15/25.. . . | United States | 14,000,000 |
|
| $15,416,170 | |
|
|
|
|
|
|
| 34,608,670 |
| Wireless Telecommunication Services 1.6% |
|
|
|
|
|
|
| Sprint Communications, Inc., |
|
|
|
|
|
|
| Senior Note, 11.5%, 11/15/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 30,000,000 |
|
| 32,606,250 | |
| Senior Note, 6%, 11/15/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,300,000 |
| 6,827,625 | ||
| Sprint Corp., |
|
|
|
|
|
|
| Senior Note, 7.875%, 9/15/23 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,500,000 |
| 14,488,125 | ||
| Senior Note, 7.125%, 6/15/24 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,200,000 |
| 9,599,330 | ||
| Senior Note, 7.625%, 3/01/26 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,500,000 |
| 9,320,325 | ||
|
|
|
|
|
|
| 72,841,655 |
| Total Corporate Bonds (Cost $1,119,932,688).. . . . . . . . . . | . . . . . . . . | . . . |
| 1,206,657,593 | ||
| U.S. Government and Agency Securities 4.1% |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| U.S. Treasury Notes, |
|
|
|
|
|
|
| 2.375%, 3/15/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 75,000,000 |
|
| 75,326,835 | |
| 2.75%, 4/30/23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,000,000 |
| 26,514,649 | ||
| 2.75%, 5/31/23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 50,000,000 |
| 53,138,672 | ||
| 2.875%, 5/31/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,000,000 |
| 27,816,406 | ||
| .. . . . .Total U.S. Government and Agency Securities (Cost $174,976,356) | . . . . . . . . | . . . |
| 182,796,562 | ||
| Asset-Backed Securities 0.2% |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Airlines 0.2% |
|
|
|
|
|
|
| United Airlines Pass-Through Trust, 2020-1, A, 5.875%, 10/15/27. . | United States | 10,000,000 |
|
| 10,832,164 | |
| Total Asset-Backed Securities (Cost $10,000,000).. . . . . . | . . . . . . . . | . . . |
| 10,832,164 | ||
| Mortgage-Backed Securities 3.2% |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Federal National Mortgage Association (FNMA) Fixed Rate 0.7% |
|
|
|
|
|
|
| FNMA, 30 Year, 3%, 8/01/50.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 28,031,580 |
|
| 29,397,019 | |
| FNMA, 30 Year, 4%, 8/01/49.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,331,353 |
| 3,631,291 | ||
|
|
|
|
|
|
| 33,028,310 |
| Government National Mortgage Association (GNMA) Fixed Rate 2.5% |
|
|
|
|
|
|
| GNMA II, Single-family, 30 Year, 3%, 7/20/50. . . . . . . . . . . . . . . . . | United States | 40,409,533 |
|
| 42,413,258 | |
| GNMA II, Single-family, 30 Year, 3.5%, 6/20/50.. . . . . . . . . . . . . . . | United States | 63,587,689 |
| 67,438,716 | ||
|
|
|
|
|
|
| 109,851,974 |
| Total Mortgage-Backed Securities (Cost $143,928,125). . | . . . . . . . . | . . . |
| 142,880,284 | ||
| Escrows and Litigation Trusts 0.0% |
|
| Shares |
|
| |
|
|
|
|
| |||
|
|
|
|
|
|
| |
| a,gMotors Liquidation Co., Escrow Account, Convertible Preferred, C.. | United States | 1,400,000 |
|
| — | |
| Total Escrows and Litigation Trusts (Cost $–). . . . . . . . . . | . . . . . . . . | . . . |
| — | ||
| Total Long Term Investments (Cost $3,734,625,632).. . . . |
|
|
|
|
| |
| . . . . . . . . | . . . |
| 4,309,806,502 | |||
|
|
|
|
|
|
|
|
FI-16
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Income VIP Fund (continued)
Short Term Investments 3.1%
a | a | Country | Shares | a |
| a |
|
|
|
Value
Money Market Funds 2.9%
h,iInstitutional Fiduciary Trust - Money Market Portfolio, 0%. . . . . . . . | United States | 129,156,296 |
| $129,156,296 |
. . . .Total Money Market Funds (Cost $129,156,296).. . . | . . . . . . . . . . . . . . . . . . . . . . . | . . . | 129,156,296 | |
jInvestments from Cash Collateral Received for |
|
|
|
|
|
|
|
| |
Loaned Securities 0.2% |
|
|
|
|
a | a | a | a | a |
Money Market Funds 0.2% |
|
|
|
|
h,iInstitutional Fiduciary Trust - Money Market Portfolio, 0%. . . . . . . . | United States | 8,117,000 |
| 8,117,000 |
|
| Principal |
|
|
|
| Amount* |
|
|
Repurchase Agreements 0.0%† |
|
|
|
|
kJoint Repurchase Agreement, BofA Securities, Inc., 0.06%, 1/04/21 |
|
|
|
|
(Maturity Value $2,029,506) |
|
|
|
|
Collateralized by U.S. Treasury Note, 1.5%, 11/30/24 (valued at |
|
|
|
|
$2,070,085).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| 2,029,492 |
| 2,029,492 |
Total Investments from Cash Collateral Received for Loaned Securities
(Cost $10,146,492).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Short Term Investments (Cost $139,302,788). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Investments (Cost $3,873,928,420) 99.7%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities 0.3%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,146,492
139,302,788
$4,449,109,290 12,714,934
$4,461,824,224
See Abbreviations on page FI-31.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
† Rounds to less than 0.1% of net assets. a Non-income producing.
bA portion or all of the security is on loan at December 31, 2020. See Note 1(f). c See Note 1(e) regarding equity-linked securities.
d Security was purchased pursuant to Rule 144A or Regulation S under the Securities Act of 1933. 144A securities may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. Regulation S securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At December 31, 2020, the aggregate value of these securities was $964,600,923, representing 21.6% of net assets.
e Perpetual security with no stated maturity date.
f The coupon rate shown represents the rate at period end.
g Fair valued using significant unobservable inputs. See Note 11 regarding fair value measurements.
hSee Note 3(e) regarding investments in affiliated management investment companies.
iThe rate shown is the annualized seven-day effective yield at period end.
jSee Note 1(f) regarding securities on loan.
kSee Note 1(c) regarding joint repurchase agreement.
The accompanying notes are an integral part of these financial statements.
Annual Report
FI-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Franklin Income |
| VIP Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $3,734,625,632 |
Cost - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 137,273,296 |
Cost - Unaffiliated repurchase agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,029,492 |
Value - Unaffiliated issuers (Includes securities loaned of $12,342,255). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $4,309,806,502 |
Value - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 137,273,296 |
Value - Unaffiliated repurchase agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,029,492 |
Cash.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,767,754 |
Receivables: |
|
Investment securities sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 148,290 |
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,185,083 |
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 19,897,579 |
European Union tax reclaims (Note 1g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,815,625 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 593 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,477,924,214 |
Liabilities: |
|
Payables: |
|
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,883,479 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,700,567 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 903,050 |
Payable upon return of securities loaned (Note 1f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 10,147,450 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 465,444 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 16,099,990 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $4,461,824,224 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $4,098,783,262 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 363,040,962 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $4,461,824,224 |
| Franklin Income |
| VIP Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $306,640,581 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 19,595,784 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $15.65 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $3,852,709,182 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 256,135,806 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $15.04 |
Class 4: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $302,474,461 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 19,580,873 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $15.45 |
FI-18
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the year ended December 31, 2020
| Franklin Income |
| VIP Fund |
Investment income: |
|
Dividends: (net of foreign taxes of $983,509) |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $74,390,932 |
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 359,949 |
Interest: |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 113,942,527 |
Income from securities loaned: |
|
Unaffiliated entities (net of fees and rebates).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 65,989 |
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 11,050 |
Other income (Note 1g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,763,953 |
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 190,534,400 |
Expenses: |
|
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 19,563,347 |
Distribution fees: (Note 3c) |
|
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,305,342 |
Class 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,017,005 |
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 28,971 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 429,141 |
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 70,275 |
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 25,612 |
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 106,902 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Total expenses | 30,546,595 |
Expense reductions (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (38,943) |
Expenses waived/paid by affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (463,552) |
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 30,044,100 |
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 160,490,300 |
Realized and unrealized gains (losses): |
|
Net realized gain (loss) from: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (373,510,166) |
Written options.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,013,522 |
Foreign currency transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 56,254 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (366,440,390) |
Net change in unrealized appreciation (depreciation) on: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 189,707,080 |
Translation of other assets and liabilities denominated in foreign currencies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 73,571 |
Net change in unrealized appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 189,780,651 |
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (176,659,739) |
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $(16,169,439) |
The accompanying notes are an integral part of these financial statements.
Annual Report
FI-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin Income VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $160,490,300 | $211,417,673 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (366,440,390) | 40,047,821 |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | 189,780,651 | 514,968,839 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | (16,169,439) | 766,434,333 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (16,535,949) | (26,604,329) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (219,850,517) | (301,656,285) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (16,548,919) | (21,101,452) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (252,935,385) | (349,362,066) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 11,863,357 | (360,324,820) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (227,620,547) | (103,843,936) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (4,380,893) | 4,153,985 |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (220,138,083) | (460,014,771) |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | (489,242,907) | (42,942,504) |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,951,067,131 | 4,994,009,635 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $4,461,824,224 | $4,951,067,131 |
FI-20
Annual Report
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
Franklin Income VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Income VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust's Board of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities and derivative financial instruments listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities
are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund's pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.
Investments in open-end mutual funds are valued at the closing NAV. Investments in repurchase agreements are valued at cost, which approximates fair value.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Events can occur
Annual Report
FI-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
a. Financial Instrument Valuation (continued)
between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund's portfolio securities as determined at the foreign market close and the latest indications of value at
4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund's securities to the latest indications of fair value at 4 p.m Eastern time. At December 31, 2020, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy. See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result in differences between the value of the Fund's portfolio securities on the last business day and the last calendar day of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Joint Repurchase Agreement
The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund's custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non- defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the
FI-22
Annual Report
Franklin Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
c. Joint Repurchase Agreement (continued)
seller. The joint repurchase agreement held by the Fund at year end, as indicated in the Statement of Investments, had been entered into on December 31, 2020.
d. Derivative Financial Instruments
The Fund invested in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including
the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.
Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities.
The Fund purchased or wrote exchange traded option contracts primarily to gain exposure to equity price risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. When an option is purchased or written, an amount equal to the premium paid or received is recorded as an asset or liability, respectively. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium received or paid and the cost to close the position is recorded as a realized gain or loss.
See Note 10 regarding other derivative information.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
e. Equity-Linked Securities
The Fund invests in equity-linked securities. Equity-linked securities are hybrid financial instruments that generally combine both debt and equity characteristics into a single note form. Income received from equity-linked securities is recorded as realized gains in the Statements of Operations and may be based on the performance of an underlying equity security, an equity index, or an option position.
The risks of investing in equity-linked securities include unfavorable price movements in the underlying security and the credit risk of the issuing financial institution. There may be no guarantee of a return of principal with equity-linked securities and the appreciation potential may be limited. Equity-linked securities may be more volatile and less liquid than other investments held by the Fund.
f. Securities Lending
The Fund participates in an agency based securities lending program to earn additional income. The Fund receives collateral in the form of cash and/or U.S. Government
and Agency securities against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. Any cash collateral received is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. Additionally, The Fund received $2,464,779 in U.S. Government and Agency securities as collateral. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statement of Operations. The Fund bears the market risk with respect to any cash collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.
Annual Report
FI-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
g. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected
as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities.
When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, when EU reclaims are received by the Fund and the Fund previously passed foreign tax credit on to its shareholders, the Fund will enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund’s shareholders.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial
statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
h. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization
of premium and accretion of discount on debt securities are included in interest income. Paydown gains and losses are recorded as an adjustment to interest income. Facility fees are recognized as income over the expected term of the loan. Dividend income is recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
FI-24
Annual Report
Franklin Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
i. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
j. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
| Year Ended | Year Ended | ||
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,306,541 | $33,745,188 | 1,872,752 | $30,211,199 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 1,187,928 | 16,535,949 | 1,709,790 | 26,604,329 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2,618,645) | (38,417,780) | (25,004,206) | (417,140,348) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 875,824 | $11,863,357 | (21,421,664) | $(360,324,820) |
Class 2 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 4 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
18,351,749 | $260,263,939 | 16,435,568 | $256,969,286 |
16,406,755 | 219,850,517 | 20,097,021 | 301,656,285 |
(49,970,834) | (707,735,003) | (42,487,994) | (662,469,507) |
(15,212,330) | $(227,620,547) | (5,955,405) | $(103,843,936) |
2,068,153 | $30,108,099 | 2,582,430 | $41,387,759 |
1,201,809 | 16,548,919 | 1,370,224 | 21,101,452 |
(3,520,562) | (51,037,911) | (3,658,374) | (58,335,226) |
(250,600) | $(4,380,893) | 294,280 | $4,153,985 |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Advisers, Inc. (Advisers) | Investment Manager |
|
|
Franklin Templeton Services, LLC (FT Services) | Administrative Manager |
|
|
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
|
|
Annual Report
FI-25
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Income VIP Fund (continued)
3. Transactions with Affiliates (continued)
a. Management Fees
The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:
Subsidiary | Affiliation |
0.625% | Up to and including $100 million |
0.500% | Over $100 million, up to and including $250 million |
|
|
0.450% | Over $250 million, up to and including $7.5 billion |
0.440% | Over $7.5 billion, up to and including $10 billion |
|
|
0.430% | Over $10 billion, up to and including $12.5 billion |
0.420% | Over $12.5 billion, up to and including $15 billion |
|
|
0.400% | In excess of $15 billion |
For the year ended December 31, 2020, the gross effective investment management fee rate was 0.456% of the Fund’s average daily net assets.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
FI-26
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Income VIP Fund (continued)
3. Transactions with Affiliates (continued)
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
|
|
|
|
| Net Change in |
| Number of |
|
| Value at |
|
|
| Unrealized | Value | Shares Held |
|
| Beginning |
|
| Realized Gain | Appreciation | at End | at End | Investment |
| of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Franklin Income VIP Fund |
|
|
|
|
|
|
|
|
Non-Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividends |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
|
Market Portfolio, 0%.. . . . . . . . . | $83,971,136 | $1,539,873,425 | $(1,494,688,265) | $— | $— | $129,156,296 | 129,156,296 | $359,949 |
Non-Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income from |
|
|
|
|
|
|
|
| securities |
|
|
|
|
|
|
|
| loaned |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
|
Market Portfolio, 0%.. . . . . . . . . | $747,000 | $182,584,000 | $(175,214,000) | $— | $— | $8,117,000 | 8,117,000 | $11,050 |
Total Affiliated Securities. . . . . | $84,718,136 | $1,722,457,425 | $(1,669,902,265) | $— | $— | $137,273,296 |
| $370,999 |
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains.
At December 31, 2020, the capital loss carryforwards were as follows:
Capital loss carryforwards not subject to expiration: |
|
|
|
Short term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $18,659,427 | ||
Long term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . |
| 396,154,822 |
Total capital loss carryforwards.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . |
| $414,814,249 |
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows: |
| ||
| 2020 |
| 2019 |
Distributions paid from: |
|
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $249,422,628 |
| $268,440,004 |
Long term capital gain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,512,757 |
| 80,922,062 |
| $252,935,385 |
| $349,362,066 |
Annual Report
FI-27
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Income VIP Fund (continued)
5. Income Taxes (continued)
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,870,914,430
$718,582,199 (140,387,339)
$578,194,860
$197,818,227
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of equity-linked securities, bond discounts and premiums, convertible securities and wash sales.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $1,881,432,362 and $2,189,513,542, respectively.
At December 31, 2020, in connection with securities lending transactions, the Fund loaned equity investments and received $10,147,450 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.
7. Credit Risk
At December 31, 2020, the Fund had 20.6% of its portfolio invested in high yield, senior secured floating rate loans, or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.
8. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
FI-28
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Income VIP Fund (continued)
9. Other Derivative Information
For the year ended December 31, 2020, the effect of derivative contracts in the Statement of Operations was as follows:
|
|
|
|
| Net Change in |
|
|
|
|
| Unrealized |
Derivative Contracts |
| Net Realized |
| Appreciation | |
Not Accounted for as | Statement of | Gain (Loss) for | Statement of | (Depreciation) | |
Hedging Instruments | Operations Location | the Year | Operations Location | for the Year | |
| Net realized gain (loss) from: |
|
| Net change in unrealized |
|
|
|
|
| appreciation (depreciation) on: |
|
Franklin Income VIP Fund |
|
|
|
|
|
Equity Contracts.. . . . . . . . . . . |
|
|
|
|
|
| Investments | $(30,006,115)a | Investments | $22,734,076a | |
| Written options | 7,013,522 |
| Written options | — |
Total.. . . . . . . . . . . . . . . . . . . . |
| $(22,992,593) |
|
| $22,734,076 |
aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Statement of Operations.
For the year ended December 31, 2020, the average month end notional amount of options represented 211,538 shares.
See Note 1(c) regarding derivative financial instruments.
10. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
11. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
Annual Report
FI-29
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Income VIP Fund (continued)
11.Fair Value Measurements (continued)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level. A summary of inputs used as of December 31, 2020, in valuing the Fund's assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total |
Franklin Income VIP Fund |
|
|
|
|
Assets: |
|
|
|
|
Investments in Securities: |
|
|
|
|
Common Stocks: |
|
|
|
|
Aerospace & Defense .. . . . . . . . . . . . . . . . . . . | $53,401,200 | $— | $— | $53,401,200 |
Air Freight & Logistics .. . . . . . . . . . . . . . . . . . . | 36,660,680 | — | — | 36,660,680 |
Automobiles .. . . . . . . . . . . . . . . . . . . . . . . . . . | 24,984,000 | — | — | 24,984,000 |
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 305,445,925 | 25,078,006 | — | 330,523,931 |
Beverages .. . . . . . . . . . . . . . . . . . . . . . . . . . . | 132,280,400 | — | — | 132,280,400 |
Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . | 56,879,900 | — | — | 56,879,900 |
Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 19,125,400 | 25,689,921 | — | 44,815,321 |
Diversified Telecommunication Services . . . . . . | 90,438,983 | — | — | 90,438,983 |
Electric Utilities .. . . . . . . . . . . . . . . . . . . . . . . . | 210,746,100 | — | — | 210,746,100 |
Energy Equipment & Services . . . . . . . . . . . . . | 4,500,000 | — | — | 4,500,000 |
Equity Real Estate Investment Trusts (REITs) .. | 14,630,000 | — | — | 14,630,000 |
Health Care Providers & Services .. . . . . . . . . . | 70,266,000 | — | — | 70,266,000 |
Household Products .. . . . . . . . . . . . . . . . . . . . | 69,570,000 | — | — | 69,570,000 |
Industrial Conglomerates . . . . . . . . . . . . . . . . . | 63,810,000 | — | — | 63,810,000 |
Insurance .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 62,683,321 | — | — | 62,683,321 |
IT Services .. . . . . . . . . . . . . . . . . . . . . . . . . . . | 12,588,000 | — | — | 12,588,000 |
Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 22,710,000 | — | — | 22,710,000 |
Media .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 26,200,000 | — | — | 26,200,000 |
Metals & Mining .. . . . . . . . . . . . . . . . . . . . . . . | 60,176,000 | — | — | 60,176,000 |
Multi-Utilities .. . . . . . . . . . . . . . . . . . . . . . . . . . | 115,357,928 | — | — | 115,357,928 |
Oil, Gas & Consumable Fuels .. . . . . . . . . . . . . | 219,166,500 | — | — | 219,166,500 |
Personal Products . . . . . . . . . . . . . . . . . . . . . . | — | 14,994,515 | — | 14,994,515 |
Pharmaceuticals .. . . . . . . . . . . . . . . . . . . . . . . | 186,400,000 | 45,372,857 | — | 231,772,857 |
Road & Rail . . . . . . . . . . . . . . . . . . . . . . . . . . . | 37,479,600 | — | — | 37,479,600 |
Semiconductors & Semiconductor Equipment .. | 105,335,000 | — | — | 105,335,000 |
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,484,096 | — | — | 2,484,096 |
Specialty Retail . . . . . . . . . . . . . . . . . . . . . . . . | 8,499,840 | — | — | 8,499,840 |
Tobacco .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 28,976,500 | — | — | 28,976,500 |
Equity-Linked Securities . . . . . . . . . . . . . . . . . . . | — | 380,802,457 | — | 380,802,457 |
Convertible Preferred Stocks: |
|
|
|
|
Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . | 5,123,800 | — | — | 5,123,800 |
Electric Utilities .. . . . . . . . . . . . . . . . . . . . . . . . | 78,151,374 | — | — | 78,151,374 |
Multi-Utilities .. . . . . . . . . . . . . . . . . . . . . . . . . . | 44,816,000 | — | — | 44,816,000 |
Semiconductors & Semiconductor Equipment .. | 71,123,500 | — | — | 71,123,500 |
Thrifts & Mortgage Finance .. . . . . . . . . . . . . . . | — | 14,843,750 | — | 14,843,750 |
Preferred Stocks .. . . . . . . . . . . . . . . . . . . . . . . . | 7,459,596 | — | — | 7,459,596 |
Convertible Bonds .. . . . . . . . . . . . . . . . . . . . . . . | — | 12,388,750 | — | 12,388,750 |
Corporate Bonds .. . . . . . . . . . . . . . . . . . . . . . . . | — | 1,206,657,593 | — | 1,206,657,593 |
U.S. Government and Agency Securities.. . . . . . . | — | 182,796,562 | — | 182,796,562 |
Asset-Backed Securities . . . . . . . . . . . . . . . . . . . | — | 10,832,164 | — | 10,832,164 |
Mortgage-Backed Securities.. . . . . . . . . . . . . . . . | — | 142,880,284 | — | 142,880,284 |
Escrows and Litigation Trusts.. . . . . . . . . . . . . . . | — | — | — a | — |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | 137,273,296 | 2,029,492 | — | 139,302,788 |
Total Investments in Securities.. . . . . . . . . . . | $2,384,742,939 | $2,064,366,351 | $— | $4,449,109,290 |
aIncludes securities determined to have no value at December 31, 2020.
FI-30
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Income VIP Fund (continued)
11. Fair Value Measurements (continued)
A reconciliation in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 assets and/or liabilities at the beginning and/or end of the year.
12. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the LIBOR and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
13. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Abbreviations
Currency |
|
| Selected Portfolio | |
USD | United States Dollar |
| ADR | American Depositary Receipt |
|
|
| FNMA | Federal National Mortgage Association |
|
|
| FRN | Floating Rate Note |
|
|
| GNMA | Government National Mortgage Association |
|
|
| LIBOR | London Inter-Bank Offered Rate |
Annual Report
FI-31
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Franklin Income VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Franklin Income VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
FI-32
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Franklin Income VIP Fund
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $3,512,757 as a long term capital gain dividend for the fiscal year ended December 31, 2020.
Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 23.12% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2020.
Annual Report
FI-33
Franklin Large Cap Growth VIP Fund
This annual report for Franklin Large Cap Growth VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | +44.98% |
5-Year | +19.57% |
10-Year | +15.39% |
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance is compared to the performance of the Standard
&Poor’s® 500 Index (S&P 500®). One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.
$45,000
$40,000 |
|
|
|
| $41,858 |
|
|
|
| $36,700 | |
$35,000 |
|
|
|
| |
|
|
|
|
| |
$30,000 |
|
|
|
|
|
$25,000 |
|
|
|
|
|
$20,000 |
|
|
|
|
|
$15,000 |
|
|
|
|
|
$10,000 |
|
|
|
|
|
$5,000 |
|
|
|
|
|
1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
|
| Franklin Large Cap Growth | S&P 500* |
|
|
|
| VIP Fund |
|
|
|
*Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
Annual Report
FLG-1
Franklin Large Cap Growth VIP Fund
Fund Goal and Main Investments
The Fund seeks capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of large-capitalization companies. For
this Fund, large-capitalization companies are those with market capitalization values within those of the top 50% of companies in the Russell 1000® Index at the time of purchase.1
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Growth stock prices reflect projections of future earnings or revenues, and can, therefore, fall dramatically if the company fails to meet those projections. The Fund may focus on particular sectors of the market from time to time, which can carry greater risks of adverse developments in such sectors. Investments in foreign securities may involve special risks including currency fluctuations and economic and political uncertainty. Smaller or midsized companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Fund’s benchmark, the Standard & Poor's 500 Index (S&P 500), posted a 18.40% total return.2
Portfolio Composition 12/31/20
| % of Total |
| Net Assets |
Software | 18.7% |
IT Services | 15.5% |
Internet & Direct Marketing Retail | 9.2% |
Health Care Equipment & Supplies | 7.1% |
Capital Markets | 5.8% |
Professional Services | 4.6% |
Semiconductors & Semiconductor Equipment | 4.3% |
Technology Hardware, Storage & Peripherals | 4.2% |
Interactive Media & Services | 3.2% |
Equity Real Estate Investment Trusts (REITs) | 2.6% |
Health Care Providers & Services | 2.5% |
Industrial Conglomerates | 2.1% |
Health Care Technology | 2.0% |
Pharmaceuticals | 1.7% |
Biotechnology | 1.7% |
Beverages | 1.4% |
Life Sciences Tools & Services | 1.3% |
Chemicals | 1.3% |
Wireless Telecommunication Services | 1.3% |
Food Products | 1.3% |
Automobiles | 1.2% |
Other | 6.1% |
Short-Term Investments & Other Net Assets | 0.9% |
Economic and Market Overview
U.S. equities, as measured by the S&P 500, advanced strongly during the 12 months ended December 31, 2020. Although equities began the year with gains, a sharp selloff began in late February 2020 amid investor fears of a global economic slowdown due to the novel coronavirus (COVID-19) pandemic. Such fears drove many investors to sell equities and buy government bonds, cash equivalents and other investments perceived as safe. Nevertheless, equities began to advance in late March, as monetary and fiscal stimulus drove stocks sharply higher. Following declines in September and October, equities, as measured by the S&P 500, advanced to all-time price highs in December.
Pandemic-related restrictions severely curtailed economic activity, resulting in mass layoffs that drove the unemployment rate to 14.8% in April 2020.3 The longest
1.Please see Index Descriptions following the Fund Summaries.
2.Source: Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
3.Source: Bureau of Labor Statistics.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
FLG-2
Annual Report
U.S. economic expansion in history ended in February, according to the National Bureau of Economic Research, and the country slipped into a deep recession with second- quarter 2020 gross domestic product (GDP) posting a record annualized decline.
In an effort to support the economy, the U.S. Federal Reserve (Fed) lowered the federal funds target rate to a range of 0.00%–0.25% in March 2020. The Fed also enacted quantitative easing measures aimed at ensuring credit flows to borrowers and supporting credit markets with open- ended bond purchasing. Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded its 2% target.
Equities began to rebound in late March 2020, benefiting from fiscal and monetary stimulus, a gradual lifting of restrictions and development of COVID-19 vaccines and treatments. Rising retail sales and rebounding economic activity led third-quarter GDP to expand at a record annualized pace, although growth slowed in the fourth quarter. Concerns about possible new restrictions amid rising COVID-19 infection rates and uncertainties about additional fiscal stimulus and the U.S. presidential election drove stocks lower in September and October. Despite signs that the economic recovery was stalling, as the unemployment rate remained relatively high (6.7% at period-end) and consumer spending declined, stocks rallied in November and December, buoyed by the outcome of the U.S. presidential election, the start of COVID-19 vaccination programs and the passage of a new stimulus bill.3
Investment Strategy
We are a research driven, fundamental investor, pursuing a growth strategy. As a bottom-up investor focusing primarily on individual securities, we seek companies that have identifiable drivers of future earnings growth and that present, in our opinion, the best trade-off between that potential earnings growth, business and financial risk, and valuation.
Manager’s Discussion
The Fund’s relative outperformance during the 12-month period was partially due to an overweighting and stock selection in the information technology sector, which has powered much of the market’s rebound since March 2020. ServiceNow and Twilio were top relative contributors in this space. The cloud computing specialist ServiceNow has been a beneficiary of the broad digital transformation opportunity created by the pandemic crisis as businesses quickly transitioned physical workflows into the digital space.
FRANKLIN LARGE CAP GROWTH VIP FUND
Top 10 Holdings 12/31/20
Company | % of Total |
Industry | Net Assets |
a | aa |
Amazon.com, Inc. | 8.7% |
Internet & Direct Marketing Retail |
|
Microsoft Corp. | 5.2% |
Software |
|
Mastercard, Inc. | 4.5% |
IT Services |
|
Apple, Inc. | 4.2% |
Technology Hardware, Storage & Peripherals |
|
Visa, Inc. | 4.0% |
IT Services |
|
ServiceNow, Inc. | 3.3% |
Software |
|
CoStar Group, Inc. | 2.6% |
Professional Services |
|
Adobe, Inc. | 2.5% |
Software |
|
Alphabet, Inc. | 2.3% |
Interactive Media & Services |
|
NVIDIA Corp. | 2.3% |
Semiconductors & Semiconductor Equipment |
|
The COVID-19 environment also accelerated demand for Twilio’s digital communication services from businesses in telehealth, online education and remote customer care, among others.
Other relative contributors included stock selection and an overweighting in consumer discretionary, stock selection and an underweighting in financials and stock selection in health care.
In the consumer discretionary sector, Amazon.com helped relative results as consumers increasingly turned to the company for basic goods as they spent growing amounts of time sheltering in place. The online retailer also benefited from the increase in remote working, which has made more employers reliant on technology infrastructure provided by Amazon Web Services. Peloton Interactive also contributed in the sector, benefiting from a COVID-19-related surge
in demand for the company’s at-home, connected fitness products.
In the financials sector, the Fund benefited from its lack of exposure to banks as the impact of falling yields on bank profitability put a damper on the industry.
In health care, relative performance was bolstered by a position in Veeva Systems, which provides cloud-based software for the life sciences industry. The company has sizeable exposure to the ongoing cloud transition by commercial and research-based biopharmaceutical and medical technology organizations. We believe there
Annual Report
FLG-3
FRANKLIN LARGE CAP GROWTH VIP FUND
are underpenetrated opportunities in clinical trial data management, drug safety workflow and patient data science that could sustain revenue growth for Veeva for many years.
The materials sector was the only sector that detracted slightly from relative performance. Stock selection hurt the sector as shares in specialty chemicals manufacturer Ingevity declined. The Fund liquidated its position in the company before period-end.
Elsewhere, an underweighting in strong-performing shares of Apple hampered the Fund’s relative results. Booming iPhone sales and a fast-growing wearables business have been growth drivers for the technology giant.
Heron Therapeutics and Reata Pharmaceuticals hurt relative results as both companies faced U.S. Food and Drug Administration hurdles for their non-opioid painkiller and rare neurological disorder treatment, respectively.
Diamondback Energy hurt relative performance as well, hurt by the collapse of oil prices brought on by the global economic shutdown and Russia-Saudi price war. We liquidated our position due to uncertainty about when oil prices will recover to the level needed for the company to be profitable.
Aerospace and defense company Raytheon also detracted from relative results. Raytheon merged with United Technologies on April 3, 2020, to form Raytheon Technologies. However, declining aviation demand has pressured the aerospace industry and the Fund liquidated its position during the period.
Thank you for your participation in Franklin Large Cap Growth VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
FLG-4
Annual Report
FRANKLIN LARGE CAP GROWTH VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
|
|
| Actual |
| Hypothetical |
|
| ||
|
|
| (actual return after expenses) |
| (5% annual return before expenses) |
|
| ||
|
|
|
| Fund-Level |
|
| Fund-Level |
|
|
|
|
|
| Expenses |
|
| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201,2 |
| Value 12/31/20 | 7/1/20–12/31/201,2 | a | Ratio2 |
1 | $1,000 |
| $1,254.38 | $4.72 | $1,020.95 | $4.23 |
| 0.83% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
Annual Report
FLG-5
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Franklin Large Cap Growth VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $22.73 | $19.19 | $20.93 | $17.85 | $18.42 |
Income from investment operationsa: | (0.09) | (0.06) | (0.04) | (0.03) | (0.04) |
Net investment (loss)b. . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 9.54 | 6.51 | 0.03 | 4.91 | (0.26) |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 9.45 | 6.45 | (0.01) | 4.88 | (0.30) |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | — | — | — | (0.20) | — |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2.40) | (2.91) | (1.73) | (1.60) | (0.27) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2.40) | (2.91) | (1.73) | (1.80) | (0.27) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $29.78 | $22.73 | $19.19 | $20.93 | $17.85 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 44.98% | 34.98% | (1.24)% | 28.38% | (1.49)% |
Ratios to average net assets | 0.84%e | 0.84%e | 0.85% | 0.87% | 0.80% |
Expensesd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net investment (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.36)% | (0.25)% | (0.17)% | (0.14)% | (0.19)% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $4,606 | $1,350 | $1,040 | $1,092 | $883 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 14.90% | 17.01% | 21.93% | 24.96% | 36.26%f |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind.
FLG-6
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Large Cap Growth VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $22.00 | $18.70 | $20.48 | $17.48 | $18.09 |
Income from investment operationsa: | (0.14) | (0.11) | (0.09) | (0.08) | (0.08) |
Net investment (loss)b. . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 9.19 | 6.32 | 0.04 | 4.81 | (0.26) |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 9.05 | 6.21 | (0.05) | 4.73 | (0.34) |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | — | — | — | (0.13) | — |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2.40) | (2.91) | (1.73) | (1.60) | (0.27) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2.40) | (2.91) | (1.73) | (1.73) | (0.27) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $28.65 | $22.00 | $18.70 | $20.48 | $17.48 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 44.63% | 34.58% | (1.47)% | 28.11% | (1.79)% |
Ratios to average net assets | 1.09%e | 1.09%e | 1.10% | 1.12% | 1.05% |
Expensesd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net investment (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.58)% | (0.50)% | (0.42)% | (0.39)% | (0.44)% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $131,001 | $114,170 | $100,435 | $118,875 | $113,028 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 14.90% | 17.01% | 21.93% | 24.96% | 36.26%f |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind.
The accompanying notes are an integral part of these financial statements.
Annual Report
FLG-7
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Franklin Large Cap Growth VIP Fund
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks 99.1% |
|
|
|
|
| Auto Components 0.7% |
|
|
|
|
| Aptiv plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,165 |
| $933,528 |
| Automobiles 1.2% |
|
|
|
|
| aTesla, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,225 |
| 1,570,116 |
| Beverages 1.4% |
|
|
|
|
| Constellation Brands, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,784 |
| 1,047,935 |
| aMonster Beverage Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 9,074 |
| 839,164 |
|
|
|
|
| 1,887,099 |
| Biotechnology 1.7% |
|
|
|
|
| a,bHeron Therapeutics, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 54,191 |
| 1,146,953 |
| aNovavax, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,136 |
| 795,735 |
| aPTC Therapeutics, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,750 |
| 350,922 |
|
|
|
|
| 2,293,610 |
| Capital Markets 5.8% |
|
|
|
|
| aDragoneer Growth Opportunities Corp... . . . . . . . . . . . . . . . . . . . . | United States | 28,900 |
| 404,311 |
| Intercontinental Exchange, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,810 |
| 1,592,155 |
| MarketAxess Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,308 |
| 1,316,852 |
| MSCI, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,568 |
| 2,486,279 |
| S&P Global, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,060 |
| 1,992,104 |
|
|
|
|
| 7,791,701 |
| Chemicals 1.3% |
|
|
|
|
| Ecolab, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,227 |
| 698,194 |
| Linde plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 4,039 |
| 1,064,317 |
|
|
|
|
| 1,762,511 |
| Commercial Services & Supplies 0.3% |
|
|
|
|
| Republic Services, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,233 |
| 407,638 |
| Entertainment 0.7% |
|
|
|
|
| aWalt Disney Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,434 |
| 984,532 |
| Equity Real Estate Investment Trusts (REITs) 2.6% |
|
|
|
|
| American Tower Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,709 |
| 608,062 |
| SBA Communications Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,533 |
| 2,971,675 |
|
|
|
|
| 3,579,737 |
| Food Products 1.3% |
|
|
|
|
| aFreshpet, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,731 |
| 529,765 |
| Lamb Weston Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,243 |
| 649,054 |
| aNomad Foods Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 21,530 |
| 547,292 |
|
|
|
|
| 1,726,111 |
| Health Care Equipment & Supplies 7.1% |
|
|
|
|
| Danaher Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,448 |
| 1,432,359 |
| aEdwards Lifesciences Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,268 |
| 1,392,900 |
| aIDEXX Laboratories, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,067 |
| 1,533,101 |
| aIntuitive Surgical, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,752 |
| 1,433,311 |
| aNevro Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,606 |
| 1,316,598 |
| West Pharmaceutical Services, Inc.. . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,864 |
| 2,511,260 |
|
|
|
|
| 9,619,529 |
| Health Care Providers & Services 2.5% |
|
|
|
|
| aGuardant Health, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,411 |
| 568,490 |
| UnitedHealth Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,198 |
| 2,874,874 |
|
|
|
|
| 3,443,364 |
FLG-8
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Large Cap Growth VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Health Care Technology 2.0% |
|
|
|
|
| aVeeva Systems, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 9,972 |
| $2,714,877 |
| Hotels, Restaurants & Leisure 1.0% |
|
|
|
|
| a,bAirbnb, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 600 |
| 88,080 |
| aChipotle Mexican Grill, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 918 |
| 1,273,000 |
|
|
|
|
| 1,361,080 |
| Industrial Conglomerates 2.1% |
|
|
|
|
| Honeywell International, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,246 |
| 1,328,524 |
| Roper Technologies, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,427 |
| 1,477,346 |
|
|
|
|
| 2,805,870 |
| Interactive Media & Services 3.2% |
|
|
|
|
| aAlphabet, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,748 |
| 3,063,615 |
| aFacebook, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,783 |
| 1,306,524 |
|
|
|
|
| 4,370,139 |
| Internet & Direct Marketing Retail 9.2% |
|
|
|
|
| aAmazon.com, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,623 |
| 11,799,857 |
| aBooking Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 318 |
| 708,272 |
|
|
|
|
| 12,508,129 |
| IT Services 15.5% |
|
|
|
|
| aBlack Knight, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 9,271 |
| 819,093 |
| Mastercard, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 17,130 |
| 6,114,382 |
| aOkta, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,587 |
| 657,771 |
| aPayPal Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 11,987 |
| 2,807,355 |
| aShopify, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 1,341 |
| 1,517,945 |
| aSnowflake, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,416 |
| 961,262 |
| aTwilio, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,675 |
| 2,597,988 |
| Visa, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,031 |
| 5,475,031 |
|
|
|
|
| 20,950,827 |
| Leisure Products 0.5% |
|
|
|
|
| aPeloton Interactive, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,454 |
| 675,761 |
| Life Sciences Tools & Services 1.3% |
|
|
|
|
| aIllumina, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,045 |
| 756,650 |
| aMaravai LifeSciences Holdings, Inc., A. . . . . . . . . . . . . . . . . . . . . . | United States | 3,300 |
| 92,565 |
| aWuxi Biologics Cayman, Inc., ADR. . . . . . . . . . . . . . . . . . . . . . . . . | China | 36,144 |
| 950,949 |
|
|
|
|
| 1,800,164 |
| Media 0.9% |
|
|
|
|
| aLiberty Broadband Corp., C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,911 |
| 1,252,865 |
| Pharmaceuticals 1.7% |
|
|
|
|
| AstraZeneca plc, ADR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 19,409 |
| 970,256 |
| aCatalent, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,825 |
| 710,278 |
| a,bReata Pharmaceuticals, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,944 |
| 363,937 |
| bRoyalty Pharma plc, A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,420 |
| 321,321 |
|
|
|
|
| 2,365,792 |
| Professional Services 4.6% |
|
|
|
|
| aCoStar Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,829 |
| 3,539,068 |
| TransUnion.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,285 |
| 623,598 |
| Verisk Analytics, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,158 |
| 2,108,699 |
|
|
|
|
| 6,271,365 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FLG-9
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Large Cap Growth VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Road & Rail 1.0% |
|
|
|
|
| Union Pacific Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,367 |
| $1,325,737 |
| Semiconductors & Semiconductor Equipment 4.3% |
|
|
|
|
| Analog Devices, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,706 |
| 990,678 |
| Monolithic Power Systems, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,664 |
| 1,708,097 |
| NVIDIA Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,988 |
| 3,126,933 |
|
|
|
|
| 5,825,708 |
| Software 18.7% |
|
|
|
|
| aAdobe, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,649 |
| 3,325,298 |
| aAtlassian Corp. plc, A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,189 |
| 511,941 |
| aAutodesk, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,231 |
| 681,214 |
| aAvalara, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 955 |
| 157,470 |
| aBill.com Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,457 |
| 1,427,380 |
| a,bC3.ai, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,300 |
| 180,375 |
| aDocuSign, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,078 |
| 906,539 |
| Intuit, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,974 |
| 749,824 |
| Microsoft Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 32,004 |
| 7,118,330 |
| aPaycom Software, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 875 |
| 395,719 |
| aPTC, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,482 |
| 1,253,752 |
| asalesforce.com, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,891 |
| 1,310,924 |
| aServiceNow, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,221 |
| 4,525,085 |
| aSynopsys, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,421 |
| 1,146,100 |
| aWorkday, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,121 |
| 747,823 |
| aZendesk, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,623 |
| 947,884 |
|
|
|
|
| 25,385,658 |
| Specialty Retail 0.3% |
|
|
|
|
| aBurlington Stores, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,375 |
| 359,631 |
| Technology Hardware, Storage & Peripherals 4.2% |
|
|
|
|
| Apple, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 43,166 |
| 5,727,697 |
| Textiles, Apparel & Luxury Goods 0.7% |
|
|
|
|
| NIKE, Inc., B.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,018 |
| 992,836 |
| Wireless Telecommunication Services 1.3% |
|
|
|
|
| aT-Mobile US, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,878 |
| 1,736,598 |
| . . . . . . . . . . .Total Common Stocks (Cost $43,968,760).. | . . . . . . . . . . . . . . . . . . | . . . . . . . . |
| 134,430,210 |
|
|
|
|
|
|
Short Term Investments 1.1%
|
| Principal |
|
a | a | Amount* | a |
Value
a | a | a | a | a | a |
| Repurchase Agreements 1.0% |
|
|
|
|
| cJoint Repurchase Agreement, 0.054%, 1/04/21 (Maturity Value |
|
|
|
|
| $1,308,944) |
|
|
|
|
| BNP Paribas Securities Corp. (Maturity Value $836,205) |
|
|
|
|
| Deutsche Bank Securities, Inc. (Maturity Value $249,747) |
|
|
|
|
| HSBC Securities (USA), Inc. (Maturity Value $222,992) |
|
|
|
|
| Collateralized by U.S. Government Agency Securities, 4.00% |
|
|
|
|
| - 5.00%, 2/20/49 - 5/20/49; and U.S. Treasury Notes, 0.13% - |
|
|
|
|
| 2.63%, 1/31/21 - 12/31/25 (valued at $1,335,273). . . . . . . . . . . . |
| 1,308,936 |
| 1,308,936 |
| .. . . . . . . . . . . . . . .Total Repurchase Agreements (Cost $1,308,936) | . . . . . . . | . . . . . . . . . . |
| 1,308,936 |
|
|
|
|
|
|
FLG-10
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Large Cap Growth VIP Fund (continued)
Short Term Investments (continued)
|
| Principal |
|
a | a | Amount* | a |
Value
a | a | a | a | a | a |
| dInvestments from Cash Collateral Received for |
|
|
|
|
| Loaned Securities 0.1% | Country | Shares |
|
|
|
|
|
| ||
| Money Market Funds 0.0%† |
|
|
|
|
| e,fInstitutional Fiduciary Trust - Money Market Portfolio, 0%. . . . . . . . | United States | 14,000 |
| $14,000 |
|
|
| Principal |
|
|
|
|
| Amount* |
|
|
| Repurchase Agreements 0.1% |
|
|
|
|
| cJoint Repurchase Agreement, BofA Securities, Inc., 0.06%, 1/04/21 |
|
|
|
|
| (Maturity Value $169,974) |
|
|
|
|
| Collateralized by U.S. Treasury Note, 1.5%, 11/30/24 (valued at |
|
|
|
|
| $173,373). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| 169,973 |
| 169,973 |
Total Investments from Cash Collateral Received for Loaned Securities
(Cost $183,973). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Short Term Investments (Cost $1,492,909). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Investments (Cost $45,461,669) 100.2%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities (0.2)%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
See Abbreviations on page FLG-22.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
† Rounds to less than 0.1% of net assets. a Non-income producing.
bA portion or all of the security is on loan at December 31, 2020. See Note 1(d).
cSee Note 1(c) regarding joint repurchase agreement.
dSee Note 1(d) regarding securities on loan.
eSee Note 3(e) regarding investments in affiliated management investment companies.
fThe rate shown is the annualized seven-day effective yield at period end.
183,973
1,492,909
$135,923,119 (315,823)
$135,607,296
The accompanying notes are an integral part of these financial statements.
Annual Report
FLG-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Franklin Large |
| Cap Growth VIP |
| Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $43,968,760 |
Cost - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 14,000 |
Cost - Unaffiliated repurchase agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,478,909 |
Value - Unaffiliated issuers (Includes securities loaned of $430,485).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $134,430,210 |
Value - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 14,000 |
Value - Unaffiliated repurchase agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,478,909 |
Receivables: |
|
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 34,539 |
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,899 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 16 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 135,967,573 |
Liabilities: |
|
Payables: |
|
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,771 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 84,162 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 32,023 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 21,767 |
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 32,339 |
Payable upon return of securities loaned (Note 1d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 183,973 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,242 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 360,277 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $135,607,296 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $28,781,608 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 106,825,688 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $135,607,296 |
| Franklin Large |
| Cap Growth VIP |
| Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $4,605,962 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 154,687 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $29.78 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $131,001,334 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 4,572,461 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $28.65 |
FLG-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the year ended December 31, 2020
| Franklin Large |
| Cap Growth VIP |
| Fund |
Investment income: |
|
Dividends: (net of foreign taxes of $178) |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $566,065 |
Interest: |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,673 |
Income from securities loaned: |
|
Unaffiliated entities (net of fees and rebates).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 35,030 |
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,039 |
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 605,807 |
Expenses: |
|
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 898,540 |
Distribution fees: (Note 3c) |
|
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 291,446 |
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,163 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 36,094 |
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 55,473 |
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 686 |
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 11,892 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Total expenses | 1,296,294 |
Expense reductions (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (414) |
Expenses waived/paid by affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (957) |
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,294,923 |
Net investment income (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (689,116) |
Realized and unrealized gains (losses): |
|
Net realized gain (loss) from: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 17,097,318 |
Net change in unrealized appreciation (depreciation) on: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 28,111,649 |
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 45,208,967 |
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $44,519,851 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FLG-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin Large Cap Growth VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $(689,116) | $(573,122) |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 17,097,318 | 11,677,580 |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | 28,111,649 | 22,617,082 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | 44,519,851 | 33,721,540 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (319,951) | (156,170) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (11,348,356) | (14,406,046) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (11,668,307) | (14,562,216) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,179,293 | 107,346 |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (14,944,016) | (5,221,870) |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (12,764,723) | (5,114,524) |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | 20,086,821 | 14,044,800 |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 115,520,475 | 101,475,675 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $135,607,296 | $115,520,475 |
FLG-14
Annual Report
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
Franklin Large Cap Growth VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Large Cap Growth VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At December 31, 2020, 67.5% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust's Board
of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively.
Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
(OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Investments in open-end mutual funds are valued at the closing NAV. Investments in repurchase agreements are valued at cost, which approximates fair value.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Events can occur between the time at which trading in a foreign security
is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund's portfolio securities as determined at the foreign market close and the latest indications of value at
4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund’s portfolio securities to the latest indications of fair value at 4 p.m. Eastern time.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result in differences between the value of the Fund's portfolio securities on the last business day and the last calendar
Annual Report
FLG-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Large Cap Growth VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
a. Financial Instrument Valuation (continued)
day of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Joint Repurchase Agreement
The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund's custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non- defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at year end, as indicated in the Statement of Investments, had been entered into on December 31, 2020.
d. Securities Lending
The Fund participates in an agency based securities lending program to earn additional income. The Fund receives collateral in the form of cash and/or U.S. Government
and Agency securities against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral received is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment of cash collateral,
FLG-16
Annual Report
Franklin Large Cap Growth VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
d. Securities Lending (continued)
in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statement of Operations. The Fund bears the market risk with respect to any cash collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.
e. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
f. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Dividend income and capital gain distributions are recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
g. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
h. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to Trust.
Annual Report
FLG-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Large Cap Growth VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
h. Guarantees and Indemnifications (continued)
Additionally, in the normal course of business, the Trust,
on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
|
| Year Ended |
| Year Ended |
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 2 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
91,945 | $2,104,488 | — | $— |
14,182 | 319,951 | 7,497 | 156,170 |
(10,851) | (245,146) | (2,288) | (48,824) |
95,276 | $2,179,293 | 5,209 | $107,346 |
358,053 | $8,575,790 | 338,704 | $6,860,065 |
522,004 | 11,348,356 | 713,171 | 14,406,046 |
(1,496,315) | (34,868,162) | (1,234,745) | (26,487,981) |
(616,258) | $(14,944,016) | (182,870) | $(5,221,870) |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Advisers, Inc. (Advisers) | Investment manager |
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Franklin Templeton Services, LLC (FT Services) | Administrative manager |
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
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Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
a. Management Fees
The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
0.750% | Up to and including $500 million |
|
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0.625% | Over $500 million, up to and including $1 billion |
0.500% | In excess of $1 billion |
|
|
FLG-18
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Large Cap Growth VIP Fund (continued)
3. Transactions with Affiliates (continued)
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted a distribution plan for Class 2 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plan, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.35% per year of its average daily net assets. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rate, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
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| Net Change in |
| Number of |
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| Value at |
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| Unrealized | Value | Shares Held |
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| Beginning |
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| Realized Gain | Appreciation | at End | at End | Investment |
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| of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Franklin Large Cap Growth VIP Fund |
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Non-Controlled Affiliates |
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| Income from |
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| securities |
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| loaned |
Institutional Fiduciary Trust - Money |
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Market Portfolio, 0%.. . . . . . . . . |
| $411,000 | $9,786,000 | $(10,183,000) | $— | $— | $14,000 | 14,000 | $1,039 |
Total Affiliated Securities. . . . . |
| $411,000 | $9,786,000 | $(10,183,000) | $— | $— | $14,000 |
| $1,039 |
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, the custodian fees were reduced as noted in the Statement of Operations.
Annual Report
FLG-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Large Cap Growth VIP Fund (continued)
5. Income Taxes
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows:
| 2020 | 2019 |
Distributions paid from: |
|
|
Long term capital gain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $11,668,307 | $14,562,216 |
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed long term capital gains.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total distributable earnings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$45,727,406
$90,461,450 (265,737)
$90,195,713
$593,248 $16,036,725
$16,629,973
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of passive foreign investment company shares.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $17,792,302 and $43,152,365, respectively.
At December 31, 2020, in connection with securities lending transactions, the Fund loaned equity investments and received $183,973 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.
7. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
8. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers, renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
FLG-20
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Large Cap Growth VIP Fund (continued)
8. Credit Facility (continued)
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
9. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
A summary of inputs used as of December 31, 2020, in valuing the Fund's assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total |
Franklin Large Cap Growth VIP Fund |
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Assets: |
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Investments in Securities:a |
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Common Stocks . . . . . . . . . . . . . . . . . . . . . . . . . | $134,430,210 | $— | $— | $134,430,210 |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | 14,000 | 1,478,909 | — | 1,492,909 |
Total Investments in Securities.. . . . . . . . . . . | $134,444,210 | $1,478,909 | $— | $135,923,119 |
aFor detailed categories, see the accompanying Statement of Investments.
10. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020- 04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
11. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Annual Report
FLG-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Large Cap Growth VIP Fund (continued)
Abbreviations
Selected Portfolio
ADR | American Depositary Receipt |
FLG-22
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Franklin Large Cap Growth VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Franklin Large Cap Growth VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
Annual Report
FLG-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Franklin Large Cap Growth VIP Fund
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $11,668,307 as a long term capital gain dividend for the fiscal year ended December 31, 2020.
FLG-24
Annual Report
Franklin Mutual Global Discovery VIP Fund
This annual report for Franklin Mutual Global Discovery VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | -4.22% |
5-Year | +5.41% |
10-Year | +6.54% |
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance is compared to the performance of the MSCI World Index (USD) and the MSCI World Value Index-NR (USD). One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund
Summaries.
$30,000
$27,098
$25,000
$20,000 |
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| $19,239 |
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| $18,842 |
$15,000 |
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$10,000 |
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$5,000 |
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1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
| Franklin Mutual Global Discovery | MSCI World Index (USD)* |
| ||
| VIP Fund |
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MSCI World Value Index-NR (USD)*
*Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
Annual Report
MGD-1
Franklin Mutual Global Discovery VIP Fund
Fund Goal and Main Investments
The Fund seeks capital appreciation. Under normal market conditions, the Fund invests primarily in U.S. and foreign equity securities that we believe are available at market prices less than their intrinsic value. The equity securities in which the Fund invests are primarily common stock, with a current focus on mid- and large cap companies. To a lesser extent, the Fund also invests in merger arbitrage securities and the debt and equity of distressed companies. The Fund may invest substantially and potentially up to 100% of its assets in foreign securities, which may include sovereign debt and participations in foreign government debt.
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Value securities may not increase in price as anticipated, or may decline further in value. The Fund’s investments in foreign securities involve more risks than U.S. securities, including political and economic developments, trading practices, availability of information, limited markets, and currency exchange fluctuations and policies. Because the Fund may invest at least a significant portion of its assets in companies in a specific region, including Europe, the Fund is subject to greater risks of adverse developments in that region and/or the surrounding regions than a fund that is more broadly diversified geographically. Securities issued by small and mid-capitalization companies may be more volatile in price than those of larger companies and may involve additional risks. Derivatives involve costs and can create economic leverage in the Fund’s portfolio which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that significantly exceeds the Fund’s initial investment. A merger or other restructuring, or a tender or exchange offer, proposed or pending at the time the Fund invests in merger arbitrage securities may not be completed on the terms or within the time frame contemplated, which may result in losses to the Fund. Debt obligations of distressed companies typically are unrated, lower-rated, in default or close to default and are generally more likely to become worthless than the securities
Geographic Composition 12/31/20
| % of Total |
| Net Assets |
United States | 51.7% |
United Kingdom | 9.6% |
Germany | 8.4% |
Switzerland | 7.3% |
Netherlands | 5.6% |
South Korea | 2.9% |
Israel | 2.0% |
China | 1.9% |
Japan | 1.6% |
Canada | 1.3% |
France | 1.2% |
Other | 0.6% |
Short-Term Investments & Other Net Assets | 5.9% |
of more financially stable companies. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Fund’s new benchmark, the MSCI World Value Index-NR (USD), posted a -1.16% total return for the period under review.1 Also for comparison, the Fund’s former benchmark, the MSCI World Index (USD), posted a +16.50% total return for the same period.1 The MSCI World Value Index-NR (USD; net of taxes on dividends) is replacing the MSCI World Index (USD; gross of taxes on dividends) as the Fund’s benchmark.
The investment manager believes the composition of the MSCI World Value Index-NR (USD) more accurately reflects the Fund’s current investment strategy and portfolio characteristics, and that the actual withholding rates for the Fund are closer to the assumptions of the MSCI World Value Index-NR (USD) than the MSCI World Index (USD).
Economic and Market Overview
Global developed and emerging market equities, as measured by the MSCI All Country World Index (USD), posted a +16.82% total return for the 12 months ended December 31, 2020.1 Stocks fell sharply in early 2020 as
1.Source: Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
MGD-2
Annual Report
FRANKLIN MUTUAL GLOBAL DISCOVERY VIP FUND
many investors sold equities amid fears of a global economic slowdown due to the novel coronavirus (COVID-19) pandemic. Global equities began to rebound in late March 2020 amid optimism about easing lockdown restrictions, vaccine and treatment development and economic stimulus measures. Despite declines in September and October due to geopolitical tensions and rising infection rates, markets rebounded in November and December, as positive sentiment about successful trials of COVID-19 vaccines, the beginning of vaccination programs in some countries and apparent resolution of political uncertainty supported markets.
In the U.S., pandemic-related restrictions caused stiff economic headwinds, including mass layoffs that drove the unemployment rate to 14.8% in April 2020.2 According to the National Bureau of Economic Research, the longest U.S. economic expansion in history ended in February, and the country slipped into a deep recession. Equities began to rebound in the spring amid the government’s fiscal and monetary stimulus, declining jobless claims, rising retail sales and optimism about treatments and potential vaccines for COVID-19. Following a record annualized decline in second-quarter gross domestic product (GDP), resilient consumer spending helped drive third-quarter GDP to expand at a record annualized rate, although growth slowed in the fourth quarter. Equities continued to rise during the summer but declined in the fall due to concerns about possible new restrictions amid rising COVID-19 infection rates and uncertainties about additional fiscal stimulus and the U.S. presidential election. Despite signs that the economic recovery was stalling as the unemployment
rate remained relatively high (6.7% at period-end) and consumer spending declined, stocks rallied in November and December, buoyed by the outcome of the U.S. presidential election, the start of COVID-19 vaccination programs and the passage of a new U.S. stimulus bill.2
In an effort to support the economy, the U.S. Federal Reserve (Fed) lowered the federal funds target rate to a range of 0.00%–0.25% in March 2020. The Fed also enacted quantitative easing measures aimed at ensuring credit flows to borrowers and supporting credit markets with open- ended bond purchasing. Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded its 2% target.
In the eurozone, the economy contracted again in the fourth quarter of 2020, following quarter-on-quarter expansion in the third quarter and contractions in the first and second quarters. After several months of gains
2. Source: U.S. Bureau of Labor Statistics.
due to easing restrictions and robust stimulus measures, European developed market equities, as measured by the MSCI Europe Index (USD), declined in September and October as rising infection rates heightened investor concerns that the nascent economic revival could stall. Nevertheless, successful vaccine development and a Brexit resolution supported European developed market equities, as measured by the MSCI Europe Index (USD), to post a +5.93% total return for the period.1
Asian developed and emerging market equities, as measured by the MSCI All Country Asia Index (USD), posted a +21.30% total return for the 12 months under review.1 Although pandemic-related lockdowns derailed economic growth in early 2020, sharp market declines were followed by rebounds as China’s economy, a key driver of the region’s economic activity, recovered from the contraction in the first quarter and expanded during the rest of 2020. Asian stocks rose as the region’s economies reopened, aided by robust stimulus measures and optimism that economic revitalization would be further spurred by COVID-19 vaccines.
Global emerging market stocks, as measured by the MSCI Emerging Markets Index (USD), posted a +18.69% total return for the period, despite steep pandemic-related declines in early 2020, benefiting from improving economic activity, stabilizing oil prices and U.S. dollar weakness.1 In spite of higher COVID-19 cases in some countries, emerging market stocks rallied near the end of 2020, bolstered by easing political uncertainty, commencement of COVID-19 vaccinations and rising commodity prices.
Investment Strategy
At Franklin Mutual Advisors, we are committed to our distinctive value approach to investing. Our major investment strategy is investing in undervalued stocks. When selecting undervalued equities, we are attracted to what we believe are fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow
and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset-rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. While the vast majority of our undervalued equity investments are made in publicly traded companies globally, we may invest occasionally in privately held companies as well. Our portfolio selection process
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generally includes an assessment of the potential impacts of any material environmental, social and governance (ESG) factors on the long-term risk and return profile of a company.
We complement this more traditional investment strategy with two others. One is distressed investing, which is complex and can take many forms. The most common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially distressed company is reorganized, often in bankruptcy court, the old debt is typically replaced with new securities issued by the financially stronger company.
The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers, commonly referred to as deals, the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and eschew rumored deals or other situations we consider relatively risky.
In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.
Manager’s Discussion
A year ago, we reflected on a decade of equity market strength and solid, but weaker, returns for our value investing strategy. 2020 turned out to be an amplification of this performance gap, rather than a correction. The year started with a continuation of strong performance from market- darling growth stocks. The gap exploded as COVID-19 led to lockdowns and people working from home. The market leaders often benefited from these changes, with technology tools being adopted more quickly than before. Meanwhile, the lockdowns and disruption severely impacted many companies thought of as value stocks.
Even as central banks and governments across the globe acted through fiscal and monetary stimulus, the recovery came slowly and only accelerated when the prospects of an effective vaccine helped markets understand when the health crisis might be over. By the end of 2020, the MSCI World Value Index (USD) had recovered to be almost flat, with a -0.38% return.1 However, growth stocks advanced substantially further, as evidenced by the MSCI World Growth Index (USD), ending the year up +34.18%.1
Top 10 Industries 12/31/20
| % of Total |
| Net Assets |
Pharmaceuticals | 11.4% |
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Insurance | 8.2% |
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Oil, Gas & Consumable Fuels | 7.2% |
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Banks | 7.0% |
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Technology Hardware, Storage & Peripherals | 5.3% |
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Health Care Providers & Services | 4.2% |
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Software | 3.7% |
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Tobacco | 3.7% |
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Chemicals | 3.7% |
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Automobiles | 3.4% |
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Many signs of increased speculation in the market have appeared, with a surge in the number of IPOs not seen since the tech bubble and a boom in special purpose acquisition companies (SPACs), a type of company which raises money opportunistically and then looks around for a profitable opportunity. There is no guarantee that equity markets will not go higher or that some speculation will not be profitable, but we try to look through the speculation and continue to see attractive values in various parts of the market.
Our traditional value equity investment approach is complemented with two other strategies, distressed investing and merger arbitrage. We were active in both during 2020.
Within merger arbitrage, which involves trading the stocks of companies involved in a merger or acquisition (M&A), activity has climbed in tandem with increasing confidence about
an end to the pandemic crisis. Significant new deals have been announced and some present attractive investment opportunities. In addition, the deals which were impacted by the emergence of the coronavirus have seen renegotiated terms and moved toward amicable resolution. This includes deals such as Tiffany’s acquisition by LVMH Moet Hennessy Louis Vuitton and Taubman’s acquisition by Simon Property Group. We expect an ongoing acceleration of M&A activity given a recovering economy, strong markets, and the hope for increasing regulatory and trade predictability under the incoming U.S. administration.
Within our distressed credit strategy, we targeted companies and industries directly impacted by the coronavirus pandemic. The robust government fiscal and monetary interventions have limited the number of attractive options, but we found opportunities in the energy sector and the retail and travel industries. As the vaccine news arrived and liquidity remained strong, the opportunities have become
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more limited. We expect to see fewer new distressed debt opportunities than the merger arbitrage opportunities discussed above.
Fund Performance
Turning to Fund performance, top positive contributors included Samsung Electronics, Charter Communications and Cognizant Technology.
After experiencing COVID-related volatility during the first few months of the year, the stock price of South Korea- based electronics and computer peripherals manufacturer Samsung Electronics started to recover in April and continued an upward trajectory for the remainder of the year, making it a leading contributor to portfolio performance. The company posted strong first-quarter results, with revenue and operating profit rising year-over-year, propelled by sales of its memory chips. Demand for memory chips increased during the lockdown, driven by hyperscale data center spending and spending to enable working from home and online learning. Investors are optimistic that strength in memory prices can continue, and Samsung is expected to announce a new capital return program in early 2021, which may include a special dividend.
Shares of U.S.-based cable operator Charter Communications rallied throughout much of 2020’s second half, lifted by second-quarter earnings that exceeded consensus expectations. The stay-at-home economy emerging in the wake of the coronavirus pandemic led to an increase in the number of high-speed data subscribers and lower turnover among the existing customer base. These factors drove higher margins and increased free cash flow, which management used to buy back stock. Third-quarter results were also strong, with high-speed data net subscriber additions and residential video growth soundly beating expectations. The company’s financials also continued to improve.
Shares of U.S.-based Cognizant Technology Solutions Group, a provider of information technology (IT), consulting and business process outsourcing services, rose in February largely due to fourth-quarter 2019 financial results that beat expectations. After price fluctuation in March due
to uncertainty around the impact of COVID-19, the stock continued its rally after first-quarter 2020 results announced in May were also better than expected, despite softer- than-expected margins and pandemic-related expenses. Second-quarter financial results similarly beat expectations. Shares of Cognizant rallied as management’s turnaround initiatives contributed to positive investor sentiment. The pandemic has also accelerated digital transformation across industries, which resulted in solid growth for IT services
vendors such as Cognizant. Growth in the company’s digital practice segments—which were up by half—drove second- quarter results. Cognizant continued to ramp up its digital strategy by acquiring seven companies that it merged into existing divisions during 2020’s first three quarters. A strong third-quarter announcement and broader recovery in IT services demand continued to support the stock price, which generally rose throughout the remainder of the period.
Top 10 Holdings 12/31/20
Company | % of Total |
Industry, Country | Net Assets |
GlaxoSmithKline plc | 3.1% |
Pharmaceuticals, United Kingdom |
|
Novartis AG | 2.9% |
Pharmaceuticals, Switzerland |
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Samsung Electronics Co. Ltd. | 2.9% |
Technology Hardware, Storage & Peripherals, |
|
South Korea |
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Medtronic plc | 2.8% |
Health Care Equipment & Supplies, United |
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States |
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Merck & Co., Inc. | 2.8% |
Pharmaceuticals, United States |
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Charter Communications, Inc. | 2.8% |
Media, United States |
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CVS Health Corp. | 2.7% |
Health Care Providers & Services, United States |
|
NN Group NV | 2.6% |
Insurance, Netherlands |
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British American Tobacco plc | 2.6% |
Tobacco, United Kingdom |
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Hartford Financial Services Group, Inc. (The) | 2.6% |
Insurance, United States |
|
During the period under review, Fund investments that detracted from performance included American International Group (AIG), Citizens Financial Group and Wells Fargo.
The stock price of U.S.-based insurer AIG fell from mid- February through late March. The declining valuation was fueled by investor concerns regarding the coronavirus outbreak and operating shortfalls in fourth-quarter earnings. An uncertain environment and changes in leadership
and business strategy continued to affect the company throughout the remainder of the year, culminating in the announcement of the spinoff of its life insurance business and a change in leadership. We have since exited the position.
The stock price of U.S.-based banking services company Citizens Financial Group declined from mid-February through late March. The valuation reduction was fueled by investor concern regarding the coronavirus outbreak and its economic effects, including increased borrower defaults and a falling interest-rate environment, which decreases the profitability of lending products. However, the price
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stabilized as the broader market calmed down. In April, the bank posted decent first-quarter financial results amid a deteriorating economic environment. Management reported modest increases in revenue, loans and net interest margin, and broadly stable credit performance in the loan portfolio. However, in June, bank stocks retreated based on concerns about potential dividend cuts resulting from the Federal Reserve Board’s stress tests of large banks. The company’s stock price was bolstered in July by favorable second- quarter earnings, but continued to experience volatility toward period-end as third-quarter results fell short of consensus, due in part to large payments into reserves. We have since exited the stock.
The performance of U.S.-based diversified financial services company Wells Fargo was affected by the regulatory restrictions placed on it following the account opening scandal, particularly the ability to grow the size of its balance sheet freely. These limits negatively impacted the company in March when a flurry of companies rushed to draw on their credit lines to strengthen their liquidity positions as the effects of the pandemic became more tangible. After the March downturn, COVID-related uncertainty and interest- rate declines continued to hinder the organization, leading management to revise its forward guidance several times throughout the year. First-quarter earnings fell short of expectations, and Wells Fargo posted a second-quarter loss, although much of it was due to the bank’s massive contribution to its loan loss reserves. The company
also drastically cut its dividend. During the third quarter, headline earnings fell short of expectations, but many of the costs endured during the quarter were associated with restructuring, which management expects will reduce costs in 2021. In addition to shedding its student loan business in 2020, the company looks forward to streamlining its business model further in the year ahead.
During the period, the Fund held currency forwards and futures seeking to hedge most of the currency risk of the portfolio’s non-U.S. dollar investments. The hedges had a negative overall impact on the Fund’s performance as the dollar fell against most currencies during the period.
Thank you for your participation in Franklin Mutual Global Discovery VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
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| Actual |
| Hypothetical |
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| (actual return after expenses) |
| (5% annual return before expenses) |
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| Fund-Level |
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| Fund-Level |
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| Expenses |
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| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201,2 |
| Value 12/31/20 | 7/1/20–12/31/201,2 | a | Ratio2 |
1 | $1,000 |
| $1,214.36 | $5.40 | $1,020.10 | $4.93 |
| 0.97% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Franklin Mutual Global Discovery VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $19.17 | $17.47 | $20.38 | $20.22 | $19.85 |
Income from investment operationsa: | 0.57c | 0.43 | 0.36 | 0.47 | 0.41 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (1.52) | 3.64 | (2.50) | 1.29 | 1.92 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (0.95) | 4.07 | (2.14) | 1.76 | 2.33 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.42) | (0.37) | (0.52) | (0.42) | (0.39) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.30) | (2.00) | (0.25) | (1.18) | (1.57) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.72) | (2.37) | (0.77) | (1.60) | (1.96) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $17.50 | $19.17 | $17.47 | $20.38 | $20.22 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (4.22)% | 24.71% | (11.01)% | 8.99% | 12.32% |
Ratios to average net assets | 0.97% | 0.94% | 0.96% | 1.01% | 1.01% |
Expensese,f,g.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Expenses - incurred in connection with securities sold short. | 0.01% | 0.02% | 0.01% | — | 0.01% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.57%c | 2.22% | 1.81% | 2.29% | 2.10% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $3,788 | $3,878 | $3,282 | $3,189 | $3,084 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 34.79% | 21.82% | 29.84% | 17.49% | 17.54% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchas- es of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.24 per share related to income received in the form of special dividends and EU reclaims in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.07%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Prod- ucts Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gIncludes dividends and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(d).
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The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Mutual Global Discovery VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $18.54 | $16.96 | $19.80 | $19.69 | $19.37 |
Income from investment operationsa: | 0.51c | 0.37 | 0.30 | 0.41 | 0.35 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (1.47) | 3.53 | (2.42) | 1.25 | 1.87 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (0.96) | 3.90 | (2.12) | 1.66 | 2.22 |
Less distributions from: |
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Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.37) | (0.32) | (0.47) | (0.37) | (0.33) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.30) | (2.00) | (0.25) | (1.18) | (1.57) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.67) | (2.32) | (0.72) | (1.55) | (1.90) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $16.91 | $18.54 | $16.96 | $19.80 | $19.69 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (4.46)% | 24.37% | (11.22)% | 8.71% | 12.06% |
Ratios to average net assets | 1.22% | 1.19% | 1.21% | 1.26% | 1.26% |
Expensese,f,g.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Expenses - incurred in connection with securities sold short. | 0.01% | 0.02% | 0.01% | — | 0.01% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.33%c | 1.97% | 1.56% | 2.04% | 1.85% |
Supplemental data |
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Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $467,653 | $539,759 | $500,607 | $631,179 | $630,397 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 34.79% | 21.82% | 29.84% | 17.49% | 17.54% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchas- es of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.24 per share related to income received in the form of special dividends and EU reclaims in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.83%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Prod- ucts Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gIncludes dividends and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(d).
The accompanying notes are an integral part of these financial statements.
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Mutual Global Discovery VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 4
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $18.98 | $17.30 | $20.17 | $20.02 | $19.66 |
Income from investment operationsa: | 0.51c | 0.36 | 0.29 | 0.40 | 0.34 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (1.50) | 3.61 | (2.47) | 1.27 | 1.89 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (0.99) | 3.97 | (2.18) | 1.67 | 2.23 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.35) | (0.29) | (0.44) | (0.34) | (0.30) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.30) | (2.00) | (0.25) | (1.18) | (1.57) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.65) | (2.29) | (0.69) | (1.52) | (1.87) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $17.34 | $18.98 | $17.30 | $20.17 | $20.02 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (4.54)% | 24.28% | (11.31)% | 8.61% | 11.91% |
Ratios to average net assets | 1.32% | 1.29% | 1.31% | 1.36% | 1.36% |
Expensese,f,g.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Expenses - incurred in connection with securities sold short. | 0.01% | 0.02% | 0.01% | — | 0.01% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.22%c | 1.87% | 1.46% | 1.94% | 1.75% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $26,688 | $30,865 | $30,094 | $41,713 | $45,262 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 34.79% | 21.82% | 29.84% | 17.49% | 17.54% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchas- es of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.24 per share related to income received in the form of special dividends and EU reclaims in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.72%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Prod- ucts Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gIncludes dividends and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(d).
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The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Franklin Mutual Global Discovery VIP Fund
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks 91.2% |
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| Aerospace & Defense 1.4% |
|
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| BAE Systems plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 1,054,973 |
| $7,035,891 |
| Auto Components 0.0%† |
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| a,b,cInternational Automotive Components Group Brazil LLC. . . . . . . . . | Belgium | 424,073 |
| 9,018 |
| Automobiles 1.0% |
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| General Motors Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 119,200 |
| 4,963,488 |
| Banks 7.0% |
|
|
|
|
| Citigroup, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 104,550 |
| 6,446,553 |
| bING Groep NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 964,232 |
| 8,965,646 |
| JPMorgan Chase & Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 77,386 |
| 9,833,439 |
| Wells Fargo & Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 313,466 |
| 9,460,404 |
|
|
|
|
| 34,706,042 |
| Beverages 1.2% |
|
|
|
|
| Heineken NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 55,066 |
| 6,136,746 |
| Biotechnology 0.3% |
|
|
|
|
| bAlexion Pharmaceuticals, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,293 |
| 1,608,178 |
| Building Products 1.2% |
|
|
|
|
| Johnson Controls International plc. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 130,642 |
| 6,086,611 |
| Capital Markets 3.4% |
|
|
|
|
| Credit Suisse Group AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 722,165 |
| 9,323,785 |
| bDeutsche Bank AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 526,158 |
| 5,787,441 |
| dGuotai Junan Securities Co. Ltd., H, 144A, Reg S.. . . . . . . . . . . . . | China | 1,275,797 |
| 1,859,057 |
|
|
|
|
| 16,970,283 |
| Chemicals 3.7% |
|
|
|
|
| BASF SE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 102,530 |
| 8,104,577 |
| dCovestro AG, 144A, Reg S.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 163,168 |
| 10,053,754 |
|
|
|
|
| 18,158,331 |
| Communications Equipment 0.9% |
|
|
|
|
| Cisco Systems, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 101,280 |
| 4,532,280 |
| Construction Materials 1.2% |
|
|
|
|
| bLafargeHolcim Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 109,629 |
| 6,017,295 |
| Consumer Finance 1.6% |
|
|
|
|
| Capital One Financial Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 79,688 |
| 7,877,159 |
| Containers & Packaging 1.1% |
|
|
|
|
| International Paper Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 106,400 |
| 5,290,208 |
| Diversified Financial Services 1.9% |
|
|
|
|
| Voya Financial, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 161,150 |
| 9,477,232 |
| Diversified Telecommunication Services 1.1% |
|
|
|
|
| Deutsche Telekom AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 304,611 |
| 5,560,170 |
| Entertainment 2.2% |
|
|
|
|
| bWalt Disney Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 60,591 |
| 10,977,878 |
| Food Products 2.1% |
|
|
|
|
| Kraft Heinz Co. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 306,200 |
| 10,612,892 |
| Health Care Equipment & Supplies 2.8% |
|
|
|
|
| Medtronic plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 118,813 |
| 13,917,755 |
The accompanying notes are an integral part of these financial statements.
Annual Report
MGD-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Health Care Providers & Services 4.2% |
|
|
|
|
| Anthem, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 23,232 |
| $7,459,563 |
| CVS Health Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 199,991 |
| 13,659,385 |
|
|
|
|
| 21,118,948 |
| Hotels, Restaurants & Leisure 1.2% |
|
|
|
|
| bAccor SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 167,404 |
| 6,073,799 |
| Industrial Conglomerates 1.4% |
|
|
|
|
| General Electric Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 625,050 |
| 6,750,540 |
| Insurance 9.0% |
|
|
|
|
| Alleghany Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,530 |
| 4,545,786 |
| China Pacific Insurance Group Co. Ltd., H. . . . . . . . . . . . . . . . . . . | China | 1,931,308 |
| 7,551,368 |
| Everest Re Group Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,078 |
| 3,529,609 |
| Hartford Financial Services Group, Inc. (The). . . . . . . . . . . . . . . . . | United States | 259,896 |
| 12,729,706 |
| NN Group NV.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 299,072 |
| 12,929,482 |
| Willis Towers Watson plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 16,114 |
| 3,394,897 |
|
|
|
|
| 44,680,848 |
| IT Services 2.1% |
|
|
|
|
| Cognizant Technology Solutions Corp., A. . . . . . . . . . . . . . . . . . . . | United States | 127,760 |
| 10,469,932 |
| Media 3.0% |
|
|
|
|
| bCharter Communications, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 20,786 |
| 13,750,978 |
| biHeartMedia, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 95,199 |
| 1,235,683 |
| a,biHeartMedia, Inc., B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,606 |
| 19,387 |
|
|
|
|
| 15,006,048 |
| Oil, Gas & Consumable Fuels 7.2% |
|
|
|
|
| BP plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 2,966,046 |
| 10,235,810 |
| Canadian Natural Resources Ltd... . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 278,200 |
| 6,689,834 |
| Kinder Morgan, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 499,770 |
| 6,831,856 |
| Williams Cos., Inc. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 611,601 |
| 12,262,600 |
|
|
|
|
| 36,020,100 |
| Pharmaceuticals 11.7% |
|
|
|
|
| bElanco Animal Health, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 60,998 |
| 1,870,809 |
| Eli Lilly and Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 73,735 |
| 12,449,417 |
| GlaxoSmithKline plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 850,402 |
| 15,561,764 |
| Merck & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 169,416 |
| 13,858,229 |
| Novartis AG, ADR.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 151,697 |
| 14,324,748 |
|
|
|
|
| 58,064,967 |
| Semiconductors & Semiconductor Equipment 2.6% |
|
|
|
|
| bInphi Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,200 |
| 1,315,854 |
| bRenesas Electronics Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 758,463 |
| 7,938,825 |
| Xilinx, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,200 |
| 3,572,604 |
|
|
|
|
| 12,827,283 |
| Software 3.7% |
|
|
|
|
| bAvaya Holdings Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4 |
| 76 |
| bCheck Point Software Technologies Ltd.. . . . . . . . . . . . . . . . . . . . . | Israel | 73,259 |
| 9,736,854 |
| Oracle Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 134,000 |
| 8,668,460 |
|
|
|
|
| 18,405,390 |
| Technology Hardware, Storage & Peripherals 5.3% |
|
|
|
|
| Catcher Technology Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Taiwan | 411,000 |
| 3,021,335 |
| Samsung Electronics Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . | South Korea | 191,101 |
| 14,248,989 |
MGD-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
a a
Country Shares
a
Value
a | a | a | a | a | a | ||
| Common Stocks (continued) |
|
|
|
|
|
|
| Technology Hardware, Storage & Peripherals (continued) |
|
|
|
|
|
|
| Western Digital Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 166,446 |
|
| $9,219,444 | |
|
|
|
|
|
|
| 26,489,768 |
| Textiles, Apparel & Luxury Goods 1.3% |
|
|
|
|
|
|
| Cie Financiere Richemont SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 73,673 |
|
| 6,655,768 | |
| Tobacco 3.7% |
|
|
|
|
|
|
| Altria Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 135,684 |
|
| 5,563,044 | |
| British American Tobacco plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 290,877 |
|
| 10,803,050 | |
| British American Tobacco plc, ADR.. . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 53,648 |
|
| 2,011,264 | |
|
|
|
|
|
|
| 18,377,358 |
| Wireless Telecommunication Services 0.7% |
|
|
|
|
|
|
| Vodafone Group plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 2,197,260 |
|
| 3,609,237 | |
| .Total Common Stocks (Cost $355,728,998).. . . . . . . . | . . . . . . . . . . . . . . . . . . | . . . . . . . | . . . |
| 454,487,443 | |
| Preferred Stocks 2.5% |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Automobiles 2.5% |
|
|
|
|
|
|
| eVolkswagen AG, 3.18%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 65,040 |
|
| 12,155,426 | |
| .Total Preferred Stocks (Cost $10,628,895).. . . . . . . . . | . . . . . . . . . . . . . . . . . . | . . . . . . . | . . . |
| 12,155,426 | |
|
|
|
| Warrants |
|
| |
|
|
|
|
|
| ||
| Warrants 0.0%† |
|
|
|
|
|
|
| Software 0.0%† |
|
|
|
|
|
|
| bAvaya Holdings Corp., 12/15/22. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,179 |
|
| 16,832 | |
| Textiles, Apparel & Luxury Goods 0.0%† |
|
|
|
|
|
|
| bCie Financiere Richemont SA, 11/22/23. . . . . . . . . . . . . . . . . . . . . | Switzerland | 147,346 |
|
| 38,280 | |
| .Total Warrants (Cost $—).. . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . . . | . . . . . . . | . . . |
| 55,112 | |
|
|
|
| Principal |
|
| |
|
|
|
|
|
| ||
|
|
|
| Amount* |
|
| |
| Corporate Bonds 2.3% |
|
|
|
|
|
|
| Airlines 1.3% |
|
|
|
|
|
|
| dAmerican Airlines, Inc., Senior Secured Note, 144A, 11.75%, 7/15/25. | United States | 3,988,000 |
|
| 4,605,143 | |
| dMileage Plus Holdings LLC / Mileage Plus Intellectual Property |
|
|
|
|
|
|
| Assets Ltd., Senior Secured Note, 144A, 6.5%, 6/20/27.. . . . . . . | United States | 2,060,000 |
|
| 2,218,363 | |
|
|
|
|
|
|
| 6,823,506 |
| Diversified Telecommunication Services 0.8% |
|
|
|
|
|
|
| fFrontier Communications Corp., |
|
|
|
|
|
|
| Senior Note, 10.5%, 9/15/22 .. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,610,000 |
|
| 1,889,889 | |
| Senior Note, 11%, 9/15/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,065,000 |
| 2,141,747 | ||
|
|
|
|
|
|
| 4,031,636 |
| Multiline Retail 0.2% |
|
|
|
|
|
|
| dMacy's, Inc., Senior Secured Note, 144A, 8.375%, 6/15/25. . . . . . . | United States | 829,000 |
|
| 921,516 | |
| .Total Corporate Bonds (Cost $13,968,435).. . . . . . . . . | . . . . . . . . . . . . . . . . . . | . . . . . . . | . . . |
| 11,776,658 | |
|
|
|
| Shares |
|
| |
|
|
|
|
|
| ||
| Companies in Liquidation 0.0%† |
|
|
|
|
|
|
| a,b,gTribune Media, Litigation Trust, Contingent Distribution. . . . . . . . . . | United States | 57,457 |
|
| — | |
| a,b,gVistra Energy Corp., Litigation Trust, Contingent Distribution.. . . . . | United States | 5,912,264 |
|
| 8,868 |
The accompanying notes are an integral part of these financial statements.
Annual Report
MGD-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Companies in Liquidation (continued) |
|
|
|
|
| a,b,gWalter Energy, Inc., Litigation Trust, Contingent Distribution.. . . . . . | United States | 966,000 |
| $— |
| . . . . .Total Companies in Liquidation (Cost $185,800). . | . . . . . . . . . . . . . . . . . | . . . . . . . . . |
| 8,868 |
| Total Long Term Investments (Cost $380,512,128) |
|
|
|
|
| . . . . . . . . . . . . . . . . . | . . . . . . . . . |
| 478,483,507 | |
| Short Term Investments 2.6% |
|
|
|
|
|
|
|
|
|
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a | ||
| U.S. Government and Agency Securities 2.6% |
|
|
|
|
|
|
hFHLB, 1/04/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,000,000 |
|
| 1,000,000 | ||
hU.S. Treasury Bills, |
|
|
|
|
|
| |
| 1/05/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,500,000 |
|
| 4,500,000 | |
i | 1/14/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,500,000 |
|
| 1,499,985 | |
i | 1/21/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,500,000 |
|
| 2,499,959 | |
i | 2/04/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,500,000 |
|
| 1,499,942 | |
i | 2/11/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,500,000 |
|
| 1,499,921 | |
i | 6/24/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
|
| 499,828 | |
|
|
|
|
|
|
| 11,999,635 |
| .. . . . . . . . . . . . . .Total U.S. Government and Agency Securities (Cost $12,999,230) | . . . |
| 12,999,635 | |||
| Total Short Term Investments (Cost $12,999,230) |
|
|
|
|
|
|
| . . . . . . . . . . . . . . . . . . | . . . . . . . | . . . |
| 12,999,635 | ||
| Total Investments (Cost $393,511,358) 98.6%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
|
| ||||
|
| $491,483,142 | |||||
| Securities Sold Short (1.9)%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| (9,658,529) | ||||
| Other Assets, less Liabilities 3.3%. . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . . . | . . . . . . . | . . . |
| 16,304,059 | |
| . . . .Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . . . | . . . . . . . | . . . |
| $498,128,672 | |
|
|
|
| Shares |
|
| |
|
|
|
|
|
| ||
| Securities Sold Short (1.9)% |
|
|
|
|
|
|
| Common Stocks (1.9)% |
|
|
|
|
|
|
| Insurance (0.7)% |
|
|
|
|
|
|
jAon plc, A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 17,404 |
|
| (3,676,943) | ||
| Pharmaceuticals (0.2)% |
|
|
|
|
|
|
jAstraZeneca plc, ADR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 21,865 |
|
| (1,093,031) | ||
jSemiconductors & Semiconductor Equipment (1.0)% |
|
|
|
|
|
| |
| Advanced Micro Devices, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 43,430 |
|
| (3,982,965) | |
| Marvell Technology Group Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 19,049 |
| (905,590) | ||
|
|
|
|
|
|
| (4,888,555) |
Total Common Stocks (Proceeds $9,551,906).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Securities Sold Short (Proceeds $9,551,906). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9,658,529)
$(9,658,529)
MGD-14
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
*The principal amount is stated in U.S. dollars unless otherwise indicated.
† Rounds to less than 0.1% of net assets.
a Fair valued using significant unobservable inputs. See Note 13 regarding fair value measurements. b Non-income producing.
c See Note 10 regarding restricted securities.
dSecurity was purchased pursuant to Rule 144A or Regulation S under the Securities Act of 1933. 144A securities may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. Regulation S securities cannot be sold in the United States without either
an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At December 31, 2020, the aggregate value of these securities was $19,657,833, representing 3.9% of net assets.
eVariable rate security. The rate shown represents the yield at period end.
fSee Note 7 regarding credit risk and defaulted securities.
gContingent distributions represent the right to receive additional distributions, if any, during the reorganization of the underlying company. Shares represent total underlying principal of debt securities.
hThe security was issued on a discount basis with no stated coupon rate.
iA portion or all of the security has been segregated as collateral for securities sold short and forward exchange contracts. At December 31, 2020, the aggregate value of these securities pledged amounted to $5,652,000, representing 1.1% of net assets.
jSee Note 1(d) regarding securities sold short.
At December 31, 2020, the Fund had the following futures contracts outstanding. See Note 1(c).
Futures Contracts
|
|
|
|
| Value/ |
|
|
|
|
| Unrealized |
|
| Number of | Notional | Expiration | Appreciation |
Description | Type | Contracts | Amount* | Date | (Depreciation) |
Foreign exchange contracts | Short | 94 | $14,389,050 | 3/15/21 | $(84,810) |
Foreign Exchange EUR/USD. . . . . . . . . . . . . . . . . . . . | |||||
Foreign Exchange GBP/USD. . . . . . . . . . . . . . . . . . . . | Short | 115 | 9,817,406 | 3/15/21 | (145,812) |
Total Futures Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $(230,622) |
*As of period end.
At December 31, 2020, the Fund had the following forward exchange contracts outstanding. See Note 1(c).
Forward Exchange Contracts
| Counter- |
|
| Contract | Settlement | Unrealized | Unrealized |
Currency | partya | Type | Quantity | Amount* | Date | Appreciation | Depreciation |
a | a | a | a | a | a | a | a |
OTC Forward Exchange Contracts |
|
|
|
|
|
| |
British Pound. . . . . . . | BNY | Buy | 12,562 | 17,087 | 1/19/21 | $96 | $— |
British Pound. . . . . . . | BOFA | Buy | 1,187,076 | 1,552,325 | 1/19/21 | 71,329 | — |
British Pound. . . . . . . | HSBK | Buy | 2,150,250 | 2,464,839 | 1/19/21 | 92,418 | — |
British Pound. . . . . . . | HSBK | Sell | 8,496,369 | 11,082,573 | 1/19/21 | — | (538,548) |
British Pound. . . . . . . | SSBT | Buy | 48,666 | 65,623 | 1/19/21 | 941 | — |
British Pound. . . . . . . | UBSW | Buy | 901,437 | 1,178,800 | 1/19/21 | 54,164 | — |
New Taiwan Dollar. . . | HSBK | Sell | 39,559,878 | 1,409,551 | 1/29/21 | 392 | (3,850) |
New Taiwan Dollar. . . | UBSW | Sell | 41,719,482 | 1,487,819 | 1/29/21 | 458 | (2,786) |
Swiss Franc.. . . . . . . | HSBK | Sell | 3,918,376 | 4,415,236 | 2/16/21 | — | (16,445) |
Swiss Franc.. . . . . . . | UBSW | Sell | 3,918,376 | 4,413,952 | 2/16/21 | — | (17,728) |
Euro.. . . . . . . . . . . . . | BOFA | Sell | 81,850 | 99,824 | 2/23/21 | — | (285) |
Euro.. . . . . . . . . . . . . | HSBK | Sell | 27,252,626 | 33,096,105 | 2/23/21 | — | (236,171) |
Euro.. . . . . . . . . . . . . | UBSW | Sell | 1,740,181 | 2,119,348 | 2/23/21 | — | (9,042) |
South Korean Won.. . | HSBK | Buy | 2,026,564,425 | 1,839,874 | 5/14/21 | 22,635 | (318) |
South Korean Won.. . | HSBK | Sell | 5,698,790,095 | 5,083,226 | 5/14/21 | — | (153,341) |
South Korean Won.. . | UBSW | Sell | 926,097,546 | 832,597 | 5/14/21 | — | (18,387) |
South Korean Won.. . | HSBK | Sell | 6,252,499,822 | 5,658,966 | 6/18/21 | — | (86,069) |
The accompanying notes are an integral part of these financial statements.
Annual Report
MGD-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
Forward Exchange Contracts (continued)
| Counter- |
|
| Contract | Settlement | Unrealized | Unrealized |
Currency | partya | Type | Quantity | Amount* | Date | Appreciation | Depreciation |
a | a | a | a | a | a | a | a |
OTC Forward Exchange Contracts (continued) |
|
|
|
|
| ||
South Korean Won.. . | UBSW | Sell | 178,093,425 | 160,842 | 6/18/21 | $— | $(2,798) |
Total Forward Exchange Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $242,433 | $(1,085,768) | |||||
Net unrealized appreciation (depreciation). . . . . . | . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . | . . . . . . . . |
| $(843,335) |
*In U.S. dollars unless otherwise indicated.
aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.
See Note 11 regarding other derivative information.
See Abbreviations on page 32.
MGD-16
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Franklin |
| Mutual Global |
| Discovery VIP |
| Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $393,511,358 |
Value - Unaffiliated issuers .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $491,483,142 |
Cash.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 472,463 |
Foreign currency, at value (cost $194,668).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 194,668 |
Receivables: |
|
Investment securities sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,339,573 |
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 242,820 |
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,287,709 |
European Union tax reclaims (Note 1g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,809,872 |
Deposits with brokers for: |
|
Securities sold short. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,764,289 |
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 552,431 |
Variation margin on futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 43,969 |
Unrealized appreciation on OTC forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 242,433 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 194,734 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 510,628,103 |
Liabilities: |
|
Payables: |
|
Investment securities purchased.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 445,584 |
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 548,142 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 366,500 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 106,230 |
Securities sold short, at value (proceeds $9,551,906).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,658,529 |
Unrealized depreciation on OTC forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,085,768 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 288,678 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 12,499,431 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $498,128,672 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $417,112,250 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 81,016,422 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $498,128,672 |
| Franklin |
| Mutual Global |
| Discovery VIP |
| Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $3,787,718 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 216,444 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $17.50 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $467,653,328 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 27,648,982 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $16.91 |
Class 4: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $26,687,626 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 1,539,333 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $17.34 |
The accompanying notes are an integral part of these financial statements.
Annual Report
MGD-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the year ended December 31, 2020
| Franklin |
| Mutual Global |
| Discovery VIP |
| Fund |
Investment income: |
|
Dividends: (net of foreign taxes of $518,967) |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $17,985,535 |
Interest: |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 800,391 |
Adjustment for uncollectible interest (Note 7) | (404,250) |
Income from securities loaned: |
|
Unaffiliated entities (net of fees and rebates).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 104,673 |
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,064 |
Other income (Note 1g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,677,692 |
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 21,165,105 |
Expenses: |
|
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,061,717 |
Distribution fees: (Note 3c) |
|
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,089,401 |
Class 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 88,190 |
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 13,928 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 126,559 |
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 155,568 |
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,798 |
Dividends on securities sold short. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 56,530 |
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 127,926 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Total expenses | 5,722,617 |
Expense reductions (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2,828) |
Expenses waived/paid by affiliates (Note 3e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,186) |
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,718,603 |
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 15,446,502 |
Realized and unrealized gains (losses): |
|
Net realized gain (loss) from: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (24,816,002) |
Foreign currency transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 99,343 |
Forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (4,767,212) |
Futures contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,661,927) |
Securities sold short.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (293,748) |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (31,439,546) |
Net change in unrealized appreciation (depreciation) on: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (12,743,596) |
Translation of other assets and liabilities denominated in foreign currencies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 128,044 |
Forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 531,023 |
Futures contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 103,829 |
Securities sold short.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 268,328 |
Net change in unrealized appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (11,712,372) |
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (43,151,918) |
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $(27,705,416) |
MGD-18
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin Mutual Global Discovery VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $15,446,502 | $11,110,516 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (31,439,546) | 10,200,575 |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | (11,712,372) | 100,899,252 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | (27,705,416) | 122,210,343 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (151,550) | (427,555) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (18,507,580) | (61,286,007) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,028,932) | (3,431,154) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (19,688,062) | (65,144,716) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 172,218 | 231,219 |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (27,296,236) | (14,266,368) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,856,627) | (2,510,695) |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (28,980,645) | (16,545,844) |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | (76,374,123) | 40,519,783 |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 574,502,795 | 533,983,012 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $498,128,672 | $574,502,795 |
The accompanying notes are an integral part of these financial statements.
Annual Report
MGD-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Notes to Financial Statements
Franklin Mutual Global Discovery VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Mutual Global Discovery VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At December 31, 2020, 43.4% of the Fund's shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust's Board
of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities, exchange traded funds and derivative financial instruments listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the
foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the- counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund's pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.
Investments in open-end mutual funds are valued at the closing NAV. Investments in repurchase agreements are valued at cost, which approximates fair value.
Certain derivative financial instruments are centrally cleared or trade in the OTC market. The Fund's pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund's net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the
MGD-20
Annual Report
Franklin Mutual Global Discovery VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
a. Financial Instrument Valuation (continued)
investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund's portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund's securities to the latest indications of fair value at 4 p.m Eastern time. At December 31, 2020, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy. See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result in differences between the value of the Fund's portfolio securities on the last business day and the last calendar day of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Derivative Financial Instruments
The Fund invested in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including
the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.
Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements
Annual Report
MGD-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
c. Derivative Financial Instruments (continued)
with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination.
Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure
of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets
and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement. At December 31, 2020 the Fund had OTC derivatives in a net liability position of $843,335 and the aggregate value of collateral pledged for such contracts was $871,985.
Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund's custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund's investment objectives. To the extent that the amounts due to the Fund
from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.
The Fund entered into exchange traded futures contracts primarily to manage and/or gain exposure to interest rate and equity price risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities.
The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.
See Note 11 regarding other derivative information.
d. Securities Sold Short
The Fund is engaged in selling securities short, which obligates the Fund to replace a borrowed security with the same security at current fair value. The Fund incurs a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund realizes a gain if the price of the security declines between those dates. Gains are limited to the price at which the Fund sold the security short, while losses are potentially unlimited in size.
The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale to the extent necessary to meet margin requirements until the short position is closed out. A deposit must also be maintained with the Fund's custodian/counterparty broker consisting of cash and/or securities having a value equal to a specified percentage of the value of the securities sold short. The Fund is obligated to pay fees for borrowing the securities sold short and is required to pay the counterparty any dividends and/or interest due on securities sold short. Such dividends and/or interest and any security borrowing fees are recorded as an expense to the Fund.
MGD-22
Annual Report
Franklin Mutual Global Discovery VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
e. Securities Lending
The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned is reported separately in the Statement of Operations. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower. At December 31, 2020, the Fund had no securities on loan.
f. Senior Floating Rate Interests
The Fund invests in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity. Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to certain restrictions on resale. On July 27, 2017, the United Kingdom's Financial Conduct Authority announced its intention to cease sustaining LIBOR after 2021. There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
As such, the potential effect of a transition away from LIBOR on the Fund or the Fund's investments that use or may use a floating rate based on LIBOR cannot yet be determined.
g. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected
as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities.
When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, when EU reclaims are received by the Fund and the Fund previously passed foreign tax credit on to its shareholders, the Fund will enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund’s shareholders.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund
Annual Report
MGD-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
g. Income and Deferred Taxes (continued)
has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
h. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Paydown gains and losses are recorded as an adjustment to interest income. Dividend income, capital gain distributions are recorded on the ex- dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
i. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
j. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
MGD-24
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
2. Shares of Beneficial Interest (continued)
|
| Year Ended |
| Year Ended |
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 2 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 4 Shares:
35,855 | $553,637 | 24,462 | $464,734 |
10,310 | 151,550 | 24,488 | 427,555 |
(32,073) | (532,969) | (34,522) | (661,070) |
14,092 | $172,218 | 14,428 | $231,219 |
2,017,207 | $28,571,483 | 753,358 | $13,863,507 |
1,301,518 | 18,507,580 | 3,626,391 | 61,286,007 |
(4,784,030) | (74,375,299) | (4,790,566) | (89,415,882) |
(1,465,305) | $(27,296,236) | (410,817) | $(14,266,368) |
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 178,276 | $2,524,788 | 22,659 | $428,560 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 70,572 | 1,028,932 | 198,332 | 3,431,154 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (336,123) | (5,410,347) | (334,363) | (6,370,409) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | (87,275) | $(1,856,627) | (113,372) | $(2,510,695) |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Mutual Advisers, LLC. (Franklin Mutual) | Investment manager |
|
|
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
|
|
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
|
|
Annual Report
MGD-25
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
3. Transactions with Affiliates (continued)
a. Management Fees
The Fund pays an investment management fee to Franklin Mutual based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
0.875% | Up to and including $4 billion |
|
|
0.845% | Over $4 billion, up to and including $7 billion |
|
|
0.825% | Over $7 billion, up to and including $10 billion |
|
|
0.805% | Over $10 billion, up to and including $13 billion |
0.785% | Over $13 billion, up to and including $16 billion |
|
|
0.765% | Over $16 billion, up to and including $19 billion |
0.745% | Over $19 billion, up to and including $22 billion |
|
|
0.725% | Over $22 billion, up to and including $25 billion |
0.705% | Over $25 billion, up to and including $28 billion |
|
|
0.685% | In excess of $28 billion |
|
|
b. Administrative Fees
Under an agreement with Franklin Mutual, FT Services provides administrative services to the Fund. The fee is paid by Franklin Mutual based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
MGD-26
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
3. Transactions with Affiliates (continued)
e. Investments in Affiliated Management Investment Companies (continued)
|
|
|
|
| Net Change in |
| Number of |
|
| Value at |
|
|
| Unrealized | Value | Shares Held |
|
| Beginning |
|
| Realized Gain | Appreciation | at End | at End | Investment |
| of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Franklin Mutual Global Discovery VIP Fund |
|
|
|
|
|
|
| |
Non-Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income from |
|
|
|
|
|
|
|
| securities |
|
|
|
|
|
|
|
| loaned |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
|
Market Portfolio, 0%.. . . . . . . . . | $— | $21,908,000 | $(21,908,000) | $— | $— | $—a | — | $1,064 |
Total Affiliated Securities. . . . . | $— | $21,908,000 | $(21,908,000) | $— | $— | $— |
| $1,064 |
aAs of December 31, 2020, no longer held by the fund.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains.
At December 31, 2020, the capital loss carryforwards were as follows:
Capital loss carryforwards not subject to expiration: |
|
|
|
Short term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $3,106,976 | ||
Long term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . |
| 26,241,010 |
Total capital loss carryforwards.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . |
| $29,347,986 |
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows |
| ||
| 2020 |
| 2019 |
Distributions paid from: |
|
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $14,126,592 |
| $16,065,752 |
Long term capital gain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,561,470 |
| 49,078,964 |
| $19,688,062 |
| $65,144,716 |
Annual Report
MGD-27
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
5. Income Taxes (continued)
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$385,834,100
$118,052,649 (23,136,093)
$94,916,556
$12,712,129
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of partnerships, bond market discounts and premiums, return of capital distributions, defaulted securities, foreign currency transactions and wash sales, EU reclaims, passive foreign investment company shares and tax straddles.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities and securities sold short) for the year ended December 31, 2020, aggregated $153,687,922 and $191,146,300, respectively.
7. Credit Risk and Defaulted Securities
The Fund may purchase the pre-default or defaulted debt of distressed companies. Distressed companies are financially troubled and could be or are already involved in financial restructuring or bankruptcy. Risks associated with purchasing these securities include the possibility that the bankruptcy or other restructuring process takes longer than expected, or that distributions in restructuring are less than anticipated, either or both of which may result in unfavorable consequences to the Fund. If it becomes probable that the income on debt securities, including those of distressed companies, will not be collected, the Fund discontinues accruing income and recognizes an adjustment for uncollectible interest. For the period ended December 31, 2020, the Fund recorded an uncollectible interest of $404,250 as noted in the Statement of Operations.
At December 31, 2020, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $4,031,636, representing 0.8% of the Fund's net assets. For information as to specific securities, see the accompanying Statement of Investments.
8. Concentration of Risk
Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local, regional and global economic, political and social conditions, which may result in greater market volatility. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in securities in Europe. In addition, certain foreign securities may not be as liquid as U.S. securities.
MGD-28
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
9. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
10. Restricted Securities
The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act). Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.
At December 31, 2020, investments in restricted securities, excluding securities exempt from registration under the 1933 Act, were as follows:
|
| Acquisition |
|
|
Shares | Issuer | Date | Cost | Value |
424,073 | International Automotive Components Group Brazil LLC . | 4/13/06 - 12/26/08 | $281,629 | $9,018 |
11. Other Derivative Information
At December 31, 2020, investments in derivative contracts are reflected in the Statement of Assets and Liabilities as follows:
| Asset Derivatives |
|
| Liability Derivatives |
| ||
Derivative Contracts | Statement of |
|
| Statement of |
| ||
Not Accounted for as | Assets and Liabilities |
|
| Assets and Liabilities |
| ||
Hedging Instruments | Location | Fair Value |
| Location | Fair Value | ||
Franklin Mutual Global Discovery VIP Fund |
|
|
|
|
| ||
Foreign exchange contracts. . . |
|
|
|
|
|
|
|
| Variation margin on futures | $— |
| Variation margin on futures | $230,622a | ||
| contracts |
|
| contracts |
| ||
| Unrealized appreciation on OTC | 242,433 |
| Unrealized depreciation on OTC | 1,085,768 | ||
| forward exchange contracts |
|
| forward exchange contracts |
| ||
Total.. . . . . . . . . . . . . . . . . . . . |
|
| $242,433 |
|
|
| $1,316,390 |
aThis amount reflects the cumulative appreciation (depreciation) of futures contracts as reported in the Statement of Investments. Only the variation margin receivable/payable at year end is separately reported within the Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.
Annual Report
MGD-29
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
11. Other Derivative Information (continued)
For the year ended December 31, 2020, the effect of derivative contracts in the Statement of Operations was as follows:
|
|
|
|
| Net Change in |
|
|
|
|
| Unrealized |
Derivative Contracts |
| Net Realized |
| Appreciation | |
Not Accounted for as | Statement of | Gain (Loss) for | Statement of | (Depreciation) | |
Hedging Instruments | Operations Location | the Year | Operations Location | for the Year | |
| Net realized gain (loss) from: |
|
| Net change in unrealized |
|
|
|
|
| appreciation (depreciation) on: |
|
Franklin Mutual Global Discovery VIP Fund |
|
|
|
| |
Foreign exchange contracts. . . |
|
|
|
|
|
| Futures contracts | $(1,661,927) |
| Futures contracts | $103,829 |
| Forward exchange contracts | (4,767,212) |
| Forward exchange contracts | 531,023 |
Total.. . . . . . . . . . . . . . . . . . . . |
| $(6,429,139) |
|
| $634,852 |
For the year ended December 31, 2020, the average month end notional amount of futures contracts represented $30,263,706. The average month end contract value of forward exchange contracts was $82,634,629.
See Note 1(c) regarding derivative financial instruments.
12. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers, renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
13. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
MGD-30
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
13.Fair Value Measurements (continued)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments).
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level. A summary of inputs used as of December 31, 2020, in valuing the Fund's assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 |
| Total |
Franklin Mutual Global Discovery VIP Fund |
|
|
|
|
|
Assets: |
|
|
|
|
|
Investments in Securities: |
|
|
|
|
|
Common Stocks: |
|
|
|
|
|
Aerospace & Defense .. . . . . . . . . . . . . . . . . . . | $— | $7,035,891 | $— |
| $7,035,891 |
Auto Components .. . . . . . . . . . . . . . . . . . . . . . | — | — | 9,018 |
| 9,018 |
Automobiles .. . . . . . . . . . . . . . . . . . . . . . . . . . | 4,963,488 | — | — |
| 4,963,488 |
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 25,740,396 | 8,965,646 | — |
| 34,706,042 |
Beverages .. . . . . . . . . . . . . . . . . . . . . . . . . . . | 6,136,746 | — | — |
| 6,136,746 |
Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . | 1,608,178 | — | — |
| 1,608,178 |
Building Products .. . . . . . . . . . . . . . . . . . . . . . | 6,086,611 | — | — |
| 6,086,611 |
Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . | — | 16,970,283 | — |
| 16,970,283 |
Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 18,158,331 | — |
| 18,158,331 |
Communications Equipment .. . . . . . . . . . . . . . | 4,532,280 | — | — |
| 4,532,280 |
Construction Materials . . . . . . . . . . . . . . . . . . . | — | 6,017,295 | — |
| 6,017,295 |
Consumer Finance .. . . . . . . . . . . . . . . . . . . . . | 7,877,159 | — | — |
| 7,877,159 |
Containers & Packaging .. . . . . . . . . . . . . . . . . | 5,290,208 | — | — |
| 5,290,208 |
Diversified Financial Services .. . . . . . . . . . . . . | 9,477,232 | — | — |
| 9,477,232 |
Diversified Telecommunication Services . . . . . . | — | 5,560,170 | — |
| 5,560,170 |
Entertainment .. . . . . . . . . . . . . . . . . . . . . . . . . | 10,977,878 | — | — |
| 10,977,878 |
Food Products . . . . . . . . . . . . . . . . . . . . . . . . . | 10,612,892 | — | — |
| 10,612,892 |
Health Care Equipment & Supplies .. . . . . . . . . | 13,917,755 | — | — |
| 13,917,755 |
Health Care Providers & Services .. . . . . . . . . . | 21,118,948 | — | — |
| 21,118,948 |
Hotels, Restaurants & Leisure . . . . . . . . . . . . . | — | 6,073,799 | — |
| 6,073,799 |
Industrial Conglomerates . . . . . . . . . . . . . . . . . | 6,750,540 | — | — |
| 6,750,540 |
Insurance .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 24,199,998 | 20,480,850 | — |
| 44,680,848 |
IT Services .. . . . . . . . . . . . . . . . . . . . . . . . . . . | 10,469,932 | — | — |
| 10,469,932 |
Media .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 14,986,661 | — | 19,387 |
| 15,006,048 |
Oil, Gas & Consumable Fuels .. . . . . . . . . . . . . | 25,784,290 | 10,235,810 | — |
| 36,020,100 |
Pharmaceuticals .. . . . . . . . . . . . . . . . . . . . . . . | 42,503,203 | 15,561,764 | — |
| 58,064,967 |
Semiconductors & Semiconductor Equipment .. | 4,888,458 | 7,938,825 | — |
| 12,827,283 |
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 18,405,390 | — | — |
| 18,405,390 |
Technology Hardware, Storage & Peripherals .. | 9,219,444 | 17,270,324 | — |
| 26,489,768 |
Textiles, Apparel & Luxury Goods .. . . . . . . . . . | — | 6,655,768 | — |
| 6,655,768 |
Tobacco .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,574,308 | 10,803,050 | — |
| 18,377,358 |
Wireless Telecommunication Services .. . . . . . . | — | 3,609,237 | — |
| 3,609,237 |
Preferred Stocks .. . . . . . . . . . . . . . . . . . . . . . . . | — | 12,155,426 | — |
| 12,155,426 |
Warrants: |
|
|
|
|
|
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 16,832 | — |
| 16,832 |
Textiles, Apparel & Luxury Goods .. . . . . . . . . . | 38,280 | — | — |
| 38,280 |
Corporate Bonds .. . . . . . . . . . . . . . . . . . . . . . . . | — | 11,776,658 | — |
| 11,776,658 |
Companies in Liquidation.. . . . . . . . . . . . . . . . . . | — | — | 8,868 | a | 8,868 |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | 11,999,635 | 1,000,000 | — |
| 12,999,635 |
Total Investments in Securities.. . . . . . . . . . . | $305,159,910 | $186,285,959 | $37,273 |
| $491,483,142 |
Other Financial Instruments: |
|
|
|
|
|
Forward exchange contracts . . . . . . . . . . . . . . . . | $— | $242,433 | $— |
| $242,433 |
.. . . . . . . . .Total Other Financial Instruments | $— | $242,433 | $— |
| $242,433 |
Annual Report
MGD-31
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Global Discovery VIP Fund (continued)
13. Fair Value Measurements (continued)
|
| Level 1 | Level 2 | Level 3 | Total |
Franklin Mutual Global Discovery VIP Fund (continued) |
|
|
|
| |
Liabilities: |
|
|
|
| |
Other Financial Instruments: |
|
|
|
| |
Securities Sold Short. . . . . . . . . . . . . . . . . . . . . . | $9,658,529 | $— | $— | $9,658,529 | |
Forward exchange contracts.. . . . . . . . . . . . . . . . | — | 1,085,768 | — | 1,085,768 | |
Futures contracts.. . . . . . . . . . . . . . . . . . . . . . . . | 230,622 | — | — | 230,622 | |
.. . . . . . . . .Total Other Financial Instruments |
| $9,889,151 | $1,085,768 | $— | $10,974,919 |
aIncludes securities determined to have no value at December 31, 2020.
A reconciliation in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 assets and/or liabilities at the beginning and/or end of the year.
14. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of LIBOR and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
15. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Abbreviations
Counterparty
BNY | Bank of New York |
BOFA | Bank of America Corp. |
HSBK | HSBC Bank plc |
SSBT | State Street Bank and Trust Co. |
UBSW | UBS AG |
Currency
EUR | Euro |
GBP | British Pound |
USD | United States Dollar |
Selected Portfolio | |
ADR | American Depositary Receipt |
FHLB | Federal Home Loan Banks |
MGD-32
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Franklin Mutual Global Discovery VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Franklin Mutual Global Discovery VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31,
2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
Annual Report
MGD-33
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Franklin Mutual Global Discovery VIP Fund
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $5,561,470 as a long term capital gain dividend for the fiscal year ended December 31, 2020.
Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 70.38% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2020.
MGD-34
Annual Report
Franklin Mutual Shares VIP Fund
This annual report for Franklin Mutual Shares VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | -4.85% |
5-Year | +6.15% |
10-Year | +7.26% |
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance is compared to the performance of the Standard
&Poor’s® 500 Index (S&P 500®) and the Russell 1000® Value Index. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund
Summaries.
$40,000
$35,000 |
|
|
|
| $36,700 |
|
|
|
|
| |
$30,000 |
|
|
|
| $27,148 |
$25,000 |
|
|
|
| |
|
|
|
|
| |
$20,000 |
|
|
|
| $20,152 |
$15,000 |
|
|
|
|
|
$10,000 |
|
|
|
|
|
$5,000 |
|
|
|
|
|
1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
| Franklin Mutual Shares VIP | S&P 500* |
| Russell 1000 Value Index* | |
| Fund |
|
|
|
|
*Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
Annual Report
MS-1
Franklin Mutual Shares VIP Fund
Fund Goal and Main Investments
The Fund seeks capital appreciation. Its secondary goal is income. Under normal market conditions, the Fund invests primarily in U.S. and foreign equity securities that we believe are available at market prices less than their intrinsic value. The equity securities in which the Fund invests are primarily common stock, with a current focus on companies with market capitalizations greater than $5 billion. To a lesser extent, the Fund also invests in merger arbitrage securities and the debt and equity of distressed companies. The Fund may invest up to 35% of its assets in foreign securities, which may include sovereign debt and participations in foreign government debt.
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Value securities may not increase in price
as anticipated or may decline further in value. Investing in foreign securities typically involves more risks than investing in U.S. securities, including risks related to currency exchange rates and policies, country or government specific issues, less favorable trading practices or regulation and greater price volatility. Securities issued by small and mid- capitalization companies may be more volatile in price than those of larger companies and may involve additional risks. Derivatives involve costs and can create economic leverage in the Fund’s portfolio which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that significantly exceeds the Fund’s initial investment. A merger or other restructuring, or a tender or exchange offer, proposed or pending at the time the Fund invests in merger arbitrage securities may not be completed on the terms or within the time frame contemplated, which may result in losses to the Fund. Debt obligations of distressed companies typically are unrated, lower-rated, in default or close to default and are generally more likely to become worthless than the securities of more financially stable companies. To the extent that the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, the Fund may be subject to
Geographic Composition 12/31/20
| % of Total |
| Net Assets |
United States | 82.1% |
United Kingdom | 6.9% |
Switzerland | 3.4% |
South Korea | 2.8% |
Other | 0.6% |
Short-Term Investments & Other Net Assets | 4.2% |
greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. The Fund
is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Fund’s new benchmark, the Russell 1000® Value Index, posted a +2.80% total return for the period under review.1 Also for comparison, the Fund’s prior benchmark, the Standard & Poor’s® 500 Index (S&P 500®), posted a +18.40% total return for the same period.1 The Russell 1000® Value Index is replacing the S&P 500 as the Fund’s benchmark. The investment manager believes the composition of the Russell 1000® Value Index more accurately reflects the Fund’s current investment strategy and portfolio characteristics.
Economic and Market Overview
Global developed and emerging market equities, as measured by the MSCI All Country World Index (USD), posted a +16.82% total return for the 12 months ended December 31, 2020.1 Stocks fell sharply in early 2020 as many investors sold equities amid fears of a global economic slowdown due to the novel coronavirus (COVID-19) pandemic. Global equities began to rebound in late March 2020 amid optimism about easing lockdown restrictions, vaccine and treatment development and economic stimulus measures. Despite declines in September and October due to geopolitical tensions and rising infection rates, markets rebounded in November and December, as positive sentiment about successful trials of COVID-19 vaccines,
1.Source: Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
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the beginning of vaccination programs in some countries and apparent resolution of political uncertainty supported markets.
In the U.S., pandemic-related restrictions caused stiff economic headwinds, including mass layoffs that drove the unemployment rate to 14.8% in April 2020.2 According to the National Bureau of Economic Research, the longest U.S. economic expansion in history ended in February, and the country slipped into a deep recession. Equities began to rebound in the spring amid the government’s fiscal and monetary stimulus, declining jobless claims, rising retail sales and optimism about treatments and potential vaccines for COVID-19. Following a record annualized decline in second-quarter gross domestic product (GDP), resilient consumer spending helped drive third-quarter GDP to expand at a record annualized rate, although growth slowed in the fourth quarter. Equities continued to rise during the summer but declined in the fall due to concerns about possible new restrictions amid rising COVID-19 infection rates and uncertainties about additional fiscal stimulus and the U.S. presidential election. Despite signs that the economic recovery was stalling as the unemployment
rate remained relatively high (6.7% at period-end) and consumer spending declined, stocks rallied in November and December, buoyed by the outcome of the U.S. presidential election, the start of COVID-19 vaccination programs and the passage of a new U.S. stimulus bill.2
In an effort to support the economy, the U.S. Federal Reserve (Fed) lowered the federal funds target rate to a range of 0.00%–0.25% in March 2020. The Fed also enacted quantitative easing measures aimed at ensuring credit flows to borrowers and supporting credit markets with open- ended bond purchasing. Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded its 2% target.
In the eurozone, the economy contracted again in the fourth quarter of 2020, following quarter-on-quarter expansion in the third quarter and contractions in the first and second quarters. After several months of gains due to easing restrictions and robust stimulus measures, European developed market equities, as measured by the MSCI Europe Index (USD), declined in September and October as rising infection rates heightened investor concerns that the nascent economic revival could stall. Nevertheless, successful vaccine development and a Brexit resolution supported European developed market equities, as measured by the MSCI Europe Index (USD), to post a +5.93% total return for the period.1
2. Source: U.S. Bureau of Labor Statistics.
FRANKLIN MUTUAL SHARES VIP FUND
Top 10 Industries 12/31/20
| % of Total |
| Net Assets |
Pharmaceuticals | 10.1% |
|
|
Banks | 8.3% |
|
|
Insurance | 6.3% |
|
|
Media | 6.0% |
|
|
Software | 4.8% |
|
|
Oil, Gas & Consumable Fuels | 4.7% |
|
|
Technology Hardware, Storage & Peripherals | 4.3% |
|
|
Food Products | 4.2% |
|
|
Health Care Providers & Services | 3.9% |
|
|
Health Care Equipment & Supplies | 3.4% |
|
|
Asian developed and emerging market equities, as measured by the MSCI All Country Asia Index (USD), posted a +21.30% total return for the 12 months under review.1 Although pandemic-related lockdowns derailed economic growth in early 2020, sharp market declines were followed by rebounds as China’s economy, a key driver of the region’s economic activity, recovered from the contraction in the first quarter and expanded during the rest of 2020. Asian stocks rose as the region’s economies reopened, aided by robust stimulus measures and optimism that economic revitalization would be further spurred by COVID-19 vaccines.
Global emerging market stocks, as measured by the MSCI Emerging Markets Index (USD), posted a +18.69% total return for the period, despite steep pandemic-related declines in early 2020, benefiting from improving economic activity, stabilizing oil prices and U.S. dollar weakness.1 In spite of higher COVID-19 cases in some countries, emerging market stocks rallied near the end of 2020, bolstered by easing political uncertainty, commencement of COVID-19 vaccinations and rising commodity prices.
Investment Strategy
At Franklin Mutual Advisors, we are committed to our distinctive value approach to investing. Our major investment strategy is investing in undervalued stocks. When selecting undervalued equities, we are attracted to what we believe are fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow
and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset-rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings
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FRANKLIN MUTUAL SHARES VIP FUND
disappointments, litigation, management strategy or other perceived negatives. While the vast majority of our undervalued equity investments are made in publicly traded companies globally, we may invest occasionally in privately held companies as well. Our portfolio selection process generally includes an assessment of the potential impacts of any material environmental, social and governance (ESG) factors on the long-term risk and return profile of a company.
We complement this more traditional investment strategy with two others. One is distressed investing, which is complex and can take many forms. The most common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially distressed company is reorganized, often in bankruptcy court, the old debt is typically replaced with new securities issued by the financially stronger company.
The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers, commonly referred to as deals, the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and eschew rumored deals or other situations we consider relatively risky.
In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.
Manager’s Discussion
A year ago, we reflected on a decade of equity market strength and solid, but weaker, returns for our value investing strategy. 2020 turned out to be an amplification of this performance gap, rather than a correction. The year started with a continuation of strong performance from market- darling growth stocks. The gap exploded as COVID-19 led to lockdowns and people working from home. The market leaders often benefited from these changes, with technology tools being adopted more quickly than before. Meanwhile, the lockdowns and disruption severely impacted many companies thought of as value stocks.
Even as central banks and governments across the globe acted through fiscal and monetary stimulus, the recovery came slowly and only accelerated when the prospects of an effective vaccine helped markets understand when the
health crisis might be over. By the end of 2020, the MSCI World Value Index (USD) had recovered to be almost flat, with a -0.38% return.1 However, growth stocks advanced substantially further, as evidenced by the MSCI World Growth Index (USD), ending the year up +34.18%.1
Many signs of increased speculation in the market have appeared, with a surge in the number of IPOs not seen since the tech bubble and a boom in special purpose acquisition companies (SPACs), a type of company which raises money opportunistically and then looks around for a profitable opportunity. There is no guarantee that equity markets will not go higher or that some speculation will not be profitable, but we try to look through the speculation and continue to see attractive values in various parts of the market.
Our traditional value equity investment approach is complemented with two other strategies, distressed investing and merger arbitrage. We were active in both during 2020.
Within merger arbitrage, which involves trading the stocks of companies involved in a merger or acquisition (M&A), activity has climbed in tandem with increasing confidence about
an end to the pandemic crisis. Significant new deals have been announced and some present attractive investment opportunities. In addition, the deals which were impacted by the emergence of the coronavirus have seen renegotiated terms and moved toward amicable resolution. This includes deals such as Tiffany’s acquisition by LVMH Moet Hennessy Louis Vuitton and Taubman’s acquisition by Simon Property Group. We expect an ongoing acceleration of M&A activity given a recovering economy, strong markets, and the hope for increasing regulatory and trade predictability under the incoming U.S. administration.
Within our distressed credit strategy, we targeted companies and industries directly impacted by the coronavirus pandemic. The robust government fiscal and monetary interventions have limited the number of attractive options, but we found opportunities in the energy sector and the retail and travel industries. As the vaccine news arrived and liquidity remained strong, the opportunities have become more limited. We expect to see fewer new distressed
debt opportunities than the merger arbitrage opportunities discussed above.
Fund Performance
Turning to Fund performance, top positive contributors included Charter Communications, Samsung Electronics and Cognizant Technologies.
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Shares of U.S.-based cable operator Charter Communications rallied throughout much of 2020’s second half, lifted by second-quarter earnings that exceeded consensus expectations. The stay-at-home economy emerging in the wake of the coronavirus pandemic led to an increase in the number of high-speed data subscribers and lower turnover among the existing customer base. These factors drove higher margins and increased free cash flow, which management used to buy back stock. Third-quarter results were also strong, with high-speed data net subscriber additions and residential video growth soundly beating expectations. The company’s financials also continued to improve.
After experiencing COVID-related volatility during the first few months of the year, the stock price of South Korea- based electronics and computer peripherals manufacturer Samsung Electronics started to recover in April and continued an upward trajectory for the remainder of the year, making it a leading contributor to portfolio performance. The company posted strong first-quarter results, with revenue and operating profit rising year-over-year, propelled by sales of its memory chips. Demand for memory chips increased during the lockdown, driven by hyperscale data center spending and spending to enable working from home and online learning. Investors are optimistic that strength in memory prices can continue and Samsung is expected to announce a new capital return program in early 2021, which may include a special dividend.
Shares of U.S.-based Cognizant Technology Solutions Group, a provider of information technology (IT), consulting and business process outsourcing services, rose in February largely due to fourth-quarter 2019 financial results that beat expectations. After price fluctuation in March due
to uncertainty around the impact of COVID-19, the stock continued its rally after first-quarter 2020 results announced in May were also better than expected, despite softer- than-expected margins and pandemic-related expenses. Second-quarter financial results similarly beat expectations. Shares of Cognizant rallied as management’s turnaround initiatives contributed to positive investor sentiment. The pandemic has also accelerated digital transformation across industries, which resulted in solid growth for IT services vendors such as Cognizant. Growth in the company’s digital practice segments—which were up by half—drove second- quarter results. Cognizant continued to ramp up its digital strategy by acquiring seven companies that it merged into existing divisions during 2020’s first three quarters. A strong third-quarter announcement and broader recovery in IT services demand continued to support the stock price, which generally rose throughout the remainder of the period.
FRANKLIN MUTUAL SHARES VIP FUND
Top 10 Holdings 12/31/20
Company | % of Total |
Industry, Country | Net Assets |
Medtronic plc | 3.4% |
Health Care Equipment & Supplies, United |
|
States |
|
Charter Communications, Inc. | 3.3% |
Media, United States |
|
Samsung Electronics Co. Ltd. | 2.8% |
Technology Hardware, Storage & Peripherals, |
|
South Korea |
|
Merck & Co., Inc. | 2.6% |
Pharmaceuticals, United States |
|
CVS Health Corp. | 2.5% |
Health Care Providers & Services, United States |
|
Oracle Corp. | 2.5% |
Software, United States |
|
Walt Disney Co. (The) | 2.4% |
Entertainment, United States |
|
Kraft Heinz Co. (The) | 2.3% |
Food Products, United States |
|
Comcast Corp. | 2.3% |
Media, United States |
|
JPMorgan Chase & Co. | 2.3% |
Banks, United States |
|
During the period under review, Fund investments that detracted from performance included American International Group (AIG), Wells Fargo and Citizens Financial Group.
The stock price of U.S.-based insurer AIG fell from mid- February through late March. The declining valuation was fueled by investor concerns regarding the coronavirus outbreak and operating shortfalls in fourth-quarter earnings. An uncertain environment and changes in leadership
and business strategy continued to affect the company throughout the remainder of the year, culminating in the announcement of the spinoff of its life insurance business and a change in leadership. We have since exited the position.
The performance of U.S.-based diversified financial services company Wells Fargo was affected by the regulatory restrictions placed on it following the account opening scandal, particularly the ability to grow the size of its balance sheet freely. These limits negatively impacted the company in March when a flurry of companies rushed to draw on their credit lines to strengthen their liquidity positions as the effects of the pandemic became more tangible. After the March downturn, COVID-related uncertainty and interest- rate declines continued to hinder the organization, leading management to revise its forward guidance several times throughout the year. First-quarter earnings fell short of expectations, and Wells Fargo posted a second-quarter loss, although much of it was due to the bank’s massive contribution to its loan loss reserves. The company
also drastically cut its dividend. During the third quarter,
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FRANKLIN MUTUAL SHARES VIP FUND
headline earnings fell short of expectations, but many of the costs endured during the quarter were associated with restructuring, which management expects will reduce cost in 2021. In addition to shedding its student loan business in 2020, the company looks forward to streamlining its business model further in the year ahead.
The stock price of U.S.-based banking services company Citizens Financial Group declined from mid-February through late March. The valuation reduction was fueled by investor concern regarding the coronavirus outbreak and its economic effects, including increased borrower defaults and a falling interest-rate environment which decreases the profitability of lending products. However, the price stabilized as the broader market calmed down. In April, the bank posted decent first-quarter financial results amid a deteriorating economic environment. Management reported modest increases in revenue, loans and net interest margin, and broadly stable credit performance in the loan portfolio. However, in June, bank stocks retreated based on concerns about potential dividend cuts resulting from the Federal Reserve Board’s stress tests of large banks. The company’s stock price was bolstered in July by favorable second- quarter earnings, but continued to experience volatility toward period-end as third-quarter results fell short of consensus, due in part to large payments into reserves. We have since exited the stock.
During the period, the Fund held currency forwards and futures seeking to hedge most of the currency risk of the portfolio’s non-U.S. dollar investments. The hedges had a negative overall impact on the Fund’s performance as the dollar fell against most currencies during the period.
Thank you for your participation in Franklin Mutual Shares VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN MUTUAL SHARES VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
|
|
| Actual |
| Hypothetical |
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| ||
|
|
| (actual return after expenses) |
| (5% annual return before expenses) |
|
| ||
|
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| Fund-Level |
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| Fund-Level |
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|
|
| Expenses |
|
| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201,2 |
| Value 12/31/20 | 7/1/20–12/31/201,2 | a | Ratio2 |
1 | $1,000 |
| $1,206.00 | $3.99 | $1,021.52 | $3.65 |
| 0.72% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Franklin Mutual Shares VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $19.19 | $17.71 | $20.71 | $20.40 | $19.48 |
Income from investment operationsa: | 0.55c | 0.46 | 0.36 | 0.49 | 0.50 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (1.68) | 3.39 | (2.04) | 1.22 | 2.56 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (1.13) | 3.85 | (1.68) | 1.71 | 3.06 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.50) | (0.42) | (0.55) | (0.53) | (0.46) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.63) | (1.95) | (0.77) | (0.87) | (1.68) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.13) | (2.37) | (1.32) | (1.40) | (2.14) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $16.93 | $19.19 | $17.71 | $20.71 | $20.40 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (4.85)% | 22.92% | (8.86)% | 8.64% | 16.35% |
Ratios to average net assets | 0.73% | 0.71% | 0.71% | 0.72% | 0.72% |
Expensese,f,g.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Expenses - incurred in connection with securities sold short. | 0.01% | 0.02% | 0.01% | — | 0.01% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.48%c | 2.35% | 1.77% | 2.34% | 2.57% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $157,734 | $158,431 | $537,324 | $653,700 | $610,395 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 36.96% | 38.50% | 24.67% | 18.32% | 24.45% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.19 per share related to income received in the form of special dividends and EU reclaims in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.27%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gIncludes dividends and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(d).
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The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Mutual Shares VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $18.81 | $17.40 | $20.36 | $20.08 | $19.20 |
Income from investment operationsa: | 0.51c | 0.40 | 0.31 | 0.43 | 0.45 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (1.65) | 3.32 | (2.00) | 1.20 | 2.52 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (1.14) | 3.72 | (1.69) | 1.63 | 2.97 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.45) | (0.36) | (0.50) | (0.48) | (0.41) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.63) | (1.95) | (0.77) | (0.87) | (1.68) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.08) | (2.31) | (1.27) | (1.35) | (2.09) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $16.59 | $18.81 | $17.40 | $20.36 | $20.08 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (5.04)% | 22.57% | (9.07)% | 8.35% | 16.06% |
Ratios to average net assets | 0.98% | 0.96% | 0.96% | 0.97% | 0.97% |
Expensese,f,g.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Expenses - incurred in connection with securities sold short. | 0.01% | 0.02% | 0.01% | — | 0.01% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.25%c | 2.10% | 1.52% | 2.09% | 2.32% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $2,620,645 | $2,931,753 | $2,516,834 | $3,476,913 | $3,621,358 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 36.96% | 38.50% | 24.67% | 18.32% | 24.45% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.19 per share related to income received in the form of special dividends and EU reclaims in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.04%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gIncludes dividends and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(d).
The accompanying notes are an integral part of these financial statements.
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Mutual Shares VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 4
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $18.99 | $17.55 | $20.53 | $20.23 | $19.32 |
Income from investment operationsa: | 0.49c | 0.38 | 0.29 | 0.41 | 0.44 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (1.66) | 3.36 | (2.02) | 1.21 | 2.53 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (1.17) | 3.74 | (1.73) | 1.62 | 2.97 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.44) | (0.35) | (0.48) | (0.45) | (0.38) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.63) | (1.95) | (0.77) | (0.87) | (1.68) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.07) | (2.30) | (1.25) | (1.32) | (2.06) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $16.75 | $18.99 | $17.55 | $20.53 | $20.23 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (5.17)% | 22.44% | (9.16)% | 8.25% | 15.94% |
Ratios to average net assets | 1.08% | 1.06% | 1.06% | 1.07% | 1.07% |
Expensese,f,g.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Expenses - incurred in connection with securities sold short. | 0.01% | 0.02% | 0.01% | — | 0.01% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.13%c | 2.00% | 1.42% | 1.99% | 2.22% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $116,704 | $120,345 | $105,047 | $122,942 | $122,476 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 36.96% | 38.50% | 24.67% | 18.32% | 24.45% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.19 per share related to income received in the form of special dividends and EU reclaims in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.92%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gIncludes dividends and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(d).
MS-10
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Franklin Mutual Shares VIP Fund
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks 93.8% |
|
|
|
|
| Aerospace & Defense 2.3% |
|
|
|
|
| BAE Systems plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 4,955,228 |
| $33,047,711 |
| Huntington Ingalls Industries, Inc... . . . . . . . . . . . . . . . . . . . . . . . . | United States | 201,965 |
| 34,430,993 |
|
|
|
|
| 67,478,704 |
| Auto Components 0.0%† |
|
|
|
|
| a,b,cInternational Automotive Components Group Brazil LLC. . . . . . . . . | Belgium | 1,730,515 |
| 36,801 |
| Automobiles 0.9% |
|
|
|
|
| General Motors Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 626,250 |
| 26,077,050 |
| Banks 8.3% |
|
|
|
|
| Bank of America Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,220,023 |
| 36,978,897 |
| Citigroup, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 998,798 |
| 61,585,885 |
| JPMorgan Chase & Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 528,683 |
| 67,179,749 |
| Synovus Financial Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 962,235 |
| 31,147,547 |
| Wells Fargo & Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,416,289 |
| 42,743,602 |
|
|
|
|
| 239,635,680 |
| Beverages 0.6% |
|
|
|
|
| Heineken NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 158,036 |
| 17,612,080 |
| Biotechnology 0.3% |
|
|
|
|
| bAlexion Pharmaceuticals, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 59,817 |
| 9,345,808 |
| Building Products 1.7% |
|
|
|
|
| Johnson Controls International plc. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,052,349 |
| 49,028,940 |
| Capital Markets 1.2% |
|
|
|
|
| Credit Suisse Group AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 2,740,559 |
| 35,383,025 |
| Communications Equipment 1.0% |
|
|
|
|
| Cisco Systems, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 645,776 |
| 28,898,476 |
| Consumer Finance 1.9% |
|
|
|
|
| Capital One Financial Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 561,002 |
| 55,455,048 |
| Containers & Packaging 1.5% |
|
|
|
|
| International Paper Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 863,984 |
| 42,957,284 |
| Diversified Financial Services 2.1% |
|
|
|
|
| bBerkshire Hathaway, Inc., B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 64,294 |
| 14,907,850 |
| Voya Financial, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 758,210 |
| 44,590,330 |
|
|
|
|
| 59,498,180 |
| Diversified Telecommunication Services 0.3% |
|
|
|
|
| a,b,cWindstream Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 609,467 |
| 8,068,734 |
| Electric Utilities 1.0% |
|
|
|
|
| Pinnacle West Capital Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 367,001 |
| 29,341,730 |
| Electrical Equipment 2.2% |
|
|
|
|
| bSensata Technologies Holding plc.. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,214,086 |
| 64,030,896 |
| Electronic Equipment, Instruments & Components 0.6% |
|
|
|
|
| Corning, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 497,343 |
| 17,904,348 |
| Energy Equipment & Services 0.8% |
|
|
|
|
| Schlumberger NV.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,034,400 |
| 22,580,952 |
| Entertainment 2.4% |
|
|
|
|
| bWalt Disney Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 380,169 |
| 68,879,019 |
The accompanying notes are an integral part of these financial statements.
Annual Report
MS-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Mutual Shares VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Equity Real Estate Investment Trusts (REITs) 1.2% |
|
|
|
|
| Alexander's, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 31,168 |
| $8,644,445 |
| Uniti Group, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 517,941 |
| 6,075,448 |
| Vornado Realty Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 577,242 |
| 21,554,216 |
|
|
|
|
| 36,274,109 |
| Food & Staples Retailing 1.8% |
|
|
|
|
| Kroger Co. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,604,213 |
| 50,949,805 |
| Food Products 4.2% |
|
|
|
|
| Archer-Daniels-Midland Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 647,613 |
| 32,646,171 |
| Conagra Brands, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 606,522 |
| 21,992,488 |
| Kraft Heinz Co. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,959,930 |
| 67,931,174 |
|
|
|
|
| 122,569,833 |
| Health Care Equipment & Supplies 3.4% |
|
|
|
|
| Medtronic plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 828,839 |
| 97,090,200 |
| Health Care Providers & Services 3.9% |
|
|
|
|
| Anthem, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 126,694 |
| 40,680,176 |
| CVS Health Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,074,742 |
| 73,404,879 |
|
|
|
|
| 114,085,055 |
| Household Durables 2.7% |
|
|
|
|
| Lennar Corp., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 398,374 |
| 30,368,050 |
| Newell Brands, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,255,143 |
| 47,876,686 |
|
|
|
|
| 78,244,736 |
| Household Products 0.7% |
|
|
|
|
| Energizer Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 494,021 |
| 20,837,806 |
| Industrial Conglomerates 1.4% |
|
|
|
|
| General Electric Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,783,136 |
| 40,857,869 |
| Insurance 7.0% |
|
|
|
|
| Alleghany Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 106,350 |
| 64,202,431 |
| Everest Re Group Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 142,284 |
| 33,307,262 |
| Hartford Financial Services Group, Inc. (The). . . . . . . . . . . . . . . . . | United States | 1,040,835 |
| 50,980,098 |
| MetLife, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 732,181 |
| 34,375,898 |
| Willis Towers Watson plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 90,068 |
| 18,975,526 |
|
|
|
|
| 201,841,215 |
| IT Services 2.1% |
|
|
|
|
| Cognizant Technology Solutions Corp., A. . . . . . . . . . . . . . . . . . . . | United States | 748,658 |
| 61,352,523 |
| Media 6.0% |
|
|
|
|
| bCharter Communications, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 145,766 |
| 96,431,497 |
| Comcast Corp., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,282,070 |
| 67,180,468 |
| biHeartMedia, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 717,645 |
| 9,315,032 |
| a,biHeartMedia, Inc., B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,783 |
| 154,309 |
|
|
|
|
| 173,081,306 |
| Oil, Gas & Consumable Fuels 4.7% |
|
|
|
|
| BP plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 13,763,147 |
| 47,496,552 |
| Kinder Morgan, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,821,394 |
| 24,898,456 |
| Williams Cos., Inc. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,163,081 |
| 63,419,774 |
|
|
|
|
| 135,814,782 |
| Pharmaceuticals 10.3% |
|
|
|
|
| bElanco Animal Health, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 326,387 |
| 10,010,289 |
MS-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Mutual Shares VIP Fund (continued)
a | a | Country | Shares |
a
Value
a | a | a | a | a | a | ||
| Common Stocks (continued) |
|
|
|
|
|
|
| Pharmaceuticals (continued) |
|
|
|
|
|
|
| Eli Lilly and Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 396,656 |
|
| $66,971,399 | |
| GlaxoSmithKline plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 3,207,819 |
|
| 58,700,848 | |
| Merck & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 916,817 |
|
| 74,995,631 | |
| Novartis AG, ADR.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 676,615 |
|
| 63,892,754 | |
| Perrigo Co. plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 524,909 |
| 23,473,931 | ||
|
|
|
|
|
|
| 298,044,852 |
| Semiconductors & Semiconductor Equipment 1.0% |
|
|
|
|
|
|
| bInphi Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 47,300 |
|
| 7,590,231 | |
| Xilinx, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 146,300 |
| 20,740,951 | ||
|
|
|
|
|
|
| 28,331,182 |
| Software 3.2% |
|
|
|
|
|
|
| bAvaya Holdings Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 116 |
|
| 2,221 | |
| NortonLifeLock, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,034,757 |
|
| 21,502,251 | |
| Oracle Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,110,810 |
|
| 71,858,299 | |
|
|
|
|
|
|
| 93,362,771 |
| Specialty Retail 1.1% |
|
|
|
|
|
|
| Tiffany & Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 210,393 |
|
| 27,656,160 | |
| a,bTRU Kids Parent LLC.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,039 |
|
| 4,656,309 | |
| a,bWayne Services Legacy, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,039 |
|
| — | |
|
|
|
|
|
|
| 32,312,469 |
| Technology Hardware, Storage & Peripherals 4.3% |
|
|
|
|
|
|
| Samsung Electronics Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . | South Korea | 1,077,041 |
|
| 80,306,987 | |
| Western Digital Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 796,144 |
|
| 44,098,416 | |
|
|
|
|
|
|
| 124,405,403 |
| Textiles, Apparel & Luxury Goods 1.4% |
|
|
|
|
|
|
| PVH Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 417,411 |
|
| 39,190,719 | |
| Tobacco 3.0% |
|
|
|
|
|
|
| Altria Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 674,777 |
|
| 27,665,857 | |
| British American Tobacco plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 1,292,980 |
| 48,020,738 | ||
| British American Tobacco plc, ADR.. . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 307,878 |
|
| 11,542,346 | |
|
|
|
|
|
|
| 87,228,941 |
| Wireless Telecommunication Services 1.3% |
|
|
|
|
|
|
| bT-Mobile US, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 219,900 |
|
| 29,653,515 | |
| Vodafone Group plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 4,928,703 |
|
| 8,095,927 | |
|
|
|
|
|
|
| 37,749,442 |
| . .Total Common Stocks (Cost $2,066,489,398). . . . . . | . . . . . . . . . . . . . . . . . . | . . . . . . . | . . . |
| 2,715,837,773 | |
|
|
|
| Warrants |
|
| |
|
|
|
|
|
| ||
| Warrants 0.0%† |
|
|
|
|
|
|
| Diversified Telecommunication Services 0.0%† |
|
|
|
|
|
|
| a,bWindstream Holdings, Inc., 9/21/55.. . . . . . . . . . . . . . . . . . . . . . . . | United States | 34,368 |
|
| 454,998 | |
| Software 0.0%† |
|
|
|
|
|
|
| bAvaya Holdings Corp., 12/15/22. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 91,551 |
|
| 297,541 | |
| . .Total Warrants (Cost $436,130).. . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . . . | . . . . . . . | . . . |
| 752,539 | |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Annual Report
MS-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Mutual Shares VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds 3.5% |
|
|
|
|
| Airlines 1.1% |
|
|
|
|
| dAmerican Airlines, Inc., Senior Secured Note, 144A, 11.75%, 7/15/25. | United States | 17,841,000 |
| $20,601,895 |
| dMileage Plus Holdings LLC / Mileage Plus Intellectual Property |
|
|
|
|
| Assets Ltd., Senior Secured Note, 144A, 6.5%, 6/20/27.. . . . . . . | United States | 11,070,000 |
| 11,921,006 |
|
|
|
|
| 32,522,901 |
| Diversified Telecommunication Services 0.9% |
|
|
|
|
| eFrontier Communications Corp., |
|
|
|
|
| Senior Note, 10.5%, 9/15/22 .. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 22,633,000 |
| 11,848,715 |
| Senior Note, 11%, 9/15/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,535,000 |
| 13,453,753 |
|
|
|
|
| 25,302,468 |
| Machinery 0.2% |
|
|
|
|
| dNavistar International Corp., Senior Secured Note, 144A, 9.5%, |
|
|
|
|
| 5/01/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,878,200 |
| 5,484,926 |
| Multiline Retail 0.2% |
|
|
|
|
| dMacy's, Inc., Senior Secured Note, 144A, 8.375%, 6/15/25. . . . . . . | United States | 4,438,000 |
| 4,933,281 |
| Software 1.1% |
|
|
|
|
| dVeritas US, Inc. / Veritas Bermuda Ltd., |
|
|
|
|
| Senior Note, 144A, 10.5%, 2/01/24 .. . . . . . . . . . . . . . . . . . . . . . | United States | 23,445,000 |
| 23,929,491 |
| Senior Secured Note, 144A, 7.5%, 2/01/23 .. . . . . . . . . . . . . . . . | United States | 2,856,000 |
| 2,868,209 |
| Senior Secured Note, 144A, 7.5%, 9/01/25 .. . . . . . . . . . . . . . . . | United States | 6,752,000 |
| 6,937,680 |
|
|
|
|
| 33,735,380 |
| Total Corporate Bonds (Cost $113,484,377).. . . . . . . . . . . | . . . . . . . . . . . . . . . . . . . . . . . | . . . | 101,978,956 | |
| fSenior Floating Rate Interests 0.4% |
|
|
|
|
|
|
|
|
| |
| Software 0.4% |
|
|
|
|
| gVeritas US, Inc., Term Loan, B, 6.5%, (3-month USD LIBOR + 5.5%), |
|
|
|
|
| 9/01/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,477,740 |
| 10,463,333 |
| .. . . . . . . . . . . . . . . . . . . . . . .Total Senior Floating Rate Interests (Cost $10,283,135) | . . . | 10,463,333 | ||
|
|
| Shares |
|
|
|
|
|
|
| |
| Companies in Liquidation 0.0%† |
|
|
|
|
| a,b,hBosgen Liquidating Trust c/o Verdolino and Lowey P.C., Contingent |
|
|
|
|
| Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 347,093 |
| — |
| a,b,hTribune Media, Litigation Trust, Contingent Distribution. . . . . . . . . . | United States | 397,730 |
| — |
| a,b,hVistra Energy Corp., Litigation Trust, Contingent Distribution.. . . . . | United States | 90,618,405 |
| 135,928 |
| a,b,hWalter Energy, Inc., Litigation Trust, Contingent Distribution.. . . . . . | United States | 6,301,000 |
| — |
| . . . . . . . . . . . . . . . . . . . . . . .Total Companies in Liquidation (Cost $2,834,275).. . . . . | . . . | 135,928 | ||
| Total Long Term Investments (Cost $2,193,527,315).. . . |
|
|
|
|
| . . . | 2,829,168,529 | |||
| Short Term Investments 1.8% |
|
|
|
|
|
|
|
|
|
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| U.S. Government and Agency Securities 1.8% |
|
|
|
|
iFHLB, 1/04/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,000,000 |
| 10,000,000 | |
iU.S. Treasury Bills, |
|
|
|
| |
| 1/05/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,000,000 |
| 5,000,001 |
j | 1/14/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,000,000 |
| 3,999,961 |
MS-14
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Mutual Shares VIP Fund (continued)
Short Term Investments (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a | ||
| U.S. Government and Agency Securities (continued) |
|
|
|
|
|
|
iU.S. Treasury Bills, (continued) |
|
|
|
|
|
| |
j | 1/21/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,000,000 |
|
| $4,999,917 | |
j | 2/04/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,000,000 |
|
| 5,999,768 | |
j | 2/11/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,000,000 |
|
| 5,999,683 | |
j | 6/10/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,000,000 |
|
| 14,995,241 | |
j | 6/24/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,500,000 |
|
| 2,499,139 | |
|
|
|
|
|
|
| 43,493,710 |
| .. . . . . . . . . . . . . .Total U.S. Government and Agency Securities (Cost $53,491,453) | . . . |
| 53,493,710 | |||
| Total Short Term Investments (Cost $53,491,453). |
|
|
|
|
|
|
| . . . . . . . . . . . . . . . . . | . . . . . . . . | . . . |
| 53,493,710 | ||
| Total Investments (Cost $2,247,018,768) 99.5%. . . |
|
|
|
|
|
|
| . . . . . . . . . . . . . . . . . | . . . . . . . . | . . . |
| $2,882,662,239 | ||
| Securities Sold Short (1.9)%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| (55,249,855) | ||||
| Other Assets, less Liabilities 2.4%. . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . . | . . . . . . . . | . . . |
| 67,670,775 | |
| . . .Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . . | . . . . . . . . | . . . |
| $2,895,083,159 | |
|
|
|
| Shares |
|
| |
|
|
|
|
|
| ||
| Securities Sold Short (1.9)% |
|
|
|
|
|
|
| Common Stocks (1.9)% |
|
|
|
|
|
|
| Insurance (0.7)% |
|
|
|
|
|
|
kAon plc, A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 97,273 |
|
| (20,550,867) | ||
| Pharmaceuticals (0.2)% |
|
|
|
|
|
|
kAstraZeneca plc, ADR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 127,069 |
|
| (6,352,179) | ||
kSemiconductors & Semiconductor Equipment (1.0)% |
|
|
|
|
|
| |
| Advanced Micro Devices, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 252,134 |
|
| (23,123,209) | |
| Marvell Technology Group Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 109,878 |
| (5,223,600) | ||
|
|
|
|
|
|
| (28,346,809) |
Total Common Stocks (Proceeds $54,658,735).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Securities Sold Short (Proceeds $54,658,735). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(55,249,855)
$(55,249,855)
*The principal amount is stated in U.S. dollars unless otherwise indicated.
† Rounds to less than 0.1% of net assets.
a Fair valued using significant unobservable inputs. See Note 12 regarding fair value measurements. b Non-income producing.
c See Note 9 regarding restricted securities.
d Security was purchased pursuant to Rule 144A or Regulation S under the Securities Act of 1933. 144A securities may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. Regulation S securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At December 31, 2020, the aggregate value of these securities was $76,676,488, representing 2.6% of net assets.
eSee Note 7 regarding credit risk and defaulted securities.
fSee Note 1(f) regarding senior floating rate interests.
gThe coupon rate shown represents the rate at period end.
hContingent distributions represent the right to receive additional distributions, if any, during the reorganization of the underlying company. Shares represent total underlying principal of debt securities.
iThe security was issued on a discount basis with no stated coupon rate.
jA portion or all of the security has been segregated as collateral for securities sold short and/or open forward exchange contract. At December 31, 2020, the aggregate value of these securities pledged amounted to $30,077,000, representing 1.0% of net assets.
kSee Note 1(d) regarding securities sold short.
The accompanying notes are an integral part of these financial statements.
Annual Report
MS-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Mutual Shares VIP Fund (continued)
At December 31, 2020, the Fund had the following futures contracts outstanding. See Note 1(c).
Futures Contracts
|
|
|
|
| Value/ |
|
|
|
|
| Unrealized |
|
| Number of | Notional | Expiration | Appreciation |
Description | Type | Contracts | Amount* | Date | (Depreciation) |
Foreign exchange contracts | Short | 39 | $5,969,925 | 3/15/21 | $(35,213) |
Foreign Exchange EUR/USD. . . . . . . . . . . . . . . . . . . . | |||||
Foreign Exchange GBP/USD. . . . . . . . . . . . . . . . . . . . | Short | 446 | 38,074,462 | 3/15/21 | (565,439) |
Total Futures Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $(600,652) |
*As of period end.
At December 31, 2020, the Fund had the following forward exchange contracts outstanding. See Note 1(c).
Forward Exchange Contracts
| Counter- |
|
| Contract | Settlement | Unrealized | Unrealized |
Currency | partya | Type | Quantity | Amount* | Date | Appreciation | Depreciation |
a | a | a | a | a | a | a | a |
OTC Forward Exchange Contracts |
|
|
|
|
|
| |
British Pound. . . . . . . | BNY | Buy | 868,495 | 1,181,261 | 1/19/21 | $6,645 | $— |
British Pound. . . . . . . | BOFA | Buy | 2,215,312 | 2,898,020 | 1/19/21 | 132,027 | — |
British Pound. . . . . . . | BOFA | Sell | 970,000 | 1,289,199 | 1/19/21 | — | (37,542) |
British Pound. . . . . . . | HSBK | Buy | 4,546,959 | 4,925,332 | 1/19/21 | 101,601 | — |
British Pound. . . . . . . | HSBK | Sell | 23,898,346 | 31,333,163 | 1/19/21 | — | (1,354,398) |
British Pound. . . . . . . | SSBT | Sell | 270,445 | 358,706 | 1/19/21 | — | (11,202) |
British Pound. . . . . . . | UBSW | Buy | 3,077,763 | 4,150,424 | 1/19/21 | 59,264 | — |
British Pound. . . . . . . | UBSW | Sell | 4,713,613 | 6,309,979 | 1/19/21 | — | (137,185) |
Swiss Franc.. . . . . . . | HSBK | Sell | 14,940,976 | 16,835,528 | 2/16/21 | — | (62,705) |
Swiss Franc.. . . . . . . | UBSW | Sell | 14,940,976 | 16,830,635 | 2/16/21 | — | (67,597) |
Euro.. . . . . . . . . . . . . | HSBK | Sell | 4,288,795 | 5,208,334 | 2/23/21 | — | (37,227) |
South Korean Won.. . | HSBK | Buy | 15,981,640,747 | 14,442,764 | 5/14/21 | 242,622 | — |
South Korean Won.. . | HSBK | Sell | 34,999,519,250 | 31,308,787 | 5/14/21 | — | (851,957) |
South Korean Won.. . | UBSW | Sell | 14,950,923,952 | 13,389,043 | 5/14/21 | — | (349,226) |
South Korean Won.. . | HSBK | Sell | 39,878,506,618 | 36,100,480 | 6/18/21 | — | (541,407) |
South Korean Won.. . | UBSW | Sell | 9,030,995,877 | 8,156,146 | 6/18/21 | — | (141,875) |
Total Forward Exchange Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $542,159 | $(3,592,321) | |||||
Net unrealized appreciation (depreciation). . . . | . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . | . . . . . . . . |
| $(3,050,162) |
*In U.S. dollars unless otherwise indicated.
aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.
See Note 10 regarding other derivative information.
See Abbreviations on page MS-32.
MS-16
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Franklin Mutual |
| Shares VIP |
| Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,247,018,768 |
Value - Unaffiliated issuers .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,882,662,239 |
Cash.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 249,463 |
Receivables: |
|
Investment securities sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,218,599 |
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 77,457 |
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8,193,647 |
European Union tax reclaims (Note 1g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,300,357 |
Deposits with brokers for: |
|
Securities sold short. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 55,864,970 |
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,199,421 |
Variation margin on futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 83,819 |
Unrealized appreciation on OTC forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 542,159 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 510,791 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,960,902,922 |
Liabilities: |
|
Payables: |
|
Investment securities purchased.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,588,829 |
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,490,220 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,640,057 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 584,295 |
Securities sold short, at value (proceeds $54,658,735).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 55,249,855 |
Unrealized depreciation on OTC forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,592,321 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 674,186 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 65,819,763 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,895,083,159 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,293,080,699 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 602,002,460 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,895,083,159 |
| Franklin Mutual |
| Shares VIP |
| Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $157,733,886 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 9,315,159 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $16.93 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,620,645,087 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 158,010,079 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $16.59 |
Class 4: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $116,704,186 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 6,966,093 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $16.75 |
The accompanying notes are an integral part of these financial statements.
Annual Report
MS-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the year ended December 31, 2020
| Franklin Mutual |
| Shares VIP |
| Fund |
Investment income: |
|
Dividends: (net of foreign taxes of $1,075,153) |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $93,301,427 |
Interest: |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 13,460,951 |
Adjustment for uncollectible interest (Note 7) | (2,537,110) |
Income from securities loaned: |
|
Unaffiliated entities (net of fees and rebates).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,493 |
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,234 |
Other income (Note 1g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,547,616 |
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 107,778,611 |
Expenses: |
|
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 17,224,633 |
Distribution fees: (Note 3c) |
|
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,771,709 |
Class 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 368,212 |
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 19,860 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 538,247 |
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 182,211 |
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 15,435 |
Dividends on securities sold short. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 390,444 |
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 192,728 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Total expenses | 24,703,479 |
Expense reductions (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (14,263) |
Expenses waived/paid by affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,883) |
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 24,687,333 |
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 83,091,278 |
Realized and unrealized gains (losses): |
|
Net realized gain (loss) from: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (76,454,397) |
Written options.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (262,792) |
Realized gain distributions from REITs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 866,978 |
Foreign currency transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 17,575 |
Forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (7,306,854) |
Futures contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (994,414) |
Securities sold short.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,409,935) |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (85,543,839) |
Net change in unrealized appreciation (depreciation) on: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (175,321,183) |
Translation of other assets and liabilities denominated in foreign currencies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 305,714 |
Forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (664,306) |
Futures contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 119,615 |
Securities sold short.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,381,584 |
Net change in unrealized appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (174,178,576) |
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (259,722,415) |
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $(176,631,137) |
MS-18
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin Mutual Shares VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $83,091,278 | $70,482,893 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (85,543,839) | 95,516,825 |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | (174,178,576) | 497,609,167 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | (176,631,137) | 663,608,885 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (9,923,875) | (35,828,591) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (153,724,682) | (330,340,832) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (7,227,115) | (13,089,406) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (170,875,672) | (379,258,829) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 15,161,489 | (436,530,771) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,448,782 | 198,182,849 |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,450,316 | 5,322,730 |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 32,060,587 | (233,025,192) |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | (315,446,222) | 51,324,864 |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,210,529,381 | 3,159,204,517 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,895,083,159 | $3,210,529,381 |
The accompanying notes are an integral part of these financial statements.
Annual Report
MS-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Notes to Financial Statements
Franklin Mutual Shares VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Mutual Shares VIP Fund (Fund) is included in
this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust's Board
of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities and derivative financial instruments listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities
are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple
exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund's pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.
Investments in open-end mutual funds are valued at the closing NAV. Investments in repurchase agreements are valued at cost, which approximates fair value.
Certain derivative financial instruments are centrally cleared or trade in the OTC market. The Fund's pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund's net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
MS-20
Annual Report
Franklin Mutual Shares VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
a. Financial Instrument Valuation (continued)
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund's portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund's securities to the latest indications of fair value at 4 p.m Eastern time. At December 31, 2020, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy. See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result in differences between the value of the Fund's portfolio securities on the last business day and the last calendar day of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Derivative Financial Instruments
The Fund invested in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including
the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.
Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements
with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination.
Annual Report
MS-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Shares VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
c. Derivative Financial Instruments (continued)
Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure
of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets
and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement. At December 31, 2020 the Fund had OTC derivatives in a net liability position of $3,050,162 and the aggregate value of collateral pledged for such contracts was $3,166,835.
Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund's custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund's investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.
The Fund entered into exchange traded futures contracts primarily to manage and/or gain exposure to interest rate and equity price risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities.
The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.
The Fund purchased or wrote exchange traded option contracts primarily to manage and/or gain exposure to equity price risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. When an option is purchased or written, an amount equal to the premium paid or received is recorded as an asset or liability, respectively. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium received or paid and the cost to close the position is recorded as a realized gain or loss. The Fund did not hold any option contracts at period end.
See Note 10 regarding other derivative information.
d. Securities Sold Short
The Fund is engaged in selling securities short, which obligates the Fund to replace a borrowed security with the same security at current fair value. The Fund incurs a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund realizes a gain if the price of the security declines between those dates. Gains are limited to the price at which the Fund sold the security short, while losses are potentially unlimited in size.
The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale to the extent necessary to meet margin requirements
MS-22
Annual Report
Franklin Mutual Shares VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
d. Securities Sold Short (continued)
until the short position is closed out. A deposit must also be maintained with the Fund's custodian/counterparty broker consisting of cash and/or securities having a value equal to a specified percentage of the value of the securities sold short. The Fund is obligated to pay fees for borrowing the securities sold short and is required to pay the counterparty any dividends and/or interest due on securities sold short. Such dividends and/or interest and any security borrowing fees are recorded as an expense to the Fund.
e. Securities Lending
The Fund participates in an agency based securities lending program to earn additional income. The Fund receives collateral in the form of cash and/or U.S. Government
and Agency securities against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. Any cash collateral received is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor,
is reported separately in the Statement of Operations. The Fund bears the market risk with respect to any cash collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower. At December 31, 2020, the Fund had no securities on Loan.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
f. Senior Floating Rate Interests
The Fund invests in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity. Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to certain restrictions on resale. On July 27, 2017, the United Kingdom's Financial Conduct Authority announced its intention to cease sustaining LIBOR after 2021. There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate. As such, the potential effect of a transition away from LIBOR on the Fund or the Fund's investments that use or may use a floating rate based on LIBOR cannot yet be determined.
g. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected
as other income in the Statement of Operations and any
Annual Report
MS-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Shares VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
g. Income and Deferred Taxes (continued)
related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, when EU reclaims are received by the Fund and the Fund previously passed foreign tax credit on to its shareholders, the Fund will enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund’s shareholders.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
h. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Paydown gains and losses are recorded as an adjustment to interest income. Dividend income, capital gain distributions are recorded on the ex- dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications
have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
i. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
j. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
MS-24
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Shares VIP Fund (continued)
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
| Year Ended | Year Ended | ||
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 991,549 | $14,998,414 | 765,653 | $14,772,259 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 686,298 | 9,923,875 | 2,031,099 | 35,828,591 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (619,658) | (9,760,800) | (24,880,289) | (487,131,621) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,058,189 | $15,161,489 | (22,083,537) | $(436,530,771) |
Class 2 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 22,804,922 | $339,671,560 | 29,854,091 | $583,466,693 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 10,848,601 | 153,724,682 | 19,094,846 | 330,340,832 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (31,525,525) | (483,947,460) | (37,705,675) | (715,624,676) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,127,998 | $9,448,782 | 11,243,262 | $198,182,849 |
Class 4 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,256,949 | $18,190,882 | 625,179 | $11,842,479 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 504,687 | 7,227,115 | 749,250 | 13,089,406 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,132,933) | (17,967,681) | (1,022,438) | (19,609,155) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 628,703 | $7,450,316 | 351,991 | $5,322,730 |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Mutual Advisers, LLC (Franklin Mutual) | Investment manager |
|
|
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
|
|
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
|
|
Annual Report
MS-25
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Shares VIP Fund (continued)
3. Transactions with Affiliates (continued)
a. Management Fees
The Fund pays an investment management fee to Franklin Mutual based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
0.675% | Up to and including $5 billion |
|
|
0.645% | Over $5 billion, up to and including $10 billion |
|
|
0.625% | Over $10 billion, up to and including $15 billion |
|
|
0.595% | Over $15 billion, up to and including $20 billion |
0.585% | Over $20 billion, up to and including $25 billion |
|
|
0.565% | Over $25 billion, up to and including $30 billion |
0.555% | Over $30 billion, up to and including $35 billion |
|
|
0.545% | In excess of $35 billion |
b. Administrative Fees
Under an agreement with Franklin Mutual, FT Services provides administrative services to the Fund. The fee is paid by Franklin Mutual based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
MS-26
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Shares VIP Fund (continued)
3. Transactions with Affiliates (continued)
e. Investments in Affiliated Management Investment Companies (continued)
|
|
|
|
| Net Change in |
| Number of |
|
| Value at |
|
|
| Unrealized | Value | Shares Held |
|
| Beginning |
|
| Realized Gain | Appreciation | at End | at End | Investment |
| of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Franklin Mutual Shares VIP Fund |
|
|
|
|
|
|
|
|
Non-Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income from |
|
|
|
|
|
|
|
| securities |
|
|
|
|
|
|
|
| loaned |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
|
Market Portfolio, 0%.. . . . . . . . . | $— | $20,927,000 | $(20,927,000) | $— | $— | $— | — | $3,234 |
Total Affiliated Securities. . . . . | $— | $20,927,000 | $(20,927,000) | $— | $— | $— |
| $3,234 |
f. Interfund Transactions
The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended December 31, 2020, these purchase and sale transactions aggregated $0 and $1,702,055, respectively.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains.
At December 31, 2020, the capital loss carryforwards were as follows:
Capital loss carryforwards not subject to expiration: |
|
|
|
Short term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $9,931,155 | ||
Long term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . |
| 75,381,114 |
Total capital loss carryforwards.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . |
| $85,312,269 |
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows: |
| ||
| 2020 |
| 2019 |
Distributions paid from: |
|
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $91,085,601 |
| $66,965,945 |
Long term capital gain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 79,790,071 |
| 312,292,884 |
| $170,875,672 |
| $379,258,829 |
Annual Report
MS-27
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Shares VIP Fund (continued)
5. Income Taxes (continued)
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,217,193,537
$764,953,178 (158,385,145)
$606,568,033
$76,328,333
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of EU reclaims, partnerships, defaults, return of capital from securities, foreign currency transactions and wash sales.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities and securities sold short) for the year ended December 31, 2020, aggregated $978,618,859 and $908,035,887, respectively.
7. Credit Risk and Defaulted Securities
The Fund may purchase the pre-default or defaulted debt of distressed companies. Distressed companies are financially troubled and could be or are already involved in financial restructuring or bankruptcy. Risks associated with purchasing these securities include the possibility that the bankruptcy or other restructuring process takes longer than expected, or that distributions in restructuring are less than anticipated, either or both of which may result in unfavorable consequences to the Fund. If it becomes probable that the income on debt securities, including those of distressed companies, will not be collected, the Fund discontinues accruing income and recognizes an adjustment for uncollectible interest. For the year ended December 31, 2020, the Fund recorded an adjustment for uncollectible interest of $2,537,110 as noted in the Statement of Operations.
At December 31, 2020, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $25,302,468, representing 0.9% of the Fund's net assets. For information as to specific securities, see the accompanying Statement of Investments.
8. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
9. Restricted Securities
The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act). Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.
MS-28
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Shares VIP Fund (continued)
9. Restricted Securities (continued)
At December 31, 2020, investments in restricted securities, excluding securities exempt from registration under the 1933 Act, were as follows:
|
| Acquisition |
|
|
Shares | Issuer | Date | Cost | Value |
Franklin Mutual Shares VIP Fund |
|
|
| |
1,730,515 | International Automotive Components Group Brazil LLC . | 12/26/08 | $1,149,241 | $36,801 |
609,467 | aWindstream Holdings, Inc. .. . . . . . . . . . . . . . . . . . . . . | 9/21/20 | 4,827,676 | 8,068,734 |
| . . . .Total Restricted Securities (Value is 0.28% of Net Assets) | . . . . . . . . . | $5,976,917 | $8,105,535 |
aThe Fund also invests in unrestricted securities of the issuer, valued at $454,998 as of December 31, 2020.
10. Other Derivative Information
At December 31, 2020, investments in derivative contracts are reflected in the Statement of Assets and Liabilities as follows:
| Asset Derivatives |
|
| Liability Derivatives |
| ||
Derivative Contracts | Statement of |
|
| Statement of |
| ||
Not Accounted for as | Assets and Liabilities |
|
| Assets and Liabilities |
| ||
Hedging Instruments | Location | Fair Value |
| Location | Fair Value | ||
Franklin Mutual Shares VIP Fund |
|
|
|
|
| ||
Foreign exchange contracts. . . |
|
|
|
|
|
|
|
| Variation margin on futures | $— |
| Variation margin on futures | $600,652a | ||
| contracts |
|
| contracts |
| ||
| Unrealized appreciation on OTC | 542,159 |
| Unrealized depreciation on OTC | 3,592,321 | ||
| forward exchange contracts |
|
| forward exchange contracts |
| ||
Total.. . . . . . . . . . . . . . . . . . . . |
|
| $542,159 |
|
|
| $4,192,973 |
aThis amount reflects the cumulative appreciation (depreciation) of futures contracts as reported in the Statement of Investments. Only the variation margin receivable/payable at year end is separately reported within the Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.
For the year ended December 31, 2020, the effect of derivative contracts in the Statement of Operations was as follows:
|
|
|
|
| Net Change in |
|
|
|
|
| Unrealized |
Derivative Contracts |
| Net Realized |
| Appreciation | |
Not Accounted for as | Statement of | Gain (Loss) for | Statement of | (Depreciation) | |
Hedging Instruments | Operations Location | the Year | Operations Location | for the Year | |
| Net realized gain (loss) from: |
|
| Net change in unrealized |
|
|
|
|
| appreciation (depreciation) on: |
|
Franklin Mutual Shares VIP Fund |
|
|
|
| |
Foreign exchange contracts. . . |
|
|
|
|
|
| Futures contracts | $(994,414) |
| Futures contracts | $119,615 |
| Forward exchange contracts | (7,306,854) |
| Forward exchange contracts | (664,306) |
Equity Contracts.. . . . . . . . . . . |
|
|
|
|
|
| Written options | (262,792) |
| Written options | — |
Total.. . . . . . . . . . . . . . . . . . . . |
| $(8,564,060) |
|
| $(544,691) |
For the year ended December 31, 2020, the average month end notional amount of futures contracts and options represented $56,504,189 and 885 shares, respectively. The average month end contract value of forward exchange contracts was $154,922,257.
Annual Report
MS-29
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Shares VIP Fund (continued)
10. Other Derivative Information (continued)
See Note 1(d) regarding derivative financial instruments.
11. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers, renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
12. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
A summary of inputs used as of December 31, 2020, in valuing the Fund's assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total |
Franklin Mutual Shares VIP Fund |
|
|
|
|
Assets: |
|
|
|
|
Investments in Securities: |
|
|
|
|
Common Stocks: |
|
|
|
|
Aerospace & Defense .. . . . . . . . . . . . . . . . . . . | $34,430,993 | $33,047,711 | $— | $67,478,704 |
Auto Components .. . . . . . . . . . . . . . . . . . . . . . | — | — | 36,801 | 36,801 |
Automobiles .. . . . . . . . . . . . . . . . . . . . . . . . . . | 26,077,050 | — | — | 26,077,050 |
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 239,635,680 | — | — | 239,635,680 |
Beverages .. . . . . . . . . . . . . . . . . . . . . . . . . . . | 17,612,080 | — | — | 17,612,080 |
Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . | 9,345,808 | — | — | 9,345,808 |
Building Products .. . . . . . . . . . . . . . . . . . . . . . | 49,028,940 | — | — | 49,028,940 |
Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . | — | 35,383,025 | — | 35,383,025 |
Communications Equipment .. . . . . . . . . . . . . . | 28,898,476 | — | — | 28,898,476 |
Consumer Finance .. . . . . . . . . . . . . . . . . . . . . | 55,455,048 | — | — | 55,455,048 |
Containers & Packaging .. . . . . . . . . . . . . . . . . | 42,957,284 | — | — | 42,957,284 |
MS-30
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Shares VIP Fund (continued)
12. Fair Value Measurements (continued)
| Level 1 | Level 2 | Level 3 | Total |
Franklin Mutual Shares VIP Fund (continued) |
|
|
|
|
Assets: (continued) |
|
|
|
|
Investments in Securities: |
|
|
|
|
Common Stocks: |
|
|
|
|
Diversified Financial Services .. . . . . . . . . . . . . | $59,498,180 | $— | $— | $59,498,180 |
Diversified Telecommunication Services . . . . . . | — | — | 8,068,734 | 8,068,734 |
Electric Utilities .. . . . . . . . . . . . . . . . . . . . . . . . | 29,341,730 | — | — | 29,341,730 |
Electrical Equipment .. . . . . . . . . . . . . . . . . . . . | 64,030,896 | — | — | 64,030,896 |
Electronic Equipment, Instruments & |
|
|
|
|
Components .. . . . . . . . . . . . . . . . . . . . . . . . | 17,904,348 | — | — | 17,904,348 |
Energy Equipment & Services . . . . . . . . . . . . . | 22,580,952 | — | — | 22,580,952 |
Entertainment .. . . . . . . . . . . . . . . . . . . . . . . . . | 68,879,019 | — | — | 68,879,019 |
Equity Real Estate Investment Trusts (REITs) .. | 36,274,109 | — | — | 36,274,109 |
Food & Staples Retailing . . . . . . . . . . . . . . . . . | 50,949,805 | — | — | 50,949,805 |
Food Products . . . . . . . . . . . . . . . . . . . . . . . . . | 122,569,833 | — | — | 122,569,833 |
Health Care Equipment & Supplies .. . . . . . . . . | 97,090,200 | — | — | 97,090,200 |
Health Care Providers & Services .. . . . . . . . . . | 114,085,055 | — | — | 114,085,055 |
Household Durables .. . . . . . . . . . . . . . . . . . . . | 78,244,736 | — | — | 78,244,736 |
Household Products .. . . . . . . . . . . . . . . . . . . . | 20,837,806 | — | — | 20,837,806 |
Industrial Conglomerates . . . . . . . . . . . . . . . . . | 40,857,869 | — | — | 40,857,869 |
Insurance .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 201,841,215 | — | — | 201,841,215 |
IT Services .. . . . . . . . . . . . . . . . . . . . . . . . . . . | 61,352,523 | — | — | 61,352,523 |
Media .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 172,926,997 | — | 154,309 | 173,081,306 |
Oil, Gas & Consumable Fuels .. . . . . . . . . . . . . | 88,318,230 | 47,496,552 | — | 135,814,782 |
Pharmaceuticals .. . . . . . . . . . . . . . . . . . . . . . . | 239,344,004 | 58,700,848 | — | 298,044,852 |
Semiconductors & Semiconductor Equipment .. | 28,331,182 | — | — | 28,331,182 |
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 93,362,771 | — | — | 93,362,771 |
Specialty Retail . . . . . . . . . . . . . . . . . . . . . . . . | 27,656,160 | — | 4,656,309a | 32,312,469 |
Technology Hardware, Storage & Peripherals .. | 44,098,416 | 80,306,987 | — | 124,405,403 |
Textiles, Apparel & Luxury Goods .. . . . . . . . . . | 39,190,719 | — | — | 39,190,719 |
Tobacco .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 39,208,203 | 48,020,738 | — | 87,228,941 |
Wireless Telecommunication Services .. . . . . . . | 29,653,515 | 8,095,927 | — | 37,749,442 |
Warrants: |
|
|
|
|
Diversified Telecommunication Services . . . . . . | — | — | 454,998 | 454,998 |
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 297,541 | — | 297,541 |
Corporate Bonds .. . . . . . . . . . . . . . . . . . . . . . . . | — | 101,978,956 | — | 101,978,956 |
Senior Floating Rate Interests.. . . . . . . . . . . . . . . | — | 10,463,333 | — | 10,463,333 |
Companies in Liquidation.. . . . . . . . . . . . . . . . . . | — | — | 135,928a | 135,928 |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | 43,493,710 | 10,000,000 | — | 53,493,710 |
Total Investments in Securities.. . . . . . . . . . . | $2,435,363,542 | $433,791,618 | $13,507,079 | $2,882,662,239 |
Other Financial Instruments: |
|
|
|
|
Forward exchange contracts . . . . . . . . . . . . . . . . | $— | $542,159 | $— | $542,159 |
.. . . . . . . . .Total Other Financial Instruments | $— | $542,159 | $— | $542,159 |
Liabilities: |
|
|
|
|
Other Financial Instruments: |
|
|
|
|
Securities Sold Short. . . . . . . . . . . . . . . . . . . . . . | 55,249,855 | — | — | 55,249,855 |
Forward exchange contracts.. . . . . . . . . . . . . . . . | $— | $3,592,321 | $— | $3,592,321 |
Futures contracts.. . . . . . . . . . . . . . . . . . . . . . . . | 600,652 | — | — | 600,652 |
.. . . . . . . . .Total Other Financial Instruments | $55,850,507 | $3,592,321 | $— | $59,442,828 |
aIncludes securities determined to have no value at December 31, 2020.
A reconciliation in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 assets and/or liabilities at the beginning and/or end of the year.
Annual Report
MS-31
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Mutual Shares VIP Fund (continued)
13. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of LIBOR and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
14. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in financial statements.
Abbreviations
Counterparty
BNY | Bank of New York |
BOFA | Bank of America Corp. |
HSBK | HSBC Bank plc |
SSBT | State Street Bank and Trust Co. |
UBSW | UBS AG |
Currency
EUR | Euro |
GBP | British Pound |
USD | United States Dollar |
Selected Portfolio | |
ADR | American Depositary Receipt |
FHLB | Federal Home Loan Banks |
LIBOR | London Inter-Bank Offered Rate |
MS-32
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Franklin Mutual Shares VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Franklin Mutual Shares VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
Annual Report
MS-33
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Franklin Mutual Shares VIP Fund
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $79,790,071 as a long term capital gain dividend for the fiscal year ended December 31, 2020.
Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 78.65% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2020.
MS-34
Annual Report
Franklin Rising Dividends VIP Fund
This annual report for Franklin Rising Dividends VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | +16.23% |
5-Year | +15.04% |
10-Year | +12.64% |
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance is compared to the performance of the Standard
&Poor’s® 500 Index (S&P 500®). One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.
$40,000
$35,000 |
|
|
|
| $36,700 |
|
|
|
| $32,893 | |
$30,000 |
|
|
|
| |
|
|
|
|
| |
$25,000 |
|
|
|
|
|
$20,000 |
|
|
|
|
|
$15,000 |
|
|
|
|
|
$10,000 |
|
|
|
|
|
$5,000 |
|
|
|
|
|
1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
|
| Franklin Rising Dividends | S&P 500* |
|
|
|
| VIP Fund |
|
|
|
*Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
Annual Report
FRD-1
Franklin Rising Dividends VIP Fund
Fund Goal and Main Investments
The Fund seeks long-term capital appreciation. Preservation of capital, while not a goal, is also an important consideration. Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities
of financially sound companies that have paid consistently rising dividends.
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Companies that have historically paid regular dividends to shareholders may decrease or eliminate dividend payments in the future. Securities issued by smaller and midsize companies may be more volatile in price than those of larger companies, involve substantial risks and should be considered relatively more speculative. To the extent that the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, the Fund may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Foreign investing carries additional risks such as currency and market volatility and political or social instability, risks that are heightened in developing countries. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Standard & Poor’s® 500 Index (S&P 500®) posted a +16.26% total return for the same period.1 Please note the Fund employs a bottom-up stock selection process, and the managers invest in securities without regard to benchmark comparisons.
Portfolio Composition 12/31/20
| % of Total |
| Net Assets |
Health Care Equipment & Supplies | 14.4% |
Chemicals | 10.9% |
Industrial Conglomerates | 8.6% |
Software | 8.2% |
Semiconductors & Semiconductor Equipment | 6.7% |
IT Services | 6.4% |
Specialty Retail | 3.8% |
Aerospace & Defense | 3.3% |
Machinery | 3.2% |
Household Products | 3.1% |
Pharmaceuticals | 3.0% |
Textiles, Apparel & Luxury Goods | 2.5% |
Health Care Providers & Services | 2.5% |
Multiline Retail | 2.4% |
Air Freight & Logistics | 1.9% |
Commercial Services & Supplies | 1.9% |
Hotels, Restaurants & Leisure | 1.7% |
Beverages | 1.7% |
Oil, Gas & Consumable Fuels | 1.6% |
Food & Staples Retailing | 1.6% |
Food Products | 1.6% |
Insurance | 1.5% |
Building Products | 1.4% |
Road & Rail | 1.4% |
Capital Markets | 1.2% |
Other | 2.4% |
Short-Term Investments & Other Net Assets | 1.1% |
Economic and Market Overview
U.S. equities, as measured by the S&P 500, advanced strongly during the 12 months ended December 31, 2020. Although equities began the year with gains, a sharp selloff began in late February 2020 amid investor fears of a global economic slowdown due to the novel coronavirus (COVID-19) pandemic. Such fears drove many investors to sell equities and buy government bonds, cash equivalents and other investments perceived as safe. Nevertheless, equities began to advance in late March, as monetary and fiscal stimulus drove stocks sharply higher. Following declines in September and October, equities, as measured by the S&P 500, advanced to all-time price highs in December.
1.Source: Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
FRD-2
Annual Report
FRANKLIN RISING DIVIDENDS VIP FUND
Pandemic-related restrictions severely curtailed economic activity, resulting in mass layoffs that drove the unemployment rate to 14.8% in April 2020.2 The longest U.S. economic expansion in history ended in February, according to the National Bureau of Economic Research, and the country slipped into a deep recession with second- quarter 2020 gross domestic product (GDP) posting a record annualized decline.
In an effort to support the economy, the U.S. Federal Reserve (Fed) lowered the federal funds target rate to a range of 0.00%–0.25% in March 2020. The Fed also enacted quantitative easing measures aimed at ensuring credit flows to borrowers and supporting credit markets with open- ended bond purchasing. Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded its 2% target.
Equities began to rebound in late March 2020, benefiting from fiscal and monetary stimulus, a gradual lifting of restrictions and development of COVID-19 vaccines and treatments. Rising retail sales and rebounding economic activity led third-quarter GDP to expand at a record annualized pace, although growth slowed in the fourth quarter. Concerns about possible new restrictions amid rising COVID-19 infection rates and uncertainties about additional fiscal stimulus and the U.S. presidential election drove stocks lower in September and October. Despite signs that the economic recovery was stalling, as the unemployment rate remained relatively high (6.7% at period-end) and consumer spending declined, stocks rallied in November and December, buoyed by the outcome of the U.S. presidential election, the start of COVID-19 vaccination programs and the passage of a new stimulus bill.2
Investment Strategy
We are a research-driven, fundamental investment adviser, pursuing a disciplined value-oriented strategy. As bottom-up investors concentrating primarily on individual securities, we seek fundamentally sound companies that we believe meet our screening criteria, which include consistent, substantial dividend increases; reinvested earnings; and strong balance sheets. We attempt to acquire such stocks at attractive prices, often when they are out of favor with other investors. In following these criteria, we do not necessarily focus on companies whose securities pay a high dividend but rather on companies that consistently raise their dividends.
Top 10 Holdings 12/31/20
Company | % of Total |
Industry, Country | Net Assets |
Microsoft Corp. | 8.2% |
Software, United States |
|
Roper Technologies, Inc. | 4.9% |
Industrial Conglomerates, United States |
|
Accenture plc | 4.0% |
IT Services, United States |
|
Stryker Corp. | 3.9% |
Health Care Equipment & Supplies, United |
|
States |
|
Linde plc | 3.6% |
Chemicals, United Kingdom |
|
Texas Instruments, Inc. | 3.4% |
Semiconductors & Semiconductor Equipment, |
|
United States |
|
Analog Devices, Inc. | 3.3% |
Semiconductors & Semiconductor Equipment, |
|
United States |
|
Air Products and Chemicals, Inc. | 3.2% |
Chemicals, United States |
|
West Pharmaceutical Services, Inc. | 3.0% |
Health Care Equipment & Supplies, United |
|
States |
|
Honeywell International, Inc. | 2.9% |
Industrial Conglomerates, United States |
|
Manager’s Discussion
During the 12-month period ended December 31, 2020, some companies that contributed to absolute performance included Microsoft, West Pharmaceutical Services and Albemarle.
Enterprise software firm Microsoft boosted absolute performance based on a strong earnings report and investor optimism that its cloud-based services could benefit as more people work from home during the novel coronavirus (COVID-19) pandemic. The company has seen strength in its commercial cloud services and in sales of Windows software as customers migrated away from Windows 7 in recent quarters. We believe that the trends of helping business customers move to the cloud and providing workers with productivity tools should support what we consider attractive growth over the medium to longer term.
West Pharmaceutical Services supported performance as its business saw strong demand for its products in recent quarters as demand from companies working to create therapeutics to combat COVID-19 was strong. We believe the company boasts a resilient business model and has strong long-term growth prospects even after the short-term impact from COVID-19 passes.
2. Source: Bureau of Labor Statistics.
Annual Report
FRD-3
FRANKLIN RISING DIVIDENDS VIP FUND
Lithium producer Albemarle supported returns based on optimism that rising demand for lithium from electric vehicle producers will increase over the medium term as battery costs continue to decline, which could help reduce oversupply. Lithium projects that have been postponed during the current downcycle are also likely to restart over the coming years.
In contrast, some companies that detracted from absolute performance included Raytheon Technologies, Boeing and Occidental Petroleum.
In the industrials sector, aerospace and defense firms Raytheon and Boeing declined amid weakness in the civil aviation market due to the global pandemic. However, the approval of vaccines in late 2020 has raised investor hopes that the civil aviation market will rebound over the course of 2021 and beyond. During the reporting period, United Technologies acquired Raytheon to form Raytheon Technologies, and we exited our position in Boeing amid the broader market’s uncertainties surrounding the company’s 737 MAX jet.
Occidental Petroleum, an oil and gas exploration and production company, hampered performance as the global pandemic has reduced economic activity and pressured crude oil prices in 2020.
Thank you for your participation in Franklin Rising Dividends VIP Fund. We look forward to continuing to serve your investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
FRD-4
Annual Report
FRANKLIN RISING DIVIDENDS VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
|
|
| Actual |
| Hypothetical |
|
| ||
|
|
| (actual return after expenses) |
| (5% annual return before expenses) |
|
| ||
|
|
|
| Fund-Level |
|
| Fund-Level |
|
|
|
|
|
| Expenses |
|
| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201, 2 |
| Value 12/31/20 | 7/1/20–12/31/201, 2 | a | Ratio2 |
1 | $1,000 |
| $1,220.50 | $3.56 | $1,021.93 | $3.24 |
| 0.64% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses
Annual Report
FRD-5
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Franklin Rising Dividends VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $27.90 | $25.75 | $29.21 | $25.51 | $25.26 |
Income from investment operationsa: | 0.32 | 0.37 | 0.39 | 0.40 | 0.42 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 3.76 | 6.77 | (1.65) | 4.76 | 3.45 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 4.08 | 7.14 | (1.26) | 5.16 | 3.87 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.41) | (0.45) | (0.44) | (0.48) | (0.44) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.40) | (4.54) | (1.76) | (0.98) | (3.18) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.81) | (4.99) | (2.20) | (1.46) | (3.62) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $30.17 | $27.90 | $25.75 | $29.21 | $25.51 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 16.23% | 29.58% | (4.84)% | 20.85% | 16.33% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 0.65% | 0.63% | 0.62% | 0.62% | 0.63% |
Expenses net of waiver and payments by affiliatesd.. . . . . . | 0.65%e | 0.63%e | 0.62%e | 0.62%e | 0.62% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 1.20% | 1.34% | 1.38% | 1.49% | 1.67% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $156,585 | $150,864 | $157,838 | $216,015 | $181,072 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 12.83% | 7.26%f | 3.09%f | 3.36% | 6.66% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind.
FRD-6
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Rising Dividends VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $26.99 | $25.04 | $28.46 | $24.89 | $24.72 |
Income from investment operationsa: | 0.24 | 0.29 | 0.31 | 0.33 | 0.35 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 3.65 | 6.57 | (1.61) | 4.63 | 3.37 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 3.89 | 6.86 | (1.30) | 4.96 | 3.72 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.33) | (0.37) | (0.36) | (0.41) | (0.37) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.41) | (4.54) | (1.76) | (0.98) | (3.18) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.74) | (4.91) | (2.12) | (1.39) | (3.55) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $29.14 | $26.99 | $25.04 | $28.46 | $24.89 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 15.97% | 29.23% | (5.07)% | 20.56% | 16.04% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 0.90% | 0.88% | 0.87% | 0.87% | 0.88% |
Expenses net of waiver and payments by affiliatesd.. . . . . . | 0.90%e | 0.88%e | 0.87%e | 0.87%e | 0.87% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.95% | 1.09% | 1.13% | 1.24% | 1.42% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $1,365,745 | $1,387,688 | $1,106,334 | $1,640,883 | $1,530,374 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 12.83% | 7.26%f | 3.09%f | 3.36% | 6.66% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind.
The accompanying notes are an integral part of these financial statements.
Annual Report
FRD-7
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Rising Dividends VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 4
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $27.08 | $25.11 | $28.54 | $24.98 | $24.81 |
Income from investment operationsa: | 0.22 | 0.26 | 0.29 | 0.30 | 0.32 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 3.65 | 6.60 | (1.62) | 4.65 | 3.39 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 3.87 | 6.86 | (1.33) | 4.95 | 3.71 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.32) | (0.35) | (0.34) | (0.41) | (0.36) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.41) | (4.54) | (1.76) | (0.98) | (3.18) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.73) | (4.89) | (2.10) | (1.39) | (3.54) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $29.22 | $27.08 | $25.11 | $28.54 | $24.98 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 15.85% | 29.16% | (5.16)% | 20.40% | 15.93% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.00% | 0.98% | 0.97% | 0.97% | 0.98% |
Expenses net of waiver and payments by affiliatesd.. . . . . . | 1.00%e | 0.98%e | 0.97%e | 0.97%e | 0.97% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.85% | 0.99% | 1.03% | 1.14% | 1.32% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $51,137 | $46,539 | $32,825 | $36,407 | $28,579 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 12.83% | 7.26%f | 3.09%f | 3.36% | 6.66% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind.
FRD-8
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Franklin Rising Dividends VIP Fund
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks 98.9% |
|
|
|
|
| Aerospace & Defense 3.3% |
|
|
|
|
| General Dynamics Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 115,252 |
| $17,151,803 |
| Raytheon Technologies Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 494,946 |
| 35,393,588 |
|
|
|
|
| 52,545,391 |
| Air Freight & Logistics 1.9% |
|
|
|
|
| United Parcel Service, Inc., B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 179,267 |
| 30,188,563 |
| Beverages 1.7% |
|
|
|
|
| PepsiCo, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 182,330 |
| 27,039,539 |
| Biotechnology 0.9% |
|
|
|
|
| AbbVie, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 129,636 |
| 13,890,497 |
| Building Products 1.4% |
|
|
|
|
| Johnson Controls International plc. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 482,010 |
| 22,456,846 |
| Capital Markets 1.2% |
|
|
|
|
| Nasdaq, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 116,100 |
| 15,411,114 |
| State Street Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 56,141 |
| 4,085,942 |
|
|
|
|
| 19,497,056 |
| Chemicals 10.9% |
|
|
|
|
| Air Products and Chemicals, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 182,267 |
| 49,798,990 |
| Albemarle Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 257,010 |
| 37,914,115 |
| Ecolab, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 120,309 |
| 26,030,055 |
| Linde plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 216,332 |
| 57,005,645 |
|
|
|
|
| 170,748,805 |
| Commercial Services & Supplies 1.9% |
|
|
|
|
| Cintas Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 82,072 |
| 29,009,169 |
| Electrical Equipment 0.5% |
|
|
|
|
| nVent Electric plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 342,626 |
| 7,979,760 |
| Food & Staples Retailing 1.6% |
|
|
|
|
| Walmart, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 175,808 |
| 25,342,723 |
| Food Products 1.6% |
|
|
|
|
| McCormick & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 255,894 |
| 24,463,466 |
| Health Care Equipment & Supplies 14.4% |
|
|
|
|
| Abbott Laboratories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 308,895 |
| 33,820,913 |
| Becton Dickinson and Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 164,115 |
| 41,064,855 |
| Medtronic plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 381,254 |
| 44,660,094 |
| Stryker Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 248,645 |
| 60,927,972 |
| West Pharmaceutical Services, Inc.. . . . . . . . . . . . . . . . . . . . . . . . | United States | 165,001 |
| 46,746,433 |
|
|
|
|
| 227,220,267 |
| Health Care Providers & Services 2.5% |
|
|
|
|
| CVS Health Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 147,093 |
| 10,046,452 |
| UnitedHealth Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 80,900 |
| 28,370,012 |
|
|
|
|
| 38,416,464 |
| Hotels, Restaurants & Leisure 1.7% |
|
|
|
|
| McDonald's Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 127,599 |
| 27,380,193 |
| Household Products 3.1% |
|
|
|
|
| Colgate-Palmolive Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 246,640 |
| 21,090,187 |
| Procter & Gamble Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 199,894 |
| 27,813,251 |
|
|
|
|
| 48,903,438 |
| Industrial Conglomerates 8.6% |
|
|
|
|
| Carlisle Cos., Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 78,402 |
| 12,244,824 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FRD-9
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Rising Dividends VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Industrial Conglomerates (continued) |
|
|
|
|
| Honeywell International, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 211,075 |
| $44,895,653 |
| Roper Technologies, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 179,683 |
| 77,459,544 |
|
|
|
|
| 134,600,021 |
| Insurance 1.5% |
|
|
|
|
| Aflac, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 190,604 |
| 8,476,160 |
| Erie Indemnity Co., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 63,970 |
| 15,711,032 |
|
|
|
|
| 24,187,192 |
| IT Services 6.4% |
|
|
|
|
| Accenture plc, A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 241,578 |
| 63,102,590 |
| Visa, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 171,062 |
| 37,416,391 |
|
|
|
|
| 100,518,981 |
| Machinery 3.2% |
|
|
|
|
| Donaldson Co., Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 185,297 |
| 10,354,396 |
| Dover Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 190,188 |
| 24,011,235 |
| Pentair plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 301,294 |
| 15,995,699 |
|
|
|
|
| 50,361,330 |
| Multiline Retail 2.4% |
|
|
|
|
| Target Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 217,237 |
| 38,348,848 |
| Oil, Gas & Consumable Fuels 1.6% |
|
|
|
|
| Chevron Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 149,794 |
| 12,650,103 |
| EOG Resources, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 137,461 |
| 6,855,180 |
| Exxon Mobil Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 143,861 |
| 5,929,951 |
|
|
|
|
| 25,435,234 |
| Pharmaceuticals 3.0% |
|
|
|
|
| Johnson & Johnson. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 192,829 |
| 30,347,428 |
| Perrigo Co. plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 101,563 |
| 4,541,897 |
| Pfizer, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 335,415 |
| 12,346,626 |
|
|
|
|
| 47,235,951 |
| Road & Rail 1.4% |
|
|
|
|
| Norfolk Southern Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 90,647 |
| 21,538,634 |
| Semiconductors & Semiconductor Equipment 6.7% |
|
|
|
|
| Analog Devices, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 349,219 |
| 51,590,123 |
| Texas Instruments, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 326,568 |
| 53,599,606 |
|
|
|
|
| 105,189,729 |
| Software 8.2% |
|
|
|
|
| Microsoft Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 576,928 |
| 128,320,326 |
| Specialty Retail 3.8% |
|
|
|
|
| Lowe's Cos., Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 189,600 |
| 30,432,696 |
| Ross Stores, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 234,930 |
| 28,851,753 |
|
|
|
|
| 59,284,449 |
| Textiles, Apparel & Luxury Goods 2.5% |
|
|
|
|
| NIKE, Inc., B.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 280,384 |
| 39,665,924 |
| Trading Companies & Distributors 1.0% |
|
|
|
|
| WW Grainger, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 38,293 |
| 15,636,564 |
| . . . .Total Common Stocks (Cost $629,959,561).. . . . . . . | . . . . . . . . . . . . . . . . . | . . . . . . . . . |
| 1,555,405,360 |
|
|
|
|
|
|
FRD-10
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Rising Dividends VIP Fund (continued)
Short Term Investments 1.2%
a | a | Country | Shares | a |
| a |
|
|
|
Value
Money Market Funds 1.2%
a,bInstitutional Fiduciary Trust - Money Market Portfolio, 0%. . . . . . . . | United States | 18,135,871 | $18,135,871 |
Total Money Market Funds (Cost $18,135,871).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Short Term Investments (Cost $18,135,871). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Investments (Cost $648,095,432) 100.1%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities (0.1)%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,135,871
18,135,871
$1,573,541,231 (74,785)
$1,573,466,446
aSee Note 3(e) regarding investments in affiliated management investment companies.
bThe rate shown is the annualized seven-day effective yield at period end.
The accompanying notes are an integral part of these financial statements.
Annual Report
FRD-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Franklin Rising |
| Dividends VIP |
| Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $629,959,561 |
Cost - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 18,135,871 |
Value - Unaffiliated issuers .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,555,405,360 |
Value - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 18,135,871 |
Receivables: |
|
Investment securities sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 45,237 |
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 389,623 |
Dividends.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,309,909 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 192 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,575,286,192 |
Liabilities: |
|
Payables: |
|
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 564,201 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 814,471 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 300,271 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 140,803 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,819,746 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,573,466,446 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $582,414,212 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 991,052,234 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,573,466,446 |
| Franklin Rising |
| Dividends VIP |
| Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $156,585,034 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 5,189,274 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $30.17 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,365,744,647 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 46,864,497 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $29.14 |
Class 4: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $51,136,765 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 1,750,180 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $29.22 |
FRD-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations
December 31, 2020
| Franklin Rising |
| Dividends VIP |
| Fund |
Investment income: |
|
Dividends: |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $25,971,074 |
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 38,591 |
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 26,009,665 |
Expenses: |
|
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8,931,578 |
Distribution fees: (Note 3c) |
|
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,066,004 |
Class 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 155,636 |
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,698 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 135,654 |
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 59,881 |
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8,240 |
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 39,751 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Total expenses | 12,404,442 |
Expense reductions (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (3,121) |
Expenses waived/paid by affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (53,425) |
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 12,347,896 |
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 13,661,769 |
Realized and unrealized gains (losses): |
|
Net realized gain (loss) from: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 54,763,744 |
Net change in unrealized appreciation (depreciation) on: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 120,578,165 |
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 175,341,909 |
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $189,003,678 |
The accompanying notes are an intergral part of these financial statments.
Annual Report
FRD-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin Rising Dividends VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $13,661,769 | $17,322,041 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 54,763,744 | 82,812,044 |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | 120,578,165 | 279,796,675 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | 189,003,678 | 379,930,760 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (9,363,148) | (28,799,833) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (76,921,977) | (227,983,493) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2,888,656) | (6,300,776) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (89,173,781) | (263,084,102) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (6,915,276) | (21,678,109) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (105,113,819) | 182,626,753 |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 574,344 | 10,299,225 |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (111,454,751) | 171,247,869 |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | (11,624,854) | 288,094,527 |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,585,091,300 | 1,296,996,773 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,573,466,446 | $1,585,091,300 |
FRD-14
Annual Report
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
Franklin Rising Dividends VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Rising Dividends VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board
of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively.
Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade
in multiple markets or on multiple exchanges are valued
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Investments in open-end mutual funds are valued at the closing NAV.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Events can occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund's portfolio securities as determined at the foreign market close and the latest indications of value at
4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund’s portfolio securities to the latest indications of fair value at 4 p.m Eastern time.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result in differences between the value of the Fund's portfolio securities on the last business day and the last calendar day of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
Annual Report
FRD-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Rising Dividends VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
d. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the
FRD-16
Annual Report
Franklin Rising Dividends VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
d. Security Transactions, Investment Income, Expenses and Distributions (continued)
combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
e. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
f. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust,
on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
|
| Year Ended |
| Year Ended |
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 2 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed in-kind (Note 9).. . . . . . . . . . . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 4 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
144,545 | $3,628,818 | 238,379 | $6,420,546 |
386,747 | 9,363,148 | 1,132,514 | 28,799,833 |
(749,651) | (19,907,242) | (2,092,688) | (56,898,488) |
(218,359) | $(6,915,276) | (721,795) | $(21,678,109) |
6,981,462 | $173,231,502 | 7,298,801 | $200,248,939 |
3,284,457 | 76,921,977 | 9,252,577 | 227,983,493 |
— | — | (897,175) | (22,646,135) |
(14,809,098) | (355,267,298) | (8,430,854) | (222,959,544) |
(4,543,179) | $(105,113,819) | 7,223,349 | $182,626,753 |
261,260 | $6,613,767 | 415,831 | $10,934,186 |
122,974 | 2,888,656 | 254,783 | 6,300,776 |
(352,750) | (8,928,079) | (258,933) | (6,935,737) |
31,484 | $574,344 | 411,681 | $10,299,225 |
Annual Report
FRD-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Rising Dividends VIP Fund (continued)
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Advisers, Inc. (Advisers) | Investment manager |
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
|
|
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
|
|
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
a. Management Fees
The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
0.750% | Up to and including $500 million |
0.625% | Over $500 million, up to and including $1 billion |
|
|
0.500% | Over $1 billion, up to and including $5 billion |
0.490% | In excess of $5 billion |
|
|
For the year ended December 31, 2020, the gross effective investment management fee rate was 0.633% of the Fund’s average daily net assets.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
FRD-18
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Rising Dividends VIP Fund (continued)
3. Transactions with Affiliates (continued)
e. Investments in Affiliated Management Investment Companies (continued)
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| Net Change in |
| Number of |
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| Value at |
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| Unrealized | Value | Shares Held |
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| Beginning |
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| Realized Gain | Appreciation | at End | at End | Investment |
|
| of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Franklin Rising Dividends VIP Fund |
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Non-Controlled Affiliates |
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| Dividends |
Institutional Fiduciary Trust - Money |
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Market Portfolio, 0%.. . . . . . . . . |
| $17,735,928 | $238,058,320 | $(237,658,377) | $— | $— | $18,135,871 | 18,135,871 | $38,591 |
Total Affiliated Securities. . . . . |
| $17,735,928 | $238,058,320 | $(237,658,377) | $— | $— | $18,135,871 |
| $38,591 |
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows:
| 2020 | 2019 |
Distributions paid from: |
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $20,921,386 | $20,051,545 |
Long term capital gain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 68,252,395 | 243,032,557 |
| $89,173,781 | $263,084,102 |
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed long term capital gains.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total distributable earnings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$650,711,000
$948,700,201 (25,869,969)
$922,830,232
$15,693,513 $52,528,490
$68,222,003
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of corporate actions.
Annual Report
FRD-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Rising Dividends VIP Fund (continued)
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $178,373,456 and $362,182,387, respectively.
7. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
8. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
9. Redemption In-Kind
During the year ended December 31, 2019, the Fund realized $10,655,992 of net gains resulting from redemptions in-kind in which a shareholder redeemed fund shares for cash and securities held by the Fund. Because such gains are not taxable to the Fund and are not distributed to remaining shareholders, they are reclassified from accumulated net realized gains to paid- in capital.
10. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
FRD-20
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Rising Dividends VIP Fund (continued)
10. Fair Value Measurements (continued)
At December 31, 2020, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statement of Investments.
11. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020- 04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of [the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
12. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Annual Report
FRD-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Franklin Rising Dividends VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Franklin Rising Dividends VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian and transfer agent. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
FRD-22
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Franklin Rising Dividends VIP Fund
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $68,252,395 as a long term capital gain dividend for the fiscal year ended December 31, 2020.
Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 100% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2020.
Annual Report
FRD-23
Franklin Small Cap Value VIP Fund
This annual report for Franklin Small Cap Value VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | +5.41% |
5-Year | +11.05% |
10-Year | +9.48% |
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance is compared to the performance of the Russell 2000® Value Index. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please
see Important Notes to Performance Information preceding the Fund Summaries.
$25,000 |
|
|
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| $24,727 |
|
|
|
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| $22,943 |
$20,000 |
|
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$15,000 |
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$10,000 |
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$5,000 |
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1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
|
| Franklin Small Cap Value | Russell 2000 Value Index* |
| |
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| VIP Fund |
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|
*Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
Annual Report
FSV-1
Franklin Small Cap Value VIP Fund
Fund Goal and Main Investments
The Fund seeks long-term total return. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small capitalization companies. For this Fund, small capitalization companies are those with market capitalizations not exceeding either the highest market capitalization in the Russell 2000® Index or the 12-month average of the highest market capitalization in the Russell 2000® Index, whichever is greater, at the time of purchase. The Fund generally invests in equity securities of companies that the manager believes are undervalued at the time of purchase and have the potential for capital appreciation.
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. The Fund’s investments in smaller company stocks carry special risks as such stocks have historically exhibited greater price volatility than large-company stocks, particularly over the short term. Additionally, smaller companies often have relatively small revenues, limited product lines and a small market share. Value securities may not increase in price as anticipated, or may decline further in value. In addition, the Fund may invest up to 25% of its total assets in foreign securities, which involve special risks, including currency fluctuations and economic and political uncertainty. The Fund also may invest in equity real estate investment trusts (REITs). The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Russell 2000® Value Index posted a +4.63% total return for the same period.1 Please note the Fund employs a bottom-up stock selection process, and the managers invest in securities without regard to benchmark comparisons.
Portfolio Composition 12/31/20
| % of Total |
| Net Assets |
Machinery | 17.7% |
Banks | 15.0% |
Insurance | 12.8% |
Chemicals | 7.2% |
Specialty Retail | 4.2% |
Hotels, Restaurants & Leisure | 3.9% |
Health Care Equipment & Supplies | 3.9% |
Building Products | 3.1% |
Leisure Products | 2.6% |
Electronic Equipment, Instruments & |
|
Components | 2.3% |
Food Products | 2.0% |
Multi-Utilities | 1.8% |
Communications Equipment | 1.8% |
Textiles, Apparel & Luxury Goods | 1.8% |
Construction & Engineering | 1.8% |
Metals & Mining | 1.7% |
Automobiles | 1.7% |
Oil, Gas & Consumable Fuels | 1.4% |
Software | 1.4% |
Equity Real Estate Investment Trusts (REITs) | 1.4% |
Commercial Services & Supplies | 1.4% |
Electric Utilities | 1.3% |
Paper & Forest Products | 1.2% |
Other | 5.1% |
Short-Term Investments & Other Net Assets | 1.5% |
Economic and Market Overview
U.S. equities, as measured by the Standard & Poor’s® 500 Index (S&P 500®), advanced strongly during the 12 months ended December 31, 2020. Although equities began the year with gains, a sharp selloff began in late February 2020 amid investor fears of a global economic slowdown due to the novel coronavirus (COVID-19) pandemic. Such fears drove many investors to sell equities and buy government bonds, cash equivalents and other investments perceived as safe. Nevertheless, equities began to advance in late March, as monetary and fiscal stimulus drove stocks sharply higher. Following declines in September and October, equities, as measured by the S&P 500, advanced to all-time price highs in December.
1.Source: Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
FSV-2
Annual Report
Pandemic-related restrictions severely curtailed economic activity, resulting in mass layoffs that drove the unemployment rate to 14.8% in April 2020.2 The longest U.S. economic expansion in history ended in February, according to the National Bureau of Economic Research, and the country slipped into a deep recession with second- quarter 2020 gross domestic product (GDP) posting a record annualized decline.
In an effort to support the economy, the U.S. Federal Reserve (Fed) lowered the federal funds target rate to a range of 0.00%–0.25% in March 2020. The Fed also enacted quantitative easing measures aimed at ensuring credit flows to borrowers and supporting credit markets with open- ended bond purchasing. Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded its 2% target.
Equities began to rebound in late March 2020, benefiting from fiscal and monetary stimulus, a gradual lifting of restrictions and development of COVID-19 vaccines and treatments. Rising retail sales and rebounding economic activity led third-quarter GDP to expand at a record annualized pace, although growth slowed in the fourth quarter. Concerns about possible new restrictions amid rising COVID-19 infection rates and uncertainties about additional fiscal stimulus and the U.S. presidential election drove stocks lower in September and October. Despite signs that the economic recovery was stalling, as the unemployment rate remained relatively high (6.7% at period-end) and consumer spending declined, stocks rallied in November and December, buoyed by the outcome of the U.S. presidential election, the start of COVID-19 vaccination programs and the passage of a new stimulus bill.2
Investment Strategy
Our strategy is to invest in small-cap companies that we believe are undervalued at the time of purchase and have the potential for capital appreciation. A stock is undervalued, or is a “value,” when it trades at less than the price at which the investment manager believes it would trade if the market reflected all factors relating to the company’s worth. Following this strategy, the Fund invests in companies that the investment manager believes have, for example: stock prices that are low relative to current, or historical or future earnings, book value, cash flow or sales; recent sharp price declines but the potential for good long-term earnings prospects; and valuable intangibles not reflected in the stock price. The Fund also may invest in equity real estate investment trusts (REITs).
2. Source: Bureau of Labor Statistics.
FRANKLIN SMALL CAP VALUE VIP FUND
Top 10 Holdings 12/31/20
Company | % of Total |
Industry | Net Assets |
a | aa |
Old Republic International Corp. | 3.1% |
Insurance |
|
Avient Corp. | 3.1% |
Chemicals |
|
First Horizon Corp. | 3.0% |
Banks |
|
Hanover Insurance Group, Inc. (The) | 3.0% |
Insurance |
|
Horace Mann Educators Corp. | 2.9% |
Insurance |
|
Hillenbrand, Inc. | 2.6% |
Machinery |
|
CNO Financial Group, Inc. | 2.5% |
Insurance |
|
Brunswick Corp. | 2.2% |
Leisure Products |
|
Timken Co. (The) | 2.2% |
Machinery |
|
Group 1 Automotive, Inc. | 2.2% |
Specialty Retail |
|
Manager’s Discussion
For the 12 months ended December 31, 2020, contributors to Fund performance included Avient, BJ’s Wholesale Club and Jack in the Box.
Shares of Avient, a higher value-add chemicals company, rose due to stronger than expected earnings results, driven by sequential improvement in demand across all regions and end markets including health care, consumer discretionary and automobiles. The company also completed the acquisition of Clariant’s Masterbatch business on
July 1, 2020, which further improved the company’s exposure to specialty applications and business mix, deriving approximately 60% of revenues from consumer, packaging and health care end markets. Additionally, management issued guidance for higher cost synergies from the transaction compared to initial estimates and remains committed to returning cash to shareholders and deleveraging the corporate balance sheet.
Shares of BJ’s Wholesale Club, a warehouse club retailer, rose during the period as it benefited from increased consumer spending towards food at home as a result of the pandemic. Furthermore, BJ’s reported strong membership growth and material market share gains as customers consolidated shopping trips and became increasingly focused on value. Longer term, we believe the company’s membership model could provide it with another benefit, as a larger membership base could increase sales in future years.
Annual Report
FSV-3
FRANKLIN SMALL CAP VALUE VIP FUND
Shares of Jack in the Box, a fast-food restaurant operator and franchisor, rallied during the period as its significant drive-through business and what we consider attractive value-priced offerings helped its same-store sales growth outperform peers amid the pandemic. Additionally, fiscal stimulus helped to increase consumer spending on food away from home.
Detractors from performance included Retail Properties of America, Brinker International and Toll Brothers.
Shares of Retail Properties of America, a shopping center real estate investment trust, declined as stay-at-home and closure guidelines issued to prevent the spread of the novel coronavirus (COVID-19) exacerbated a challenging environment for the shopping center operator’s brick-and- mortar retail tenants. Although mandatory closure orders have largely been rescinded and rent collections started to recover, some watch-list tenants are not expected to reopen. Also, previously more stable sectors such as fitness and casual dining may face new pressures as consumer behavior shifts in response to new social distancing and spacing regulations. We exited the position.
Shares of Brinker International, an operator of casual dining restaurants, sold off early in the period due to COVID-19 lockdowns, which resulted in mandatory closures of dining rooms. Brinker’s leverage also increased, magnifying risk amid an uncertain economic environment. As a result, we exited our position.
Shares of luxury homebuilder Toll Brothers declined as the spread of COVID-19 contributed to a deterioration in the housing market outlook. Unemployment increased as businesses quickly responded to social distancing directives. We exited our position prior to period-end.
Thank you for your participation in Franklin Small Cap Value VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
FSV-4
Annual Report
FRANKLIN SMALL CAP VALUE VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
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|
| Actual |
| Hypothetical |
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| ||
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| (actual return after expenses) |
| (5% annual return before expenses) |
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| Fund-Level |
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| Fund-Level |
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| Expenses |
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| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201, 2 |
| Value 12/31/20 | 7/1/20–12/31/201, 2 | a | Ratio2 |
1 | $1,000 |
| $1,290.30 | $3.89 | $1,021.74 | $3.44 |
| 0.68% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses
Annual Report
FSV-5
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Franklin Small Cap Value VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $15.73 | $15.14 | $20.43 | $19.93 | $18.12 |
Income from investment operationsa: | 0.20 | 0.24c | 0.21 | 0.21d | 0.15 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 0.31 | 3.35 | (2.29) | 1.82 | 4.79 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.51 | 3.59 | (2.08) | 2.03 | 4.94 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.23) | (0.22) | (0.23) | (0.15) | (0.21) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.81) | (2.78) | (2.98) | (1.38) | (2.92) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.04) | (3.00) | (3.21) | (1.53) | (3.13) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $15.20 | $15.73 | $15.14 | $20.43 | $19.93 |
Total returne. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5.41% | 26.72% | (12.69)% | 10.92% | 30.54% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 0.68% | 0.67% | 0.66% | 0.66% | 0.66% |
Expenses net of waiver and payments by affiliatesf. . . . . . . | 0.68%g | 0.67%g | 0.65% | 0.65% | 0.64% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 1.54% | 1.58%c | 1.13% | 1.06%d | 0.84% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $50,572 | $46,980 | $40,644 | $51,245 | $47,831 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 69.40% | 54.36% | 47.82% | 33.36% | 34.60% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.23%.
dNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.75%.
eTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
fBenefit of expense reduction rounds to less than 0.01%.
gBenefit of waiver and payments by affiliates rounds to less than 0.01%.
FSV-6
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Small Cap Value VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $15.05 | $14.60 | $19.80 | $19.36 | $17.68 |
Income from investment operationsa: | 0.16 | 0.20c | 0.16 | 0.15d | 0.10 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 0.30 | 3.20 | (2.20) | 1.77 | 4.66 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.46 | 3.40 | (2.04) | 1.92 | 4.76 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.19) | (0.17) | (0.18) | (0.10) | (0.16) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.82) | (2.78) | (2.98) | (1.38) | (2.92) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.01) | (2.95) | (3.16) | (1.48) | (3.08) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $14.50 | $15.05 | $14.60 | $19.80 | $19.36 |
Total returne. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5.19% | 26.35% | (12.88)% | 10.65% | 30.19% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 0.93% | 0.92% | 0.91% | 0.91% | 0.91% |
Expenses net of waiver and payments by affiliatesf. . . . . . . | 0.93%g | 0.92%g | 0.90% | 0.90% | 0.89% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 1.28% | 1.33%c | 0.88% | 0.81%d | 0.59% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $1,103,373 | $1,123,093 | $978,675 | $1,302,055 | $1,366,807 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 69.40% | 54.36% | 47.82% | 33.36% | 34.60% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.98%.
dNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.50%.
eTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
fBenefit of expense reduction rounds to less than 0.01%.
gBenefit of waiver and payments by affiliates rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Annual Report
FSV-7
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Small Cap Value VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 4
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $15.51 | $14.96 | $20.22 | $19.74 | $17.96 |
Income from investment operationsa: | 0.15 | 0.19c | 0.15 | 0.14d | 0.09 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 0.32 | 3.30 | (2.28) | 1.81 | 4.75 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.47 | 3.49 | (2.13) | 1.95 | 4.84 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.18) | (0.16) | (0.15) | (0.09) | (0.14) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.81) | (2.78) | (2.98) | (1.38) | (2.92) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.99) | (2.94) | (3.13) | (1.47) | (3.06) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $14.99 | $15.51 | $14.96 | $20.22 | $19.74 |
Total returne. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5.13% | 26.23% | (13.01)% | 10.56% | 30.12% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.03% | 1.02% | 1.01% | 1.01% | 1.01% |
Expenses net of waiver and payments by affiliatesf. . . . . . . | 1.03%g | 1.02%g | 1.00% | 1.00% | 0.99% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 1.18% | 1.23%c | 0.78% | 0.71%d | 0.49% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $29,461 | $29,238 | $24,592 | $32,053 | $32,751 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 69.40% | 54.36% | 47.82% | 33.36% | 34.60% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.88%.
dNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.40%.
eTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
fBenefit of expense reduction rounds to less than 0.01%.
gBenefit of waiver and payments by affiliates rounds to less than 0.01%.
FSV-8
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Franklin Small Cap Value VIP Fund
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks 98.3% |
|
|
|
|
| Aerospace & Defense 0.7% |
|
|
|
|
| aMeggitt plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 1,299,465 |
| $8,264,051 |
| Auto Components 0.2% |
|
|
|
|
| LCI Industries.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 17,908 |
| 2,322,309 |
| Automobiles 1.7% |
|
|
|
|
| Thor Industries, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 214,828 |
| 19,976,856 |
| Banks 15.0% |
|
|
|
|
| Atlantic Union Bankshares Corp... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 394,830 |
| 13,005,700 |
| Bryn Mawr Bank Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 445,467 |
| 13,629,063 |
| Columbia Banking System, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 693,226 |
| 24,886,813 |
| First Horizon Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,775,364 |
| 35,413,645 |
| First of Long Island Corp. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 614,355 |
| 10,966,237 |
| German American Bancorp, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 196,123 |
| 6,489,710 |
| Glacier Bancorp, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 123,625 |
| 5,687,986 |
| Lakeland Financial Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 275,503 |
| 14,761,451 |
| Peoples Bancorp, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 289,712 |
| 7,848,298 |
| South State Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 352,108 |
| 25,457,408 |
| TriCo Bancshares.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 183,505 |
| 6,474,056 |
| Washington Trust Bancorp, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 278,797 |
| 12,490,106 |
|
|
|
|
| 177,110,473 |
| Building Products 3.1% |
|
|
|
|
| Apogee Enterprises, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 278,636 |
| 8,827,188 |
| Insteel Industries, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 390,746 |
| 8,701,913 |
| aMasonite International Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 51,299 |
| 5,044,744 |
| UFP Industries, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 247,149 |
| 13,729,127 |
|
|
|
|
| 36,302,972 |
| Capital Markets 0.4% |
|
|
|
|
| Houlihan Lokey, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 79,224 |
| 5,326,230 |
| Chemicals 7.2% |
|
|
|
|
| Avient Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 906,524 |
| 36,514,787 |
| Cabot Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 455,854 |
| 20,458,727 |
| aElementis plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 2,432,290 |
| 3,825,360 |
| Minerals Technologies, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,489 |
| 24,878,377 |
|
|
|
|
| 85,677,251 |
| Commercial Services & Supplies 1.4% |
|
|
|
|
| McGrath RentCorp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 239,200 |
| 16,050,320 |
| Communications Equipment 1.8% |
|
|
|
|
| aNetScout Systems, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 788,696 |
| 21,626,044 |
| Construction & Engineering 1.8% |
|
|
|
|
| Argan, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 113,749 |
| 5,060,693 |
| aGreat Lakes Dredge & Dock Corp.. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 36,964 |
| 486,816 |
| aWillScot Mobile Mini Holdings Corp.. . . . . . . . . . . . . . . . . . . . . . . . | United States | 667,028 |
| 15,455,039 |
|
|
|
|
| 21,002,548 |
| Construction Materials 0.2% |
|
|
|
|
| Eagle Materials, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 29,690 |
| 3,009,081 |
| Electric Utilities 1.3% |
|
|
|
|
| IDACORP, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 155,542 |
| 14,936,698 |
| Electrical Equipment 0.8% |
|
|
|
|
| Regal Beloit Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 72,771 |
| 8,937,007 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSV-9
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Small Cap Value VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Electronic Equipment, Instruments & Components 2.3% |
|
|
|
|
| Benchmark Electronics, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 285,571 |
| $7,713,273 |
| aCoherent, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 131,968 |
| 19,797,839 |
|
|
|
|
| 27,511,112 |
| Energy Equipment & Services 0.5% |
|
|
|
|
| Hunting plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 1,395,634 |
| 4,256,332 |
| aNatural Gas Services Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 173,987 |
| 1,649,397 |
|
|
|
|
| 5,905,729 |
| Equity Real Estate Investment Trusts (REITs) 1.4% |
|
|
|
|
| Healthcare Realty Trust, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 146,090 |
| 4,324,264 |
| Highwoods Properties, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 172,967 |
| 6,854,682 |
| Sunstone Hotel Investors, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 451,135 |
| 5,111,360 |
|
|
|
|
| 16,290,306 |
| Food & Staples Retailing 0.1% |
|
|
|
|
| aBJ's Wholesale Club Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . . . | United States | 20,543 |
| 765,843 |
| Food Products 2.0% |
|
|
|
|
| Glanbia plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Ireland | 1,804,942 |
| 22,888,913 |
| Maple Leaf Foods, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 46,547 |
| 1,032,589 |
|
|
|
|
| 23,921,502 |
| Gas Utilities 0.1% |
|
|
|
|
| Spire, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 21,983 |
| 1,407,791 |
| Health Care Equipment & Supplies 3.9% |
|
|
|
|
| aEnvista Holdings Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 670,440 |
| 22,613,941 |
| aInteger Holdings Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 295,632 |
| 24,002,362 |
|
|
|
|
| 46,616,303 |
| Hotels, Restaurants & Leisure 3.9% |
|
|
|
|
| aDalata Hotel Group plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Ireland | 1,462,770 |
| 6,764,045 |
| aDenny's Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,150,284 |
| 16,886,169 |
| Jack in the Box, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 235,448 |
| 21,849,574 |
| Wyndham Hotels & Resorts, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 19,847 |
| 1,179,706 |
|
|
|
|
| 46,679,494 |
| Household Durables 0.5% |
|
|
|
|
| aM/I Homes, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 121,848 |
| 5,396,648 |
| Insurance 12.8% |
|
|
|
|
| CNO Financial Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,314,787 |
| 29,227,715 |
| Hanover Insurance Group, Inc. (The). . . . . . . . . . . . . . . . . . . . . . . | United States | 301,564 |
| 35,258,863 |
| Horace Mann Educators Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 808,634 |
| 33,994,973 |
| Old Republic International Corp... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,875,664 |
| 36,969,337 |
| Selective Insurance Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 235,011 |
| 15,741,037 |
|
|
|
|
| 151,191,925 |
| Leisure Products 2.6% |
|
|
|
|
| BRP, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 61,123 |
| 4,040,432 |
| Brunswick Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 347,684 |
| 26,507,428 |
|
|
|
|
| 30,547,860 |
| Machinery 17.5% |
|
|
|
|
| Astec Industries, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 178,653 |
| 10,340,436 |
| Columbus McKinnon Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 291,637 |
| 11,210,526 |
| Greenbrier Cos., Inc. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 660,361 |
| 24,023,933 |
FSV-10
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Small Cap Value VIP Fund (continued)
a | a | Country | Shares |
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Machinery (continued) |
|
|
|
|
| Hillenbrand, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 761,953 |
| $30,325,730 |
| aMeritor, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 406,142 |
| 11,335,423 |
| Mueller Industries, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 233,931 |
| 8,213,318 |
| Mueller Water Products, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,672,826 |
| 20,709,586 |
| Oshkosh Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 254,432 |
| 21,898,962 |
| REV Group, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 134,658 |
| 1,186,337 |
| Rexnord Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 516,332 |
| 20,389,951 |
| aSPX FLOW, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 149,568 |
| 8,668,961 |
| Timken Co. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 342,923 |
| 26,528,523 |
| Wabash National Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 710,214 |
| 12,236,987 |
|
|
|
|
| 207,068,673 |
| Metals & Mining 1.7% |
|
|
|
|
| Kaiser Aluminum Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 35,147 |
| 3,476,039 |
| Reliance Steel & Aluminum Co... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 139,647 |
| 16,722,728 |
|
|
|
|
| 20,198,767 |
| Multi-Utilities 1.8% |
|
|
|
|
| Black Hills Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 352,251 |
| 21,645,824 |
| Oil, Gas & Consumable Fuels 1.4% |
|
|
|
|
| Crescent Point Energy Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 7,157,980 |
| 16,711,894 |
| Paper & Forest Products 1.2% |
|
|
|
|
| Glatfelter Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 856,913 |
| 14,036,235 |
| Louisiana-Pacific Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,152 |
| 117,160 |
|
|
|
|
| 14,153,395 |
| Professional Services 0.9% |
|
|
|
|
| aHuron Consulting Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 34,036 |
| 2,006,422 |
| Kforce, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 213,631 |
| 8,991,729 |
|
|
|
|
| 10,998,151 |
| Road & Rail 0.3% |
|
|
|
|
| Heartland Express, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 175,213 |
| 3,171,355 |
| Software 1.4% |
|
|
|
|
| aACI Worldwide, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 428,999 |
| 16,486,432 |
| Specialty Retail 4.2% |
|
|
|
|
| aBoot Barn Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 329,377 |
| 14,281,787 |
| aDufry AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 140,130 |
| 8,827,494 |
| Group 1 Automotive, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 202,868 |
| 26,604,109 |
|
|
|
|
| 49,713,390 |
| Textiles, Apparel & Luxury Goods 1.8% |
|
|
|
|
| Carter's, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 164,583 |
| 15,482,323 |
| Wolverine World Wide, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 194,401 |
| 6,075,031 |
|
|
|
|
| 21,557,354 |
| Thrifts & Mortgage Finance 0.4% |
|
|
|
|
| TrustCo Bank Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 782,700 |
| 5,220,609 |
| . . . .Total Common Stocks (Cost $949,939,177).. . . . . . . | . . . . . . . . . . . . . . . . | . . . . . . . . . . |
| 1,163,702,197 |
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Annual Report
FSV-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Small Cap Value VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds 0.2% |
|
|
|
|
| Machinery 0.2% |
|
|
|
|
| Mueller Industries, Inc., Sub. Note, 6%, 3/01/27. . . . . . . . . . . . . . . | United States | 2,378,000 |
| $2,428,081 |
| . . . . .Total Corporate Bonds (Cost $2,378,000).. . . . . . . . | . . . . . . . . . . . . . . . . | . . . . . . . . . . |
| 2,428,081 |
| Total Long Term Investments (Cost $952,317,177) |
|
|
|
|
| . . . . . . . . . . . . . . . . | . . . . . . . . . . |
| 1,166,130,278 | |
|
|
|
|
|
|
Short Term Investments 1.8%
a | a | Country | Shares | a |
| a |
|
|
|
Value
Money Market Funds 1.8%
b,cInstitutional Fiduciary Trust - Money Market Portfolio, 0%. . . . . . . . | United States | 21,360,711 | 21,360,711 |
Total Money Market Funds (Cost $21,360,711). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Short Term Investments (Cost $21,360,711). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Investments (Cost $973,677,888) 100.3%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities (0.3)%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,360,711
21,360,711
$1,187,490,989 (4,085,068)
$1,183,405,921
*The principal amount is stated in U.S. dollars unless otherwise indicated. aNon-income producing.
bSee Note 3(e) regarding investments in affiliated management investment companies. cThe rate shown is the annualized seven-day effective yield at period end.
FSV-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Franklin Small |
| Cap Value VIP |
| Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $952,317,177 |
Cost - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 21,360,711 |
Value - Unaffiliated issuers .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,166,130,278 |
Value - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 21,360,711 |
Foreign currency, at value (cost $4,976).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,976 |
Receivables: |
|
Investment securities sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,119,236 |
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 106,957 |
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,300,255 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 138 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,190,022,551 |
Liabilities: |
|
Payables: |
|
Investment securities purchased.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,588,595 |
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 930,340 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 635,691 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 240,912 |
Funds advanced by custodian.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,959 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 216,133 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 6,616,630 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,183,405,921 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $925,563,433 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 257,842,488 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,183,405,921 |
| Franklin Small |
| Cap Value VIP |
| Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $50,571,501 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 3,326,110 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $15.20 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,103,373,354 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 76,082,651 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $14.50 |
Class 4: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $29,461,066 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 1,965,550 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $14.99 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSV-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Operations
for the year ended December 31, 2020
| Franklin Small |
| Cap Value VIP |
| Fund |
Investment income: |
|
Dividends: (net of foreign taxes of $26,748) |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $22,030,944 |
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 53,326 |
Interest: |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 143,076 |
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 22,227,346 |
Expenses: |
|
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 6,511,829 |
Distribution fees: (Note 3c) |
|
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,351,290 |
Class 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 88,840 |
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,456 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 252,893 |
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 55,467 |
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,929 |
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 30,291 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Total expenses | 9,301,995 |
Expense reductions (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (880) |
Expenses waived/paid by affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (40,294) |
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,260,821 |
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 12,966,525 |
Realized and unrealized gains (losses): |
|
Net realized gain (loss) from: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 35,362,377 |
Realized gain distributions from REITs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 237,639 |
Foreign currency transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (16,547) |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 35,583,469 |
Net change in unrealized appreciation (depreciation) on: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,889,896 |
Translation of other assets and liabilities denominated in foreign currencies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,600 |
Net change in unrealized appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,897,496 |
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 45,480,965 |
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $58,447,490 |
FSV-14
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin Small Cap Value VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $12,966,525 | $15,229,928 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 35,583,469 | 61,068,326 |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,897,496 | 187,554,772 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | 58,447,490 | 263,853,026 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (3,163,057) | (7,896,338) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (74,826,606) | (189,976,242) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,993,248) | (4,683,798) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (79,982,911) | (202,556,378) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,879,512 | 3,898,876 |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,523,597 | 87,139,038 |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 226,802 | 3,066,346 |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,629,911 | 94,104,260 |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | (15,905,510) | 155,400,908 |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,199,311,431 | 1,043,910,523 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,183,405,921 | $1,199,311,431 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSV-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Notes to Financial Statements
Franklin Small Cap Value VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Small Cap Value VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board
of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively.
Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade
in multiple markets or on multiple exchanges are valued
according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.
Investments in open-end mutual funds are valued at closing NAV.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Events can occur between the time at which trading in a foreign security
is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund's portfolio securities as determined at the foreign market close and the latest indications of value at
FSV-16
Annual Report
Franklin Small Cap Value VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
a. Financial Instrument Valuation (continued)
4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund's securities to the latest indications of fair value at 4 p.m. Eastern time. At December 31, 2020, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy. See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result in differences between the value of the Fund's portfolio securities on the last business day and the last calendar day of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Funds for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
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
Annual Report
FSV-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Small Cap Value VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
d. Security Transactions, Investment Income, Expenses and Distributions (continued)
and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income and capital gain distributions are recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
e. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
f. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust
on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
| Year Ended | Year Ended | ||
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 455,233 | $5,805,187 | 262,210 | $4,085,267 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 275,768 | 3,163,057 | 578,063 | 7,896,338 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (392,293) | (5,088,732) | (537,480) | (8,082,729) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 338,708 | $3,879,512 | 302,793 | $3,898,876 |
FSV-18
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Small Cap Value VIP Fund (continued)
2. Shares of Beneficial Interest (continued)
|
| Year Ended | Year Ended | ||
|
| December 31, 2020 | December 31, 2019 | ||
|
| Shares | Amount | Shares | Amount |
| Class 2 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,825,906 | $112,925,732 | 5,696,678 | $84,262,242 | |
| Shares issued in reinvestment of distributions.. . . . . . . . . . | 6,827,245 | 74,826,606 | 14,513,082 | 189,976,242 |
| Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (15,190,634) | (186,228,741) | (12,637,486) | (187,099,446) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,462,517 | $1,523,597 | 7,572,274 | $87,139,038 | |
Class 4 Shares: |
|
|
|
| |
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 422,087 | $4,787,696 | 279,692 | $4,200,102 | |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 175,927 | 1,993,248 | 346,948 | 4,683,798 | |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (517,251) | (6,554,142) | (385,667) | (5,817,554) | |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 80,763 | $226,802 | 240,973 | $3,066,346 |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Mutual Advisers, LLC (Franklin Mutual) | Investment manager |
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
|
|
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
|
|
a. Management Fees
The Fund pays an investment management fee to Franklin Mutual based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
0.750% | Up to and including $200 million |
0.635% | Over $200 million, up to and including $700 million |
0.600% | Over $700 million, up to and including $1.2 billion |
|
|
0.575% | Over $1.2 billion, up to and including $1.3 billion |
0.475% | In excess of $1.3 billion |
|
|
For the year ended December 31, 2020, the gross effective investment management fee rate was 0.647% of the Fund’s average daily net assets.
b. Administrative Fees
Under an agreement with Franklin Mutual, FT Services provides administrative services to the Fund. The fee is paid by Franklin Mutual based on the Fund's average daily net assets, and is not an additional expense of the Fund.
Annual Report
FSV-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Small Cap Value VIP Fund (continued)
3. Transactions with Affiliates (continued)
c. Distribution Fees
The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.35% per year of its average daily net asset of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
|
|
|
|
|
| Net Change in |
| Number of |
|
|
| Value at |
|
|
| Unrealized | Value | Shares Held |
|
|
| Beginning |
|
| Realized Gain | Appreciation | at End | at End | Investment |
|
| of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Franklin Small Cap Value VIP Fund |
|
|
|
|
|
|
|
| |
Non-Controlled Affiliates |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Dividends |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
| |
Market Portfolio, 0%.. . . . . . . . . | $24,977,897 | $254,626,849 | $(258,244,035) | $— | $— | $21,360,711 | 21,360,711 | $53,326 | |
Total Affiliated Securities. . . . . |
| $24,977,897 | $254,626,849 | $(258,244,035) | $— | $— | $21,360,711 |
| $53,326 |
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows:
| 2020 | 2019 |
Distributions paid from: |
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $20,917,706 | $23,319,400 |
Long term capital gain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 59,065,205 | 179,236,978 |
| $79,982,911 | $202,556,378 |
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:
FSV-20
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Small Cap Value VIP Fund (continued)
5. Income Taxes (continued)
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed long term capital gains.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total distributable earnings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$977,870,906
$237,209,883 (27,589,800)
$209,620,083
$28,690,115 $19,524,447
$48,214,562
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of wash sales.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $690,433,149 and $743,112,552, respectively.
7. Novel Coronavirus Pandem
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
8. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
9. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
Annual Report
FSV-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Small Cap Value VIP Fund (continued)
9.Fair Value Measurements (continued)
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments).
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
A summary of inputs used as of December 31, 2020, in valuing the Fund's assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total |
Franklin Small Cap Value VIP Fund |
|
|
|
|
Assets: |
|
|
|
|
Investments in Securities: |
|
|
|
|
Common Stocks: |
|
|
|
|
Aerospace & Defense .. . . . . . . . . . . . . . . . . . . | $— | $8,264,051 | $— | $8,264,051 |
Auto Components .. . . . . . . . . . . . . . . . . . . . . . | 2,322,309 | — | — | 2,322,309 |
Automobiles .. . . . . . . . . . . . . . . . . . . . . . . . . . | 19,976,856 | — | — | 19,976,856 |
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 177,110,473 | — | — | 177,110,473 |
Building Products .. . . . . . . . . . . . . . . . . . . . . . | 36,302,972 | — | — | 36,302,972 |
Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . | 5,326,230 | — | — | 5,326,230 |
Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 85,677,251 | — | — | 85,677,251 |
Commercial Services & Supplies . . . . . . . . . . . | 16,050,320 | — | — | 16,050,320 |
Communications Equipment .. . . . . . . . . . . . . . | 21,626,044 | — | — | 21,626,044 |
Construction & Engineering . . . . . . . . . . . . . . . | 21,002,548 | — | — | 21,002,548 |
Construction Materials . . . . . . . . . . . . . . . . . . . | 3,009,081 | — | — | 3,009,081 |
Electric Utilities .. . . . . . . . . . . . . . . . . . . . . . . . | 14,936,698 | — | — | 14,936,698 |
Electrical Equipment .. . . . . . . . . . . . . . . . . . . . | 8,937,007 | — | — | 8,937,007 |
Electronic Equipment, Instruments & |
|
|
|
|
Components .. . . . . . . . . . . . . . . . . . . . . . . . | 27,511,112 | — | — | 27,511,112 |
Energy Equipment & Services . . . . . . . . . . . . . | 5,905,729 | — | — | 5,905,729 |
Equity Real Estate Investment Trusts (REITs) .. | 16,290,306 | — | — | 16,290,306 |
Food & Staples Retailing . . . . . . . . . . . . . . . . . | 765,843 | — | — | 765,843 |
Food Products . . . . . . . . . . . . . . . . . . . . . . . . . | 23,921,502 | — | — | 23,921,502 |
Gas Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,407,791 | — | — | 1,407,791 |
Health Care Equipment & Supplies .. . . . . . . . . | 46,616,303 | — | — | 46,616,303 |
Hotels, Restaurants & Leisure . . . . . . . . . . . . . | 46,679,494 | — | — | 46,679,494 |
Household Durables .. . . . . . . . . . . . . . . . . . . . | 5,396,648 | — | — | 5,396,648 |
Insurance .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 151,191,925 | — | — | 151,191,925 |
Leisure Products . . . . . . . . . . . . . . . . . . . . . . . | 30,547,860 | — | — | 30,547,860 |
Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 207,068,673 | — | — | 207,068,673 |
Metals & Mining .. . . . . . . . . . . . . . . . . . . . . . . | 20,198,767 | — | — | 20,198,767 |
Multi-Utilities .. . . . . . . . . . . . . . . . . . . . . . . . . . | 21,645,824 | — | — | 21,645,824 |
Oil, Gas & Consumable Fuels .. . . . . . . . . . . . . | 16,711,894 | — | — | 16,711,894 |
Paper & Forest Products . . . . . . . . . . . . . . . . . | 14,153,395 | — | — | 14,153,395 |
Professional Services .. . . . . . . . . . . . . . . . . . . | 10,998,151 | — | — | 10,998,151 |
Road & Rail . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,171,355 | — | — | 3,171,355 |
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 16,486,432 | — | — | 16,486,432 |
Specialty Retail . . . . . . . . . . . . . . . . . . . . . . . . | 40,885,896 | 8,827,494 | — | 49,713,390 |
Textiles, Apparel & Luxury Goods .. . . . . . . . . . | 21,557,354 | — | — | 21,557,354 |
Thrifts & Mortgage Finance .. . . . . . . . . . . . . . . | 5,220,609 | — | — | 5,220,609 |
Corporate Bonds .. . . . . . . . . . . . . . . . . . . . . . . . | — | 2,428,081 | — | 2,428,081 |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | 21,360,711 | — | — | 21,360,711 |
Total Investments in Securities.. . . . . . . . . . . | $1,167,971,363 | $19,519,626 | $— | $1,187,490,989 |
FSV-22
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Small Cap Value VIP Fund (continued)
10. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020- 04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of [the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
11. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Annual Report
FSV-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Franklin Small Cap Value VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Franklin Small Cap Value VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
FSV-24
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Franklin Small Cap Value VIP Fund
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $59,065,205 as a long term capital gain dividend for the fiscal year ended December 31, 2020.
Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 95.23% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2020.
Annual Report
FSV-25
Franklin Small-Mid Cap Growth VIP Fund
This annual report for Franklin Small-Mid Cap Growth VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares* represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | +55.52% |
5-Year | +19.83% |
10-Year | +14.33% |
*The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/21. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Annual Report
FSC-1
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Russell Midcap® Growth Index and the Standard & Poor’s® 500 Index (S&P 500®). One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund
Summaries.
$45,000 |
|
|
|
| $40,613 |
$40,000 |
|
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|
| |
|
|
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| $38,150 | |
|
|
|
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| |
$35,000 |
|
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| $36,700 |
$30,000 |
|
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$25,000 |
|
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$20,000 |
|
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$15,000 |
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$10,000 |
|
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$5,000 |
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|
1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
Franklin Small-Mid Cap Growth | Russell Midcap Growth Index** | S&P 500** |
| ||
VIP Fund |
|
|
|
|
|
**Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
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Annual Report
Franklin Small-Mid Cap Growth Fund
Fund Goal and Main Investments
The Fund seeks long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small-capitalization and mid-capitalization companies. For this Fund, small-cap companies are those within the market capitalization range of companies in the Russell 2500TM Index at the time of purchase, and midcap companies are those within the market capitalization range of companies in the Russell Midcap® Index at the time of purchase.1
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Growth stock prices reflect projections of future earnings or revenues, and can, therefore, fall dramatically
if the company fails to meet those projections. Smaller, midsized and relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Historically, these securities have experienced more price volatility than larger-company stocks, especially over the short term.
To the extent the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risk of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. From time to time, the trading market for
a particular security or type of security in which the Fund invests may become less liquid or even illiquid. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. Please see Index Descriptions following the Fund Summaries.
Portfolio Composition 12/31/20
| % of Total |
| Net Assets |
Software | 17.3% |
IT Services | 11.5% |
Semiconductors & Semiconductor Equipment | 6.6% |
Health Care Equipment & Supplies | 6.5% |
Professional Services | 5.0% |
Capital Markets | 4.2% |
Hotels, Restaurants & Leisure | 4.0% |
Biotechnology | 3.9% |
Specialty Retail | 3.6% |
Life Sciences Tools & Services | 3.3% |
Entertainment | 3.2% |
Electronic Equipment, Instruments & |
|
Components | 2.5% |
Health Care Providers & Services | 2.3% |
Health Care Technology | 2.3% |
Machinery | 2.2% |
Other | 19.6% |
Short-Term Investments & Other Net Assets | 2.0% |
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Fund’s narrow benchmark, the Russell Midcap Growth® Index, posted a +35.59% total return, and its broad benchmark, the Standard
&Poor's 500 Index (S&P 500) posted a +18.40% total return for the same period.2
Economic and Market Overview
U.S. equities, as measured by the S&P 500, advanced strongly during the 12 months ended December 31, 2020. Although equities began the year with gains, a sharp selloff began in late February 2020 amid investor fears of a global economic slowdown due to the novel coronavirus (COVID-19) pandemic. Such fears drove many investors to sell equities and buy government bonds, cash equivalents and other investments perceived as safe. Nevertheless, equities began to advance in late March, as monetary and fiscal stimulus drove stocks sharply higher. Following declines in September and October, equities, as measured by the S&P 500, advanced to all-time price highs in December.
2.Source: Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
Annual Report
FSC-3
FRANKLIN SMALL-MID CAP GROWTH VIP FUND
Pandemic-related restrictions severely curtailed economic activity, resulting in mass layoffs that drove the unemployment rate to 14.8% in April 2020.3 The longest U.S. economic expansion in history ended in February, according to the National Bureau of Economic Research, and the country slipped into a deep recession with second- quarter 2020 gross domestic product (GDP) posting a record annualized decline.
In an effort to support the economy, the U.S. Federal Reserve (Fed) lowered the federal funds target rate to a range of 0.00%–0.25% in March 2020. The Fed also enacted quantitative easing measures aimed at ensuring credit flows to borrowers and supporting credit markets with open- ended bond purchasing. Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded its 2% target.
Equities began to rebound in late March 2020, benefiting from fiscal and monetary stimulus, a gradual lifting of restrictions and development of COVID-19 vaccines and treatments. Rising retail sales and rebounding economic activity led third-quarter GDP to expand at a record annualized pace, although growth slowed in the fourth quarter. Concerns about possible new restrictions amid rising COVID-19 infection rates and uncertainties about additional fiscal stimulus and the U.S. presidential election drove stocks lower in September and October. Despite signs that the economic recovery was stalling, as the unemployment rate remained relatively high (6.7% at period-end) and consumer spending declined, stocks rallied in November and December, buoyed by the outcome of the U.S. presidential election, the start of COVID-19 vaccination programs and the passage of a new stimulus bill.3
Investment Strategy
We use fundamental, bottom-up research to seek companies meeting our criteria of growth potential, quality and valuation. In seeking sustainable growth characteristics, we look for companies we believe can produce sustainable earnings and cash flow growth, evaluating the long-term market opportunity and competitive structure of an industry to target leaders and emerging leaders. We define quality companies as those with strong and improving competitive positions in attractive markets. We also believe important attributes of quality are experienced and talented management teams as well as financial strength reflected in the capital structure, gross and operating margins, free cash flow generation and returns on capital employed. In assessing value, we
3. Bureau of Labor Statistics.
Top 10 Holdings 12/31/20
Company | % of Total |
Industry | Net Assets |
a | aa |
Synopsys, Inc. | 2.5% |
Software |
|
Twilio, Inc. | 2.3% |
IT Services |
|
CoStar Group, Inc. | 2.1% |
Professional Services |
|
IDEXX Laboratories, Inc. | 2.0% |
Health Care Equipment & Supplies |
|
DocuSign, Inc. | 2.0% |
Software |
|
Verisk Analytics, Inc. | 1.9% |
Professional Services |
|
Roku, Inc. | 1.7% |
Entertainment |
|
Okta, Inc. | 1.6% |
IT Services |
|
ANSYS, Inc. | 1.6% |
Software |
|
Zendesk, Inc. | 1.6% |
Software |
|
consider whether security prices fully reflect the balance of the sustainable growth opportunities relative to business and financial risks.
Manager’s Discussion
During the period under review, the Fund outperformed the Russell Midcap® Growth Index. Stock selection in the information technology sector was the primary contributor to relative returns. Within the sector, the Fund benefited from positions in DocuSign, Twilio, CloudFlare and Bill.Com Holdings. Subscription revenue and billings growth have been positive drivers of performance for electric signature company DocuSign. While the company is benefiting from work-from-home-trends in the near term, we believe there is a large and under-penetrated market for the digital transformation of contracts and other types of agreements that require e-signatures. Twilio has seen accelerated demand in the COVID-19 environment for the company’s digital communication services, particularly in telehealth, online education and remote customer care. COVID-19 and subsequent shelter-in-place mandates have also been an opportunity for cloud-security specialists CloudFlare, which provides tools that enable remote work and social distancing. Payment solutions provider Bill.Com has been benefiting from the growing need of smaller companies to switch to cost- and time-saving innovative technologies to stay competitive.
FSC-4
Annual Report
FRANKLIN SMALL-MID CAP GROWTH VIP FUND
Stock selection in consumer discretionary also contributed to relative results. Digital sports entertainment and gaming company DraftKings was a top contributor in the sector.
DraftKings has generated revenue from online gambling and has created new products such as simulated sports events, though the company’s operations have been impacted by the suspension, postponement or cancellation of sports seasons and events due to COVID-19.
Turning to detractors, stock selection undermined relative performance in the materials sector, where a position in specialty chemicals manufacturer Ingevity detracted from results.
Elsewhere, satellite communications operator ViaSat hurt relative returns. The company has been negatively affected by emerging competition and the economic impact associated with the COVID-19 pandemic. We have since eliminated the position.
Other relative detractors included Hexcel and Diamondback Energy. Advanced materials company Hexcel, whose biggest client is the aerospace industry, was hit hard by the collapse in air travel caused by COVID-19, which resulted in airplane production cuts. Oil exploration and production company Diamondback also hindered results due to the collapse
of oil prices brought on by the global economic shutdown and Russia-Saudi price war. We liquidated our positions in both Hexcel and Diamondback due to their price recovery uncertainty.
Reata Pharmaceuticals, which faced U.S. Food and Drug Administration hurdles for its neurological disorder treatment, hurt relative results as well.
Thank you for your participation in Franklin Small-Mid Cap Growth VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
Annual Report
FSC-5
FRANKLIN SMALL-MID CAP GROWTH VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
|
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| Actual |
| Hypothetical |
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| ||
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| (actual return after expenses) |
| (5% annual return before expenses) |
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| Fund-Level |
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| Fund-Level |
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| Expenses |
|
| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201,2 |
| Value 12/31/20 | 7/1/20–12/31/201,2 | a | Ratio2 |
1 | $1,000 |
| $1,328.90 | $4.92 | $1,020.91 | $4.27 |
| 0.84% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.
FSC-6
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Franklin Small-Mid Cap Growth VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $19.74 | $17.04 | $19.71 | $17.77 | $19.09 |
Income from investment operationsa: | (0.07) | (0.04) | (0.05) | (0.04) | (0.03) |
Net investment (loss)b. . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 9.96 | 5.31 | (0.70) | 3.74 | 0.77 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 9.89 | 5.27 | (0.75) | 3.70 | 0.74 |
Less distributions from: |
|
|
|
|
|
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2.64) | (2.57) | (1.92) | (1.76) | (2.06) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $26.99 | $19.74 | $17.04 | $19.71 | $17.77 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 55.52% | 31.80% | (5.15)% | 21.75% | 4.40% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 0.85% | 0.84% | 0.86% | 0.85% | 0.84% |
Expenses net of waiver and payments by affiliatesd.. . . . . . | 0.84% | 0.83% | 0.85% | 0.84% | 0.82% |
Net investment (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.33)% | (0.19)% | (0.24)% | (0.24)% | (0.16)% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $72,039 | $43,169 | $33,518 | $36,864 | $31,756 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 48.93% | 59.07% | 44.78% | 40.49% | 32.23%e |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
eExcludes the value of portfolio securities delivered as a result of a redemption in-kind.
The accompanying notes are an integral part of these financial statements.
Annual Report
FSC-7
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $17.29 | $15.22 | $17.83 | $16.27 | $17.69 |
Income from investment operationsa: | (0.11) | (0.08) | (0.09) | (0.08) | (0.07) |
Net investment (loss)b. . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 8.57 | 4.72 | (0.60) | 3.40 | 0.71 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 8.46 | 4.64 | (0.69) | 3.32 | 0.64 |
Less distributions from: |
|
|
|
|
|
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2.64) | (2.57) | (1.92) | (1.76) | (2.06) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $23.11 | $17.29 | $15.22 | $17.83 | $16.27 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 55.09% | 31.44% | (5.37)% | 21.40% | 4.17% |
Ratios to average net assets |
|
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|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.10% | 1.09% | 1.11% | 1.10% | 1.09% |
Expenses net of waiver and payments by affiliatesd.. . . . . . | 1.09% | 1.08% | 1.10% | 1.09% | 1.07% |
Net investment (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.61)% | (0.44)% | (0.49)% | (0.49)% | (0.41)% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $503,032 | $372,442 | $310,300 | $390,094 | $392,777 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 48.93% | 59.07% | 44.78% | 40.49% | 32.23%e |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
eExcludes the value of portfolio securities delivered as a result of a redemption in-kind.
FSC-8
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 4
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $18.04 | $15.81 | $18.47 | $16.81 | $18.23 |
Income from investment operationsa: | (0.14) | (0.10) | (0.11) | (0.10) | (0.09) |
Net investment (loss)b. . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 9.00 | 4.90 | (0.63) | 3.52 | 0.73 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 8.86 | 4.80 | (0.74) | 3.42 | 0.64 |
Less distributions from: |
|
|
|
|
|
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2.64) | (2.57) | (1.92) | (1.76) | (2.06) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $24.26 | $18.04 | $15.81 | $18.47 | $16.81 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 55.01% | 31.26% | (5.46)% | 21.30% | 4.04% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.20% | 1.19% | 1.21% | 1.20% | 1.19% |
Expenses net of waiver and payments by affiliatesd.. . . . . . | 1.19% | 1.18% | 1.20% | 1.19% | 1.17% |
Net investment (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.71)% | (0.54)% | (0.59)% | (0.59)% | (0.51)% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $25,580 | $17,662 | $13,759 | $15,829 | $13,825 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 48.93% | 59.07% | 44.78% | 40.49% | 32.23%e |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
eExcludes the value of portfolio securities delivered as a result of a redemption in-kind.
The accompanying notes are an integral part of these financial statements.
Annual Report
FSC-9
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Franklin Small-Mid Cap Growth VIP Fund
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks 97.4% |
|
|
|
|
| Aerospace & Defense 1.6% |
|
|
|
|
| aKratos Defense & Security Solutions, Inc... . . . . . . . . . . . . . . . . . . | United States | 66,100 |
| $1,813,123 |
| aMercury Systems, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 56,900 |
| 5,010,614 |
| aTransDigm Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,900 |
| 3,032,365 |
|
|
|
|
| 9,856,102 |
| Airlines 0.4% |
|
|
|
|
| Southwest Airlines Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 55,000 |
| 2,563,550 |
| Banks 0.5% |
|
|
|
|
| TCF Financial Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 77,000 |
| 2,850,540 |
| Biotechnology 3.9% |
|
|
|
|
| aCertara, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,300 |
| 246,156 |
| aDeciphera Pharmaceuticals, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 50,400 |
| 2,876,328 |
| aGlobal Blood Therapeutics, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 71,700 |
| 3,105,327 |
| aHeron Therapeutics, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 153,400 |
| 3,246,711 |
| aIovance Biotherapeutics, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 118,400 |
| 5,493,760 |
| aPTC Therapeutics, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 52,000 |
| 3,173,560 |
| aRocket Pharmaceuticals, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,000 |
| 1,371,000 |
| aSeagen, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 20,700 |
| 3,625,398 |
|
|
|
|
| 23,138,240 |
| Capital Markets 4.2% |
|
|
|
|
| Ares Management Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 97,500 |
| 4,587,375 |
| MarketAxess Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,200 |
| 6,960,832 |
| MSCI, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 18,500 |
| 8,260,805 |
| Tradeweb Markets, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 87,700 |
| 5,476,865 |
|
|
|
|
| 25,285,877 |
| Chemicals 0.3% |
|
|
|
|
| aIngevity Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 26,741 |
| 2,025,096 |
| Commercial Services & Supplies 1.1% |
|
|
|
|
| Republic Services, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 66,100 |
| 6,365,430 |
| Construction Materials 0.6% |
|
|
|
|
| Martin Marietta Materials, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,000 |
| 3,691,610 |
| Containers & Packaging 1.1% |
|
|
|
|
| Ball Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 71,700 |
| 6,681,006 |
| Electronic Equipment, Instruments & Components 2.5% |
|
|
|
|
| Amphenol Corp., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 52,700 |
| 6,891,579 |
| aKeysight Technologies, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 59,550 |
| 7,865,959 |
|
|
|
|
| 14,757,538 |
| Entertainment 3.2% |
|
|
|
|
| aRoku, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 29,856 |
| 9,912,789 |
| aSpotify Technology SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 11,100 |
| 3,492,726 |
| aZynga, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 572,500 |
| 5,650,575 |
|
|
|
|
| 19,056,090 |
| Equity Real Estate Investment Trusts (REITs) 1.9% |
|
|
|
|
| SBA Communications Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 32,257 |
| 9,100,667 |
| Terreno Realty Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 41,150 |
| 2,407,687 |
|
|
|
|
| 11,508,354 |
| Food & Staples Retailing 0.4% |
|
|
|
|
| aGrocery Outlet Holding Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 61,700 |
| 2,421,725 |
FSC-10
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Food Products 0.1% |
|
|
|
|
| a,bBeyond Meat, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,700 |
| $587,500 |
| Health Care Equipment & Supplies 6.5% |
|
|
|
|
| aAlign Technology, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,400 |
| 1,816,892 |
| aDexCom, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,488 |
| 2,768,463 |
| aIDEXX Laboratories, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 24,150 |
| 12,071,860 |
| aInari Medical, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 31,400 |
| 2,740,906 |
| aInsulet Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 18,500 |
| 4,729,155 |
| aiRhythm Technologies, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,050 |
| 3,095,591 |
| a,bPenumbra, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 24,900 |
| 4,357,500 |
| Teleflex, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 18,150 |
| 7,469,996 |
|
|
|
|
| 39,050,363 |
| Health Care Providers & Services 2.3% |
|
|
|
|
| aGuardant Health, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 56,900 |
| 7,333,272 |
| aHealthEquity, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 57,000 |
| 3,973,470 |
| aOak Street Health, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 43,400 |
| 2,654,344 |
|
|
|
|
| 13,961,086 |
| Health Care Technology 2.3% |
|
|
|
|
| a,bAmerican Well Corp., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 61,800 |
| 1,565,394 |
| aTeladoc Health, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 18,766 |
| 3,752,449 |
| aVeeva Systems, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 31,500 |
| 8,575,875 |
|
|
|
|
| 13,893,718 |
| Hotels, Restaurants & Leisure 4.0% |
|
|
|
|
| aChipotle Mexican Grill, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,330 |
| 6,004,454 |
| aDraftKings, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 134,733 |
| 6,273,169 |
| Vail Resorts, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 20,300 |
| 5,662,888 |
| Wingstop, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 29,700 |
| 3,936,735 |
| Wynn Resorts Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 18,300 |
| 2,064,789 |
|
|
|
|
| 23,942,035 |
| Household Durables 0.9% |
|
|
|
|
| aNVR, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,282 |
| 5,230,381 |
| Household Products 0.8% |
|
|
|
|
| Church & Dwight Co., Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 58,300 |
| 5,085,509 |
| Interactive Media & Services 2.1% |
|
|
|
|
| aMatch Group, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 47,124 |
| 7,124,678 |
| aPinterest, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 86,100 |
| 5,673,990 |
|
|
|
|
| 12,798,668 |
| Internet & Direct Marketing Retail 1.5% |
|
|
|
|
| a,bContextLogic, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 29,000 |
| 528,960 |
| Expedia Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 35,700 |
| 4,726,680 |
| a,c,dMarqeta, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 129,178 |
| 1,208,923 |
| aWayfair, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 11,700 |
| 2,641,977 |
|
|
|
|
| 9,106,540 |
| IT Services 11.5% |
|
|
|
|
| a,bBigCommerce Holdings, Inc., 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 32,700 |
| 2,097,705 |
| aBlack Knight, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 104,000 |
| 9,188,400 |
| Booz Allen Hamilton Holding Corp.. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 48,400 |
| 4,219,512 |
| aEPAM Systems, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 9,900 |
| 3,547,665 |
| aGoDaddy, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 68,917 |
| 5,716,665 |
| Jack Henry & Associates, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 43,250 |
| 7,006,067 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSC-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| IT Services (continued) |
|
|
|
|
| aMongoDB, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,900 |
| $4,990,656 |
| a,eNuvei Corp., 144A, Reg S.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 20,900 |
| 1,258,807 |
| aOkta, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 37,500 |
| 9,534,750 |
| aShift4 Payments, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 44,300 |
| 3,340,220 |
| aTwilio, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 41,075 |
| 13,903,888 |
| aWix.com Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Israel | 16,800 |
| 4,199,328 |
|
|
|
|
| 69,003,663 |
�� | Life Sciences Tools & Services 3.3% |
|
|
|
|
| a10X Genomics, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 30,700 |
| 4,347,120 |
| Bio-Techne Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 19,625 |
| 6,231,919 |
| aMaravai LifeSciences Holdings, Inc., A. . . . . . . . . . . . . . . . . . . . . . | United States | 58,800 |
| 1,649,340 |
| aMettler-Toledo International, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,480 |
| 7,385,126 |
|
|
|
|
| 19,613,505 |
| Machinery 2.2% |
|
|
|
|
| Fortive Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 66,900 |
| 4,737,858 |
| IDEX Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 24,550 |
| 4,890,360 |
| Stanley Black & Decker, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 20,846 |
| 3,722,262 |
|
|
|
|
| 13,350,480 |
| Personal Products 0.5% |
|
|
|
|
| aBellRing Brands, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 125,800 |
| 3,058,198 |
| Pharmaceuticals 1.9% |
|
|
|
|
| a,bGW Pharmaceuticals plc, ADR. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 26,500 |
| 3,058,365 |
| aHorizon Therapeutics plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 70,000 |
| 5,120,500 |
| aReata Pharmaceuticals, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,100 |
| 3,102,862 |
|
|
|
|
| 11,281,727 |
| Professional Services 5.0% |
|
|
|
|
| aCoStar Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,735 |
| 12,694,986 |
| TransUnion.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 58,300 |
| 5,784,526 |
| Verisk Analytics, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 54,661 |
| 11,347,077 |
|
|
|
|
| 29,826,589 |
| Road & Rail 1.5% |
|
|
|
|
| Kansas City Southern.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 23,200 |
| 4,735,816 |
| Old Dominion Freight Line, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 21,850 |
| 4,264,683 |
|
|
|
|
| 9,000,499 |
| Semiconductors & Semiconductor Equipment 6.6% |
|
|
|
|
| aAllegro MicroSystems, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 83,900 |
| 2,236,774 |
| Entegris, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,000 |
| 2,402,500 |
| KLA Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 27,637 |
| 7,155,496 |
| aLattice Semiconductor Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 155,755 |
| 7,136,694 |
| Microchip Technology, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 35,427 |
| 4,892,823 |
| Monolithic Power Systems, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,350 |
| 4,889,170 |
| aSemtech Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 56,700 |
| 4,087,503 |
| aSiTime Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 60,000 |
| 6,715,800 |
|
|
|
|
| 39,516,760 |
| Software 17.2% |
|
|
|
|
| aAlteryx, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 49,400 |
| 6,016,426 |
| aANSYS, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 25,800 |
| 9,386,040 |
| aAvalara, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 43,600 |
| 7,189,204 |
| aBill.com Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 53,548 |
| 7,309,302 |
| a,bC3.ai, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,500 |
| 763,125 |
FSC-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Software (continued) |
|
|
|
|
| aCloudflare, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 75,500 |
| $5,737,245 |
| aCoupa Software, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,500 |
| 3,558,555 |
| aDocuSign, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 52,700 |
| 11,715,210 |
| a,bDuck Creek Technologies, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 35,670 |
| 1,544,511 |
| aHubSpot, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 14,600 |
| 5,788,024 |
| aLightspeed POS, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 80,500 |
| 5,666,395 |
| aPaylocity Holding Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 44,950 |
| 9,255,654 |
| aQ2 Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 40,496 |
| 5,123,959 |
| aSynopsys, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 57,750 |
| 14,971,110 |
| aZendesk, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 65,600 |
| 9,388,672 |
|
|
|
|
| 103,413,432 |
| Specialty Retail 3.6% |
|
|
|
|
| aBurlington Stores, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 30,200 |
| 7,898,810 |
| aFive Below, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 37,050 |
| 6,483,009 |
| Tractor Supply Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 27,737 |
| 3,899,267 |
| aUlta Beauty, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 12,500 |
| 3,589,500 |
|
|
|
|
| 21,870,586 |
| Textiles, Apparel & Luxury Goods 1.1% |
|
|
|
|
| Levi Strauss & Co., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 175,000 |
| 3,514,000 |
| VF Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 39,200 |
| 3,348,072 |
|
|
|
|
| 6,862,072 |
| Trading Companies & Distributors 0.8% |
|
|
|
|
| Fastenal Co... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 92,200 |
| 4,502,126 |
| . . . . .Total Common Stocks (Cost $329,601,910).. . . . . . | . . . . . . . . . . . . . . . . . | . . . . . . . . . |
| 585,156,595 |
| Preferred Stocks 0.6% |
|
|
|
|
|
|
|
|
| |
| Internet & Direct Marketing Retail 0.3% |
|
|
|
|
| a,c,dFanatics, Inc., E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 92,539 |
| 1,657,023 |
| Software 0.1% |
|
|
|
|
| a,c,dAlkami Technology, Inc., F.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 48,025 |
| 768,400 |
| Textiles, Apparel & Luxury Goods 0.2% |
|
|
|
|
| a,c,dAllbirds, Inc., E.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 92,392 |
| 1,068,276 |
| . . . . .Total Preferred Stocks (Cost $3,436,676).. . . . . . . . | . . . . . . . . . . . . . . . . . | . . . . . . . . . |
| 3,493,699 |
| Total Long Term Investments (Cost $333,038,586) |
|
|
|
|
| . . . . . . . . . . . . . . . . . | . . . . . . . . . |
| 588,650,294 | |
| Short Term Investments 3.5% |
|
|
|
|
|
|
|
|
|
a | a | Country | Shares | a |
| a |
|
|
|
Value
Money Market Funds 2.1%
f,gInstitutional Fiduciary Trust - Money Market Portfolio, 0%. . . . . . . . | United States | 12,671,175 | 12,671,175 |
.. . . . . . . .Total Money Market Funds (Cost $12,671,175) | . . . . . . . . . . . . . . . | . . . . . . . . . . . | 12,671,175 |
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Annual Report
FSC-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
Short Term Investments (continued)
a | a |
Country | Shares | a | Value |
a | a | a | a | a | a |
| hInvestments from Cash Collateral Received for |
|
|
|
|
| Loaned Securities 1.4% |
|
|
|
|
| Money Market Funds 1.4% |
|
|
|
|
| f,gInstitutional Fiduciary Trust - Money Market Portfolio, 0%. . . . . . . . | United States | 8,418,420 |
| $8,418,420 |
Total Investments from Cash Collateral Received for Loaned Securities
(Cost $8,418,420).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Short Term Investments (Cost $21,089,595). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Investments (Cost $354,128,181) 101.5%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities (1.5)%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,418,420
21,089,595
$609,739,889 (9,087,689)
$600,652,200
See Abbreviations on page FSC-27
aNon-income producing.
bA portion or all of the security is on loan at December 31, 2020. See Note 1(c).
cFair valued using significant unobservable inputs. See Note 10 regarding fair value measurements.
dSee Note 7 regarding restricted securities.
eSecurity was purchased pursuant to Rule 144A or Regulation S under the Securities Act of 1933. 144A securities may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. Regulation S securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At December 31, 2020, the value of this security was $1,258,807, representing 0.2% of net assets.
fSee Note 3(e) regarding investments in affiliated management investment companies.
gThe rate shown is the annualized seven-day effective yield at period end.
hSee Note 1(c) regarding securities on loan.
FSC-14
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Franklin Small- |
| Mid Cap Growth |
| VIP Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $333,038,586 |
Cost - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 21,089,595 |
Value - Unaffiliated issuers (Includes securities loaned of $8,062,670). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $588,650,294 |
Value - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 21,089,595 |
Receivables: |
|
Investment securities sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 82,892 |
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 179,091 |
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 81,071 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 54 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 610,082,997 |
Liabilities: |
|
Payables: |
|
Investment securities purchased.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 106,263 |
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 262,074 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 392,338 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 113,228 |
Payable upon return of securities loaned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8,418,420 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 138,474 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,430,797 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $600,652,200 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $275,921,954 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 324,730,246 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $600,652,200 |
| Franklin Small- |
| Mid Cap Growth |
| VIP Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $72,039,364 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 2,669,127 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $26.99 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $503,032,360 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 21,764,448 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $23.11 |
Class 4: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $25,580,476 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 1,054,488 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $24.26 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSC-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the year ended December 31, 2020
| Franklin Small- |
| Mid Cap Growth |
| VIP Fund |
Investment income: |
|
Dividends: (net of foreign taxes of $4,065) |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,955,300 |
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 32,723 |
Interest: |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 32,720 |
Income from securities loaned: |
|
Unaffiliated entities (net of fees and rebates).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 256,355 |
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 11,432 |
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,288,530 |
Expenses: |
|
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,770,389 |
Distribution fees: (Note 3c) |
|
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,010,373 |
Class 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 68,089 |
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,519 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 134,771 |
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 78,392 |
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,614 |
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 24,479 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Total expenses | 5,092,626 |
Expense reductions (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (17) |
Expenses waived/paid by affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (32,556) |
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,060,053 |
Net investment income (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2,771,523) |
Realized and unrealized gains (losses): |
|
Net realized gain (loss) from: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 72,213,845 |
Foreign currency transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (6,798) |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 72,207,047 |
Net change in unrealized appreciation (depreciation) on: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 144,395,647 |
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 216,602,694 |
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $213,831,171 |
FSC-16
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin Small-Mid Cap Growth VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $(2,771,523) | $(1,784,697) |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 72,207,047 | 63,675,302 |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | 144,395,647 | 48,782,330 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | 213,831,171 | 110,672,935 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (5,568,768) | (5,113,428) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (53,710,860) | (51,808,967) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2,461,041) | (2,209,122) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (61,740,669) | (59,131,517) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 11,218,927 | 4,136,766 |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,617,481 | 18,159,781 |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,452,781 | 1,857,466 |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 15,289,189 | 24,154,013 |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | 167,379,691 | 75,695,431 |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 433,272,509 | 357,577,078 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $600,652,200 | $433,272,509 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSC-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Notes to Financial Statements
Franklin Small-Mid Cap Growth VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Small-Mid Cap Growth VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At December 31, 2020, 40.9% of the Fund's shares were held through one insurance company. Investment activities of these insurance company separate accounts could
have a material impact on the Fund. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust's Board
of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively.
Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter
(OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Investments in open-end mutual funds are valued at the closing NAV.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Events can occur between the time at which trading in a foreign security
is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund's portfolio securities as determined at the foreign market close and the latest indications of value at
4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund's securities to the latest indications of fair value at 4 p.m. Eastern time. At December 31, 2020, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy. See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result in differences between the value of the Fund's portfolio
FSC-18
Annual Report
Franklin Small-Mid Cap Growth VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
a. Financial Instrument Valuation (continued)
securities on the last business day and the last calendar day of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
c. Securities Lending
The Fund participates in an agency based securities lending program to earn additional income. The Fund receives collateral in the form of cash and/or U.S. Government
and Agency securities against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. Any cash collateral received is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/ or third-party vendor, is reported separately in the Statement of Operations. The Fund bears the market risk with respect to any cash collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.
d. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
Annual Report
FSC-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
d. Income and Deferred Taxes (continued)
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
e. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the
relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
f. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
g. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
FSC-20
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
| Year Ended | Year Ended | ||
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 706,229 | $16,500,714 | 318,754 | $6,251,939 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 289,889 | 5,568,768 | 273,885 | 5,113,428 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (514,114) | (10,850,555) | (372,027) | (7,228,601) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 482,004 | $11,218,927 | 220,612 | $4,136,766 |
Class 2 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,526,425 | $47,366,200 | 1,911,894 | $33,367,659 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 3,261,133 | 53,710,860 | 3,162,941 | 51,808,967 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (5,564,626) | (98,459,579) | (3,921,307) | (67,016,845) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 222,932 | $2,617,481 | 1,153,528 | $18,159,781 |
Class 4 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 319,307 | $6,396,773 | 191,080 | $3,405,783 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 142,257 | 2,461,041 | 129,188 | 2,209,122 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (385,938) | (7,405,033) | (211,768) | (3,757,439) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 75,626 | $1,452,781 | 108,500 | $1,857,466 |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Advisers, Inc. (Advisers) | Investment manager |
|
|
Franklin Templeton Services, LLC. (FT Services) | Administrative manager |
|
|
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
|
|
Annual Report
FSC-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
3. Transactions with Affiliates (continued)
a. Management Fees
The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
0.800% | Up to and including $500 million |
0.700% | Over $500 million, up to and including $1 billion |
|
|
0.650% | Over $1 billion, up to and including $1.5 billion |
0.600% | Over $1.5 billion, up to and including $6.5 billion |
|
|
0.575% | Over $6.5 billion, up to and including $11.5 billion |
0.550% | Over $11.5 billion, up to and including $16.5 billion |
|
|
0.540% | Over $16.5 billion, up to and including $19 billion |
0.530% | Over $19 billion, up to and including $21.5 billion |
0.520% | In excess of $21.5 billion |
|
|
For the year ended December 31, 2020, the gross effective investment management fee rate was 0.796% of the Fund’s average daily net assets.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
FSC-22
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
3. Transactions with Affiliates (continued)
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
|
|
|
|
| Net Change in |
| Number of |
|
| Value at |
|
|
| Unrealized | Value | Shares Held |
|
| Beginning |
|
| Realized Gain | Appreciation | at End | at End | Investment |
| of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Franklin Small-Mid Cap Growth VIP Fund |
|
|
|
|
|
|
| |
Non-Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividends |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
|
Market Portfolio, 0%.. . . . . . . . . | $10,406,987 | $138,868,272 | $(136,604,084) | $— | $— | $12,671,175 | 12,671,175 | $32,723 |
Non-Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income from |
|
|
|
|
|
|
|
| securities |
|
|
|
|
|
|
|
| loaned |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
|
Market Portfolio, 0%.. . . . . . . . . | $4,879,541 | $71,410,508 | $(67,871,629) | $— | $— | $8,418,420 | 8,418,420 | $11,432 |
Total Affiliated Securities. . . . . | $15,286,528 | $210,278,780 | $(204,475,713) | $— | $— | $21,089,595 |
| $44,155 |
f. Interfund Transactions
The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended December 31, 2020, these purchase and sale transactions aggregated $380,765 and $0, respectively.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows:
| 2020 | 2019 |
Distributions paid from: |
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $4,542,643 | — |
Long term capital gain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 57,198,026 | $59,131,517 |
| $61,740,669 | $59,131,517 |
Annual Report
FSC-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
5. Income Taxes (continued)
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed long term capital gains.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total distributable earnings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$354,230,433
$258,929,286 (3,419,830)
$255,509,456
$5,519,604 $63,701,185
$69,220,789
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of wash sales.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $226,449,811 and $277,517,497, respectively.
At December 31, 2020, in connection with securities lending transactions, the Fund loaned equity investments and received $8,418,420 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.
7. Restricted Securities
The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act). Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.
At December 31, 2020, investments in restricted securities, excluding securities exempt from registration under the 1933 Act, were as follows:
|
| Acquisition |
|
|
Shares | Issuer | Date | Cost | Value |
Franklin Small-Mid Cap Growth VIP Fund |
|
|
| |
48,025 | Alkami Technology, Inc., F .. . . . . . . . . . . . . . . . . . . . . | 9/24/20 | $768,400 | $768,400 |
92,392 | Allbirds, Inc., E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9/22/20 | 1,068,276 | 1,068,276 |
92,539 | Fanatics, Inc., E .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8/13/20 | 1,600,000 | 1,657,023 |
129,178 | Marqeta, Inc. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8/20/20 | 1,077,009 | 1,208,923 |
| . . . .Total Restricted Securities (Value is 0.78% of Net Assets) | . . . . . . . . . | $4,513,685 | $4,702,622 |
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
8. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
9. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers, renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
10. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
A summary of inputs used as of December 31, 2020, in valuing the Fund's assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total |
Franklin Small-Mid Cap Growth VIP Fund |
|
|
|
|
Assets: |
|
|
|
|
Investments in Securities: |
|
|
|
|
Common Stocks: |
|
|
|
|
Aerospace & Defense .. . . . . . . . . . . . . . . . . . . | $9,856,102 | $— | $— | $9,856,102 |
Airlines .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,563,550 | — | — | 2,563,550 |
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,850,540 | — | — | 2,850,540 |
Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . | 23,138,240 | — | — | 23,138,240 |
Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . | 25,285,877 | — | — | 25,285,877 |
Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,025,096 | — | — | 2,025,096 |
Commercial Services & Supplies . . . . . . . . . . . | 6,365,430 | — | — | 6,365,430 |
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FSC-25
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
10. Fair Value Measurements (continued)
|
| Level 1 | Level 2 | Level 3 | Total |
Franklin Small-Mid Cap Growth VIP Fund (continued) |
|
|
|
| |
Assets: (continued) |
|
|
|
| |
Investments in Securities: |
|
|
|
| |
Common Stocks: |
|
|
|
| |
Construction Materials . . . . . . . . . . . . . . . . . . . | $3,691,610 | $— | $— | $3,691,610 | |
Containers & Packaging .. . . . . . . . . . . . . . . . . | 6,681,006 | — | — | 6,681,006 | |
Electronic Equipment, Instruments & |
|
|
|
| |
Components .. . . . . . . . . . . . . . . . . . . . . . . . | 14,757,538 | — | — | 14,757,538 | |
Entertainment .. . . . . . . . . . . . . . . . . . . . . . . . . | 19,056,090 | — | — | 19,056,090 | |
Equity Real Estate Investment Trusts (REITs) .. | 11,508,354 | — | — | 11,508,354 | |
Food & Staples Retailing . . . . . . . . . . . . . . . . . | 2,421,725 | — | — | 2,421,725 | |
Food Products . . . . . . . . . . . . . . . . . . . . . . . . . | 587,500 | — | — | 587,500 | |
Health Care Equipment & Supplies .. . . . . . . . . | 39,050,363 | — | — | 39,050,363 | |
Health Care Providers & Services .. . . . . . . . . . | 13,961,086 | — | — | 13,961,086 | |
Health Care Technology .. . . . . . . . . . . . . . . . . | 13,893,718 | — | — | 13,893,718 | |
Hotels, Restaurants & Leisure . . . . . . . . . . . . . | 23,942,035 | — | — | 23,942,035 | |
Household Durables .. . . . . . . . . . . . . . . . . . . . | 5,230,381 | — | — | 5,230,381 | |
Household Products .. . . . . . . . . . . . . . . . . . . . | 5,085,509 | — | — | 5,085,509 | |
Interactive Media & Services .. . . . . . . . . . . . . . | 12,798,668 | — | — | 12,798,668 | |
Internet & Direct Marketing Retail .. . . . . . . . . . | 7,897,617 | — | 1,208,923 | 9,106,540 | |
IT Services .. . . . . . . . . . . . . . . . . . . . . . . . . . . | 69,003,663 | — | — | 69,003,663 | |
Life Sciences Tools & Services .. . . . . . . . . . . . | 19,613,505 | — | — | 19,613,505 | |
Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 13,350,480 | — | — | 13,350,480 | |
Personal Products . . . . . . . . . . . . . . . . . . . . . . | 3,058,198 | — | — | 3,058,198 | |
Pharmaceuticals .. . . . . . . . . . . . . . . . . . . . . . . | 11,281,727 | — | — | 11,281,727 | |
Professional Services .. . . . . . . . . . . . . . . . . . . | 29,826,589 | — | — | 29,826,589 | |
Road & Rail . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,000,499 | — | — | 9,000,499 | |
Semiconductors & Semiconductor Equipment .. | 39,516,760 | — | — | 39,516,760 | |
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 103,413,432 | — | — | 103,413,432 | |
Specialty Retail . . . . . . . . . . . . . . . . . . . . . . . . | 21,870,586 | — | — | 21,870,586 | |
Textiles, Apparel & Luxury Goods .. . . . . . . . . . | 6,862,072 | — | — | 6,862,072 | |
Trading Companies & Distributors .. . . . . . . . . . | 4,502,126 | — | — | 4,502,126 | |
Preferred Stocks .. . . . . . . . . . . . . . . . . . . . . . . . | — | — | 3,493,699 | 3,493,699 | |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | 21,089,595 | — | — | 21,089,595 | |
Total Investments in Securities.. . . . . . . . . . . |
| $605,037,267 | $— | $4,702,622 | $609,739,889 |
A reconciliation in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 assets and/or liabilities at the beginning and/or end of the year.
11. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020- 04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
12. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin Small-Mid Cap Growth VIP Fund (continued)
Abbreviations
Selected Portfolio
ADR | American Depositary Receipt |
Annual Report
FSC-27
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Franklin Small-Mid Cap Growth VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Franklin Small-Mid Cap Growth VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
FSC-28
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Franklin Small-Mid Cap Growth VIP Fund
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $57,198,026 as a long term capital gain dividend for the fiscal year ended December 31, 2020.
Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 41.38% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2020.
Annual Report
FSC-29
Franklin Strategic Income VIP Fund
This annual report for Franklin Strategic Income VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares* represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | 3.75% |
5-Year | 4.58% |
10-Year | 4.01% |
*The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/21. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Annual Report
FSI-1
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the Bloomberg Barclays U.S. Aggregate Bond Index and the Lipper Multi-Sector Income Funds Classification Average. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to
Performance Information preceding the Fund Summaries.
$16,000 |
|
|
|
| $15,976 |
$15,000 |
|
|
|
| $14,818 |
$14,000 |
|
|
|
| $14,576 |
|
|
|
|
| |
$13,000 |
|
|
|
|
|
$12,000 |
|
|
|
|
|
$11,000 |
|
|
|
|
|
$10,000 |
|
|
|
|
|
$9,000 |
|
|
|
|
|
1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
| Franklin Strategic Income | Lipper Multi-Sector Income |
| ||
| VIP Fund |
| Funds Classification Average*** |
|
Bloomberg Barclays U.S. Aggregate
Bond Index**
**Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
***Source: Lipper, a Thomson Reuters Company. Please see Index Descriptions following the Fund Summaries.
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Annual Report
Franklin Strategic Income VIP Fund
Fund Goal and Main Investments
The Fund seeks a high level of current income, with capital appreciation over the long term as a secondary goal. Under normal market conditions, the Fund invests primarily to predominantly in U.S. and foreign debt securities, including those in emerging markets.
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. High yields reflect the higher credit risks associated with certain lower rated securities held in the portfolio. Floating rate loans and high yield corporate bonds are rated below investment grade and are subject to greater risk of default, which could result in loss of principal—a risk that may be heightened in a slowing economy. The risks of foreign securities include currency fluctuations and political uncertainty. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. Investing in derivative securities and the use of foreign currency techniques involve special risks as such may not achieve the anticipated benefits and/or may result in losses to the Fund. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. For comparison, the Fund’s benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, posted a +7.51% total return for the period under
review.1 The Fund’s peers, as measured by the Lipper Multi-Sector Income Funds Classification Average, posted a +5.64% return.2
Portfolio Composition 12/31/20
| % of Total |
| Net Assets |
Corporate Bonds | 49.5% |
Foreign Government and Agency Securities | 14.1% |
Residential Mortgage-Backed Securities | 9.2% |
Asset-Backed Securities | 7.4% |
Senior Floating Rate Interests | 4.7% |
Mortgage-Backed Securities | 4.4% |
U.S. Government and Agency Securities | 2.8% |
Management Investment Companies | 2.0% |
Municipal Bonds | 1.9% |
Other | 1.0% |
Short-Term Investments & Other Net Assets | 3.0% |
Economic and Market Overview
The U.S. bond market, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, advanced during the 12 months ended December 31, 2020. The period was defined by the economic and social disruption that began in the wake of the novel coronavirus (COVID-19) pandemic, which caused significant volatility in U.S. bond markets. In late February, the U.S. bond market began to anticipate the adverse economic impact of business shutdowns and social distancing measures. Higher-quality, longer-term bonds rallied, with the 10-year U.S. Treasury yield (which moves inversely to price) falling in February and March, while riskier, lower-rated corporate bonds declined sharply. U.S. Federal Reserve (Fed) action led to a recovery in the corporate bond market beginning in late March, which accelerated in subsequent months as many businesses reopened. Corporate bonds, particularly high-yield bonds, also benefited from the resolution of the U.S. election and several promising vaccine results late in the reporting period.
The Fed enacted two emergency rate cuts in March 2020, lowering the federal funds target rate to a range of 0.00%– 0.25%. In addition, the Fed announced unlimited, open- ended purchasing of government-backed and corporate bonds as necessary to help keep markets functioning.
1.Source: Morningstar.
2.Source: Lipper, a Thomson Reuters Company.
One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
Annual Report
FSI-3
FRANKLIN STRATEGIC INCOME VIP FUND
Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded the Fed’s 2% target for some time.
U.S. Treasury bonds, as measured by the Bloomberg Barclays U.S. Treasury Index, posted positive total returns during the period. The 10-year U.S. Treasury yield declined significantly during the reporting period, reaching a new record closing low in early August 2020. Bond purchasing by the Fed and robust demand for investments perceived as safe drove the U.S. Treasury market. Mortgage-backed securities (MBS), as measured by the Bloomberg Barclays MBS Index, posted positive total returns for the period amid Fed support, though lower interest rates accelerated prepayments from mortgage refinancing, restricting further gains.
U.S. corporate bond performance varied somewhat based on credit rating, as many investors became concerned about the potential credit downgrades of some companies. Total returns for investment-grade corporate bonds, as represented by the Bloomberg Barclays U.S. Corporate Bond Index, exceeded total returns for high-yield corporate bonds, as represented by the Bloomberg Barclays U.S. Corporate High Yield Bond Index.
Investment Strategy
We allocate our investments among the various types of debt available based on our assessment of changing economic, global market, industry and issuer conditions. We use a top-down analysis of macroeconomic trends, combined with a bottom-up fundamental analysis of market sectors, industries and issuers, seeking to take advantage of varying sector reactions to economic events. For example, we may evaluate business cycles, yield curves, country risk, and the relative interest rates among currencies, and values between and within markets. In selecting debt securities, we generally conduct our own analysis of the security’s intrinsic value rather than simply relying on the coupon rate or rating. We may also enter into various transactions involving certain currency-, interest rate- or credit-related derivative instruments.
Manager’s Discussion
The Fund allocated assets across the broad fixed income markets seeking the best relative value opportunities for income and capital appreciation. At period end, our largest allocations were in high-yield corporate credit, investment- grade corporate bonds, non-local currency emerging market bonds and non-agency residential mortgage-backed securities (RMBS), with smaller exposures to senior secured
floating-rate loans and agency mortgage-backed securities. We increased allocation to high-yield corporate bonds over the reporting period. Even with nominal yields near historic lows, we believe that high-yield investors are more than compensated for expected default losses. We also see potential for additional spread tightening over the course of the next year and believe, in our view, that the relative yield pickup, along with the lower duration exposure and a potential rise in rates, will make U.S. high-yield an attractive asset class in the continued low global rate environment going forward. After the significant market volatility in March 2020, we had been seeing opportunities in higher-quality sectors and added to investment-grade corporate credit, while we pared exposure to collateralized loan obligations (CLOs) and senior secured floating-rate loans. We remain generally positive on investment-grade corporate bonds, although we believe the opportunity has become less compelling given tighter valuations and continued near-term macro and policy uncertainty, particularly as new COVID-19 cases surge.
We maintain a constructive view on sovereign emerging market securities as technical support for the asset class remains strong, which is likely to offset the negative impact of worsened fundamentals. We believe spread levels should continue to attract inflows in an environment of low-to- negative yields, loose global liquidity and where investors remain structurally underweight emerging markets.
We remained allocated to the RMBS sector, with exposure primarily in the seasoned credit risk transfer securities (CRTs). Allocation to the sector decreased over the period due to paydowns in CRT. We expect continued fundamental strength of the U.S. housing sector, bolstered by favorable supply and demand forces with historically low interest-rates that should remain supportive for the sector.
Our foreign-currency exposure was held through a basket of shorts with major positions in the Canadian and Australian dollar versus a basket of longs with major positions in the Japanese yen, Indonesian rupiah, Uruguayan, Mexican, Colombian and Dominican Republic peso. Over the period, we closed out our long Norwegian krona positions. We moved from a short euro to slight long position, reduced our short Canadian and Australian dollar positions and decreased our long Japanese yen position.
The Fund’s investment-grade corporate credit allocation was the most significant contributor to returns. Additionally, allocations to high-yield corporate credit and CLOs also benefited performance. Marketplace loans and non-dollar emerging markets securities boosted performance as well. In contrast, the Fund’s allocation to senior secured floating-rate
FSI-4
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FRANKLIN STRATEGIC INCOME VIP FUND
loans, taxable municipal bonds, Treasury Inflation-Protected Securities and RMBS detracted from performance. Foreign currency exposure negatively contributed to returns. Gains mainly from our long Japanese Yen, Mexican peso and short New Zealand dollar were more than offset by negative returns from long Norwegian krona and short Australian dollar positions.
The Fund utilized derivatives, including credit default swaps, currency forwards and government bond futures, primarily as a tool for efficient portfolio management and to manage overall portfolio risk. These derivative transactions may provide the same, or similar, net long or short exposure to select currencies, interest rates, countries, duration or credit risks compared to holding securities.
Thank you for your participation in Franklin Strategic Income VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FSI-5
FRANKLIN STRATEGIC INCOME VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
|
|
| Actual |
| Hypothetical |
|
| ||
|
|
| (actual return after expenses) |
| (5% annual return before expenses) |
|
| ||
|
|
|
| Fund-Level |
|
| Fund-Level |
|
|
|
|
|
| Expenses |
|
| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201,2 |
| Value 12/31/20 | 7/1/20–12/31/201,2 | a | Ratio2 |
1 | $1,000 |
| $1,067.46 | $4.05 | $1,021.22 | $3.96 |
| 0.78% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value
over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.
FSI-6
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Consolidated Financial Highlights
Franklin Strategic Income VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $10.93 | $10.65 | $11.15 | $11.01 | $10.55 |
Income from investment operationsa: | 0.36 | 0.45 | 0.47 | 0.45 | 0.48 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 0.01 | 0.43 | (0.65) | 0.04 | 0.37 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.37 | 0.88 | (0.18) | 0.49 | 0.85 |
Less distributions from: |
|
|
|
|
|
Net investment income and net foreign currency gains.. . | (0.54) | (0.60) | (0.32) | (0.35) | (0.39) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $10.76 | $10.93 | $10.65 | $11.15 | $11.01 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.75% | 8.41% | (1.65)% | 4.46% | 8.25% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 0.75% | 0.71% | 0.67% | 0.68% | 0.67% |
Expenses net of waiver and payments by affiliatesd.. . . . . . | 0.73% | 0.68% | 0.63% | 0.63% | 0.60% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.46% | 4.09% | 4.28% | 4.00% | 4.42% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $261,409 | $285,437 | $302,610 | $361,465 | $396,170 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 114.19% | 114.89%e | 107.90%f | 108.73% | 128.51% |
Portfolio turnover rate excluding mortgage dollar rollsg.. . . . | 73.45% | 72.45%e | 40.38%f | 48.11% | 77.93% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Prod- ucts Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
eExcludes the value of portfolio activity as a result of in-kind transactions. 9
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind. gSee Note 1(h) regarding mortgage dollar rolls.
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-7
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
CONSOLIDATED FINANCIAL HIGHLIGHTS
Franklin Strategic Income VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $10.55 | $10.28 | $10.76 | $10.64 | $10.21 |
Income from investment operationsa: | 0.33 | 0.40 | 0.42 | 0.40 | 0.43 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | —c | 0.42 | (0.61) | 0.04 | 0.36 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.33 | 0.82 | (0.19) | 0.44 | 0.79 |
Less distributions from: |
|
|
|
|
|
Net investment income and net foreign currency gains.. . | (0.52) | (0.55) | (0.29) | (0.32) | (0.36) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $10.36 | $10.55 | $10.28 | $10.76 | $10.64 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.43% | 8.05% | (1.77)% | 4.17% | 7.94% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.01% | 0.96% | 0.92% | 0.93% | 0.92% |
Expenses net of waiver and payments by affiliatese.. . . . . . | 0.99% | 0.93% | 0.88% | 0.88% | 0.85% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.23% | 3.84% | 4.03% | 3.75% | 4.17% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $100,758 | $94,928 | $89,264 | $214,271 | $203,418 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 114.19% | 114.89%f | 107.90%g | 108.73% | 128.51% |
Portfolio turnover rate excluding mortgage dollar rollsh.. . . . | 73.45% | 72.45%f | 40.38%g | 48.11% | 77.93% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding. cAmount rounds to less than $0.01 per share.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Prod- ucts Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
fExcludes the value of portfolio activity as a result of in-kind transactions. 9
gExcludes the value of portfolio securities delivered as a result of a redemption in-kind. hSee Note 1(h) regarding mortgage dollar rolls.
FSI-8
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
CONSOLIDATED FINANCIAL HIGHLIGHTS
Franklin Strategic Income VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 4
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $10.83 | $10.56 | $11.04 | $10.90 | $10.44 |
Income from investment operationsa: | 0.32 | 0.41 | 0.43 | 0.40 | 0.43 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 0.01 | 0.42 | (0.64) | 0.04 | 0.38 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.33 | 0.83 | (0.21) | 0.44 | 0.81 |
Less distributions from: |
|
|
|
|
|
Net investment income and net foreign currency gains.. . | (0.50) | (0.56) | (0.27) | (0.30) | (0.35) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $10.66 | $10.83 | $10.56 | $11.04 | $10.90 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.34% | 7.93% | (1.88)% | 4.08% | 7.86% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.10% | 1.06% | 1.02% | 1.03% | 1.02% |
Expenses net of waiver and payments by affiliatesd.. . . . . . | 1.09% | 1.03% | 0.98% | 0.98% | 0.95% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.12% | 3.74% | 3.93% | 3.65% | 4.07% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $51,709 | $54,485 | $60,763 | $74,013 | $80,175 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 114.19% | 114.89%e | 107.90%f | 108.73% | 128.51% |
Portfolio turnover rate excluding mortgage dollar rollsg.. . . . | 73.45% | 72.45%e | 40.38%f | 48.11% | 77.93% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Prod- ucts Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
eExcludes the value of portfolio activity as a result of in-kind transactions. 9
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind. gSee Note 1(h) regarding mortgage dollar rolls.
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-9
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Consolidated Statement of Investments, December 31, 2020
Franklin Strategic Income VIP Fund
a a
Country Shares
a
Value
a | a | a | a | a | a | ||
| Common Stocks 0.3% |
|
|
|
|
|
|
| Aerospace & Defense 0.0% |
|
|
|
|
|
|
| a,b,cRemington Outdoor Co., Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 74,576 |
|
| $— | |
| Energy Equipment & Services 0.0%† |
|
|
|
|
|
|
| bWeatherford International plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,794 |
|
| 82,764 | |
| Machinery 0.1% |
|
|
|
|
|
|
| bBirch Permian Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,478 |
|
| 35,824 | |
| bBirch Permian Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 34,907 |
|
| 274,893 | |
| UTEX Industries, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,441 |
|
| 166,537 | |
|
|
|
|
|
|
| 477,254 |
| Media 0.0%† |
|
|
|
|
|
|
| bClear Channel Outdoor Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . | United States | 20,804 |
|
| 34,327 | |
| biHeartMedia, Inc., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,384 |
|
| 108,824 | |
| a,biHeartMedia, Inc., B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 142 |
|
| 1,714 | |
|
|
|
|
|
|
| 144,865 |
| Multiline Retail 0.0% |
|
|
|
|
|
|
| a,b,cK2016470219 South Africa Ltd., A.. . . . . . . . . . . . . . . . . . . . . . . . . | South Africa | 14,792,309 |
|
| — | |
| a,b,cK2016470219 South Africa Ltd., B.. . . . . . . . . . . . . . . . . . . . . . . . . | South Africa | 1,472,041 |
|
| — | |
|
|
|
|
|
|
| — |
| Oil, Gas & Consumable Fuels 0.0%† |
|
|
|
|
|
|
| Amplify Energy Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 431 |
|
| 564 | |
| a,bRiviera Resources, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,620 |
|
| 1,710 | |
|
|
|
|
|
|
| 2,274 |
| Paper & Forest Products 0.1% |
|
|
|
|
|
|
| a,b,cAppvion Operations, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 18,684 |
|
| 322,094 | |
| Verso Corp., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,620 |
| 67,553 | ||
|
|
|
|
|
|
| 389,647 |
| Road & Rail 0.0%† |
|
|
|
|
|
|
| a,bOnsite Rental Group Operations Pty. Ltd.. . . . . . . . . . . . . . . . . . . . | Australia | 143,820 |
|
| 3,858 | |
| Specialty Retail 0.1% |
|
|
|
|
|
|
| bParty City Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 24,031 |
|
| 147,789 | |
| . . . . . . . . . . .Total Common Stocks (Cost $2,819,680).. . | . . . . . . . . . . . . . . . | . . . . . . . . | . . . |
| 1,248,451 | |
| Management Investment Companies 2.0% |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Capital Markets 2.0% |
|
|
|
|
|
|
| dFranklin Floating Rate Income Fund. . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,118,951 |
|
| 8,481,652 | |
| .. . . . . . . . . . . . . . . . .Total Management Investment Companies (Cost $11,072,145) | . . . |
| 8,481,652 | |||
|
|
|
| Warrants |
|
| |
|
|
|
|
|
| ||
| Warrants 0.0%† |
|
|
|
|
|
|
| Machinery 0.0%† |
|
|
|
|
|
|
| a,bUTEX Industries, Inc., 2/20/49. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 135 |
|
| 310 | |
| Oil, Gas & Consumable Fuels 0.0%† |
|
|
|
|
|
|
| a,bBattalion Oil Corp., A, 10/08/22.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 879 |
|
| 50 | |
| a,bBattalion Oil Corp., B, 10/08/22.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,098 |
|
| 33 | |
| a,bBattalion Oil Corp., C, 10/08/22.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,412 |
|
| 18 | |
|
|
|
|
|
|
| 101 |
FSI-10
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
a a
Country Warrants
a
Value
a | a | a | a | a | a |
| Warrants (continued) |
|
|
|
|
| Paper & Forest Products 0.0%† |
|
|
|
|
| bVerso Corp., 7/25/23.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 592 |
| $503 |
| .. . . . . . . . . . . . . . . . . . . . . . . . . . .Total Warrants (Cost $—) | . . . . . . . . . . . . . . . . . . . . | . . . . . . |
| 914 |
Principal
Amount*
Convertible Bonds 0.0%†
Wireless Telecommunication Services 0.0%† |
|
|
e,f,gDigicel Group 0.5 Ltd., Sub. Bond, 144A, PIK, 7%, Perpetual. . . . . | Bermuda | 26,248 |
Total Convertible Bonds (Cost $4,715).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,880
6,880
Corporate Bonds 49.5%
Aerospace & Defense 0.5%
gBombardier, Inc., Senior Note, 144A, 7.5%, 3/15/25. . . . . . . . . . . .
gTransDigm, Inc., Senior Secured Note, 144A, 6.25%, 3/15/26.. . . .
Air Freight & Logistics 0.5%
gDAE Funding LLC, Senior Note, 144A, 5%, 8/01/24. . . . . . . . . . . .
FedEx Corp., Senior Bond, 4.05%, 2/15/48.. . . . . . . . . . . . . . . . . .
United Parcel Service, Inc., Senior Bond, 5.3%, 4/01/50. . . . . . . . .
Airlines 0.6%
Delta Air Lines, Inc., Senior Note, 2.9%, 10/28/24. . . . . . . . . . . . . .
gDelta Air Lines, Inc. / SkyMiles IP Ltd., Senior Secured Note, 144A, 4.5%, 10/20/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Airlines Holdings, Inc., Senior Note, 5%, 2/01/24. . . . . . . . .
Auto Components 1.0%
gAllison Transmission, Inc.,
Senior Bond, 144A, 5.875%, 6/01/29 .. . . . . . . . . . . . . . . . . . . . .
Senior Bond, 144A, 3.75%, 1/30/31 . . . . . . . . . . . . . . . . . . . . . .
Dana, Inc., Senior Note, 5.625%, 6/15/28. . . . . . . . . . . . . . . . . . . .
Goodyear Tire & Rubber Co. (The), Senior Note, 4.875%, 3/15/27..
Banks 3.0%
gAkbank T.A.S.,
Senior Note, 144A, 5.125%, 3/31/25 .. . . . . . . . . . . . . . . . . . . . .
Senior Note, 144A, 6.8%, 2/06/26 .. . . . . . . . . . . . . . . . . . . . . . .
Banco Santander SA, Sub. Note, 2.749%, 12/03/30. . . . . . . . . . . .
Bank of America Corp., Senior Bond, 3.248%, 10/21/27. . . . . . . . .
gBNP Paribas SA, Senior Note, 144A, 2.219% to 6/09/25, FRN thereafter, 6/09/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
gChina Construction Bank Corp., Sub. Note, Reg S, 4.25% to 2/27/24, FRN thereafter, 2/27/29.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
fComerica, Inc., Junior Sub. Bond, 5.625% to 10/01/25, FRN thereafter, Perpetual. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HSBC Holdings plc,
Senior Bond, 2.848% to 6/04/30, FRN thereafter, 6/04/31 . . . . . .
Senior Bond, 2.357% to 8/18/30, FRN thereafter, 8/18/31 . . . . . .
Canada | 800,000 |
United States | 1,400,000 |
United Arab |
|
Emirates | 1,294,000 |
United States | 150,000 |
United States | 300,000 |
United States | 800,000 |
United States | 1,100,000 |
United States | 400,000 |
United States | 800,000 |
United States | 500,000 |
United States | 1,200,000 |
United States | 1,300,000 |
Turkey | 1,200,000 |
Turkey | 400,000 |
Spain | 300,000 |
United States | 647,000 |
France | 500,000 |
China | 800,000 |
United States | 300,000 |
United Kingdom | 800,000 |
United Kingdom | 300,000 |
743,000
1,492,757
2,235,757
1,328,776
181,320
452,891
1,962,987
789,734
1,176,125
397,750
2,363,609
887,092
512,500
1,294,038
1,331,687
4,025,317
1,218,000
424,600
309,888
724,253
523,541
862,329
333,000
860,459
310,335
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Banks (continued) |
|
|
|
|
| Industrial & Commercial Bank of China Ltd., Senior Note, 3.538%, |
|
|
|
|
| 11/08/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 900,000 |
| $992,641 |
| JPMorgan Chase & Co., |
|
|
|
|
f | R, Junior Sub. Bond, 6% to 8/01/23, FRN thereafter, Perpetual .. | United States | 213,000 |
| 225,861 |
| Senior Bond, 2.522% to 4/22/30, FRN thereafter, 4/22/31 . . . . . . | United States | 1,000,000 |
| 1,075,608 |
| Senior Note, 3.2%, 6/15/26 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,213,000 |
| 1,358,771 |
| Sub. Note, 3.375%, 5/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 809,000 |
| 864,888 |
| Sub. Note, 3.875%, 9/10/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 809,000 |
| 906,182 |
| Lloyds Banking Group plc, Senior Note, 3.87% to 7/09/24, FRN |
|
|
|
|
| thereafter, 7/09/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 200,000 |
| 220,744 |
| SVB Financial Group, Senior Note, 3.125%, 6/05/30.. . . . . . . . . . . | United States | 300,000 |
| 338,281 |
| Wells Fargo & Co., Senior Note, 2.188% to 4/30/25, FRN thereafter, |
|
|
|
|
| 4/30/26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 700,000 |
| 737,636 |
|
|
|
|
| 12,287,017 |
| Beverages 0.5% |
|
|
|
|
| Anheuser-Busch InBev Worldwide, Inc., Senior Bond, 3.5%, 6/01/30. | Belgium | 1,700,000 |
| 1,970,525 |
| Biotechnology 0.3% |
|
|
|
|
| AbbVie, Inc., Senior Note, 3.2%, 11/21/29.. . . . . . . . . . . . . . . . . . . | United States | 700,000 |
| 785,284 |
| Biogen, Inc., Senior Note, 2.25%, 5/01/30.. . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 313,519 |
|
|
|
|
| 1,098,803 |
| Building Products 0.2% |
|
|
|
|
gCornerstone Building Brands, Inc., Senior Note, 144A, 8%, 4/15/26. | United States | 800,000 |
| 843,000 | |
| Capital Markets 1.1% |
|
|
|
|
| Goldman Sachs Group, Inc. (The), Senior Note, 3.75%, 2/25/26. . . | United States | 600,000 |
| 681,882 |
| Morgan Stanley, |
|
|
|
|
| Senior Bond, 3.591% to 7/22/27, FRN thereafter, 7/22/28 . . . . . . | United States | 809,000 |
| 924,087 |
| Senior Note, 3.875%, 1/27/26 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,795,000 |
| 2,059,494 |
gMSCI, Inc., Senior Bond, 144A, 4%, 11/15/29. . . . . . . . . . . . . . . . . | United States | 700,000 |
| 746,683 | |
|
|
|
|
| 4,412,146 |
| Chemicals 2.8% |
|
|
|
|
gAlpek SAB de CV, Senior Note, 144A, 4.25%, 9/18/29.. . . . . . . . . . | Mexico | 800,000 |
| 878,220 | |
gAxalta Coating Systems LLC, Senior Note, 144A, 3.375%, 2/15/29. | United States | 500,000 |
| 500,938 | |
gBraskem Netherlands Finance BV, Senior Bond, 144A, 4.5%, |
|
|
|
| |
| 1/31/30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Brazil | 1,600,000 |
| 1,646,000 |
gCNAC HK Finbridge Co. Ltd., Senior Note, Reg S, 4.875%, 3/14/25. | China | 800,000 |
| 857,866 | |
gElement Solutions, Inc., Senior Note, 144A, 3.875%, 9/01/28. . . . . | United States | 1,100,000 |
| 1,133,688 | |
gGates Global LLC / Gates Corp., Senior Note, 144A, 6.25%, 1/15/26. | United States | 1,200,000 |
| 1,262,004 | |
| HB Fuller Co., Senior Note, 4.25%, 10/15/28.. . . . . . . . . . . . . . . . . | United States | 800,000 |
| 821,500 |
gIngevity Corp., Senior Note, 144A, 3.875%, 11/01/28.. . . . . . . . . . . | United States | 400,000 |
| 403,750 | |
| Methanex Corp., Senior Note, 5.125%, 10/15/27.. . . . . . . . . . . . . . | Canada | 500,000 |
| 544,065 |
| Olin Corp., Senior Bond, 5.125%, 9/15/27.. . . . . . . . . . . . . . . . . . . | United States | 900,000 |
| 942,651 |
gSABIC Capital II BV, Senior Note, 144A, 4.5%, 10/10/28.. . . . . . . . | Saudi Arabia | 600,000 |
| 712,374 | |
gSyngenta Finance NV, Senior Note, 144A, 4.892%, 4/24/25. . . . . . | Switzerland | 800,000 |
| 858,932 | |
gTPC Group, Inc., Senior Secured Note, 144A, 10.5%, 8/01/24.. . . . | United States | 900,000 |
| 744,282 | |
| Westlake Chemical Corp., Senior Note, 3.375%, 6/15/30.. . . . . . . . | United States | 200,000 |
| 220,141 |
gYara International ASA, Senior Note, 144A, 3.148%, 6/04/30.. . . . . | Brazil | 100,000 |
| 108,394 | |
|
|
|
|
| 11,634,805 |
FSI-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Commercial Services & Supplies 0.6% |
|
|
|
|
| gPrime Security Services Borrower LLC / Prime Finance, Inc., Senior |
|
|
|
|
| Secured Note, 144A, 3.375%, 8/31/27.. . . . . . . . . . . . . . . . . . . . | United States | 1,300,000 |
| $1,291,875 |
| RELX Capital, Inc., Senior Note, 3%, 5/22/30. . . . . . . . . . . . . . . . . | United Kingdom | 100,000 |
| 111,117 |
| gStericycle, Inc., Senior Note, 144A, 3.875%, 1/15/29.. . . . . . . . . . . | United States | 1,000,000 |
| 1,028,750 |
|
|
|
|
| 2,431,742 |
| Communications Equipment 0.3% |
|
|
|
|
| gCommScope Technologies LLC, Senior Note, 144A, 5%, 3/15/27. . | United States | 1,374,000 |
| 1,362,836 |
| Construction & Engineering 0.0%† |
|
|
|
|
| gRutas 2 and 7 Finance Ltd., Senior Secured Bond, 144A, Zero Cpn., |
|
|
|
|
| 9/30/36. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 151,000 |
| Construction Materials 0.2% |
|
|
|
|
| gCemex SAB de CV, Senior Secured Bond, 144A, 5.7%, 1/11/25. . . | Mexico | 1,013,000 |
| 1,036,805 |
| Consumer Finance 0.6% |
|
|
|
|
| gFirstCash, Inc., Senior Note, 144A, 4.625%, 9/01/28.. . . . . . . . . . . | United States | 1,000,000 |
| 1,033,125 |
| OneMain Finance Corp., |
|
|
|
|
| Senior Note, 6.625%, 1/15/28 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,000,000 |
| 1,189,190 |
| Senior Note, 4%, 9/15/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 415,544 |
|
|
|
|
| 2,637,859 |
| Containers & Packaging 1.6% |
|
|
|
|
| gArdagh Packaging Finance plc / Ardagh Holdings USA, Inc., |
|
|
|
|
| Senior Note, 144A, 6%, 2/15/25 . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 248,000 |
| 257,238 |
| Senior Note, 144A, 5.25%, 8/15/27 .. . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 315,243 |
| Bemis Co., Inc., Senior Note, 2.63%, 6/19/30. . . . . . . . . . . . . . . . . | United States | 200,000 |
| 216,737 |
| gCCL Industries, Inc., Senior Note, 144A, 3.05%, 6/01/30.. . . . . . . . | Canada | 500,000 |
| 546,076 |
| Crown Americas LLC / Crown Americas Capital Corp. VI, Senior |
|
|
|
|
| Note, 4.75%, 2/01/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,066,000 |
| 1,109,770 |
| gMauser Packaging Solutions Holding Co., Senior Note, 144A, 7.25%, |
|
|
|
|
| 4/15/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,278,000 |
| 1,292,377 |
| gOwens-Brockway Glass Container, Inc., |
|
|
|
|
| Senior Note, 144A, 5.875%, 8/15/23 .. . . . . . . . . . . . . . . . . . . . . | United States | 566,000 |
| 607,389 |
| Senior Note, 144A, 6.625%, 5/13/27 .. . . . . . . . . . . . . . . . . . . . . | United States | 100,000 |
| 108,437 |
| gReynolds Group Issuer, Inc. / Reynolds Group Issuer LLC / Reynolds |
|
|
|
|
| Group Issuer Luxembourg SA, |
|
|
|
|
| Senior Secured Note, 144A, 5.125%, 7/15/23 .. . . . . . . . . . . . . . | United States | 22,000 |
| 22,282 |
| Senior Secured Note, 144A, 4%, 10/15/27 . . . . . . . . . . . . . . . . . | United States | 600,000 |
| 615,750 |
| gSealed Air Corp., |
|
|
|
|
| Senior Bond, 144A, 5.5%, 9/15/25 . . . . . . . . . . . . . . . . . . . . . . . | United States | 124,000 |
| 139,113 |
| Senior Note, 144A, 4.875%, 12/01/22 .. . . . . . . . . . . . . . . . . . . . | United States | 85,000 |
| 89,303 |
| Senior Note, 144A, 5.125%, 12/01/24 .. . . . . . . . . . . . . . . . . . . . | United States | 809,000 |
| 884,338 |
| WRKCo, Inc., Senior Bond, 3%, 6/15/33.. . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 440,071 |
|
|
|
|
| 6,644,124 |
| Distributors 0.1% |
|
|
|
|
| gResideo Funding, Inc., Senior Note, 144A, 6.125%, 11/01/26. . . . . | United States | 400,000 |
| 422,000 |
| Diversified Financial Services 0.4% |
|
|
|
|
| gMPH Acquisition Holdings LLC, Senior Note, 144A, 5.75%, 11/01/28. | United States | 1,500,000 |
| 1,468,125 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Diversified Telecommunication Services 1.1% |
|
|
|
|
| gAltice France Holding SA, Senior Note, 144A, 6%, 2/15/28. . . . . . . | Luxembourg | 900,000 |
| $913,127 |
| gAltice France SA, Senior Secured Note, 144A, 5.5%, 1/15/28. . . . . | France | 200,000 |
| 209,352 |
| AT&T, Inc., |
|
|
|
|
| Senior Bond, 4.3%, 2/15/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 358,626 |
| Senior Note, 2.3%, 6/01/27 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 320,130 |
| Bell Canada, Inc., Senior Bond, 4.464%, 4/01/48. . . . . . . . . . . . . . | Canada | 150,000 |
| 200,629 |
| gCCO Holdings LLC / CCO Holdings Capital Corp., |
|
|
|
|
| Senior Bond, 144A, 4.5%, 8/15/30 . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 318,751 |
| Senior Bond, 144A, 4.5%, 5/01/32 . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,000,000 |
| 1,068,970 |
| Telefonica Emisiones SA, |
|
|
|
|
| Senior Bond, 4.895%, 3/06/48 . . . . . . . . . . . . . . . . . . . . . . . . . . | Spain | 150,000 |
| 188,743 |
| Senior Note, 4.103%, 3/08/27 .. . . . . . . . . . . . . . . . . . . . . . . . . . | Spain | 300,000 |
| 347,356 |
| TELUS Corp., Senior Bond, 4.6%, 11/16/48. . . . . . . . . . . . . . . . . . | Canada | 150,000 |
| 197,214 |
| gVirgin Media Secured Finance plc, Senior Secured Bond, 144A, |
|
|
|
|
| 4.5%, 8/15/30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 600,000 |
| 627,600 |
|
|
|
|
| 4,750,498 |
| Electric Utilities 2.1% |
|
|
|
|
| gCGNPC International Ltd., Senior Note, Reg S, 3.75%, 12/11/27.. . | China | 300,000 |
| 327,171 |
| Duke Energy Corp., Senior Bond, 2.45%, 6/01/30.. . . . . . . . . . . . . | United States | 400,000 |
| 426,258 |
| Exelon Corp., Senior Bond, 4.05%, 4/15/30.. . . . . . . . . . . . . . . . . . | United States | 1,300,000 |
| 1,539,854 |
| Southern Co. (The), Senior Bond, 3.25%, 7/01/26.. . . . . . . . . . . . . | United States | 2,410,000 |
| 2,704,816 |
| gState Grid Overseas Investment 2016 Ltd., Senior Note, 144A, 3.5%, |
|
|
|
|
| 5/04/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 1,651,000 |
| 1,837,381 |
| gThree Gorges Finance I Cayman Islands Ltd., Senior Note, 144A, |
|
|
|
|
| 3.15%, 6/02/26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 1,051,000 |
| 1,132,558 |
| gTNB Global Ventures Capital Bhd., Senior Note, Reg S, 3.244%, |
|
|
|
|
| 10/19/26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Malaysia | 400,000 |
| 434,083 |
| Virginia Electric and Power Co., Senior Bond, 6.35%, 11/30/37. . . . | United States | 85,000 |
| 128,310 |
|
|
|
|
| 8,530,431 |
| Electronic Equipment, Instruments & Components 0.5% |
|
|
|
|
| CDW LLC / CDW Finance Corp., Senior Note, 3.25%, 2/15/29. . . . | United States | 1,000,000 |
| 1,020,950 |
| Flex Ltd., Senior Note, 4.875%, 5/12/30. . . . . . . . . . . . . . . . . . . . . | United States | 800,000 |
| 963,212 |
| FLIR Systems, Inc., Senior Note, 2.5%, 8/01/30. . . . . . . . . . . . . . . | United States | 200,000 |
| 210,068 |
|
|
|
|
| 2,194,230 |
| Energy Equipment & Services 0.3% |
|
|
|
|
| Baker Hughes a GE Co. LLC / Baker Hughes Co-Obligor, Inc., |
|
|
|
|
| Senior Note, 4.486%, 5/01/30. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 50,000 |
| 60,121 |
| gNabors Industries Ltd., Senior Note, 144A, 7.25%, 1/15/26. . . . . . . | United States | 800,000 |
| 562,436 |
| gSchlumberger Holdings Corp., Senior Note, 144A, 3.9%, 5/17/28. . | United States | 400,000 |
| 452,147 |
| gWeatherford International Ltd., Senior Note, 144A, 11%, 12/01/24.. | United States | 417,000 |
| 326,302 |
|
|
|
|
| 1,401,006 |
| Entertainment 0.7% |
|
|
|
|
| gLive Nation Entertainment, Inc., Senior Secured Note, 144A, 3.75%, |
|
|
|
|
| 1/15/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 202,580 |
| Netflix, Inc., |
|
|
|
|
| Senior Bond, 5.875%, 2/15/25 . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,000,000 |
| 1,152,375 |
| Senior Bond, 4.375%, 11/15/26 .. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 333,187 |
| gWMG Acquisition Corp., Senior Secured Bond, 144A, 3%, 2/15/31. | United States | 1,200,000 |
| 1,180,164 |
|
|
|
|
| 2,868,306 |
FSI-14
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Equity Real Estate Investment Trusts (REITs) 1.5% |
|
|
|
|
| AvalonBay Communities, Inc., Senior Bond, 2.45%, 1/15/31. . . . . . | United States | 500,000 |
| $538,375 |
gGlobal Net Lease, Inc. / Global Net Lease Operating Partnership LP, |
|
|
|
| |
| Senior Note, 144A, 3.75%, 12/15/27. . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 413,159 |
gMGM Growth Properties Operating Partnership LP / MGP Finance |
|
|
|
| |
| Co-Issuer, Inc., Senior Note, 144A, 3.875%, 2/15/29. . . . . . . . . . | United States | 300,000 |
| 307,313 |
| MPT Operating Partnership LP / MPT Finance Corp., |
|
|
|
|
| Senior Bond, 5.25%, 8/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 247,000 |
| 259,226 |
| Senior Bond, 5%, 10/15/27 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 889,000 |
| 947,252 |
| Senior Bond, 3.5%, 3/15/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 310,313 |
gPark Intermediate Holdings LLC / PK Domestic Property LLC / PK |
|
|
|
| |
| Finance Co-Issuer, Senior Secured Note, 144A, 5.875%, 10/01/28. | United States | 1,000,000 |
| 1,066,875 |
gSBA Communications Corp., Senior Note, 144A, 3.875%, 2/15/27.. | United States | 800,000 |
| 841,240 | |
gVICI Properties LP / VICI Note Co., Inc., Senior Note, 144A, 3.75%, |
|
|
|
| |
| 2/15/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,400,000 |
| 1,433,908 |
|
|
|
|
| 6,117,661 |
| Food & Staples Retailing 0.3% |
|
|
|
|
gCencosud SA, Senior Note, 144A, 4.375%, 7/17/27. . . . . . . . . . . . | Chile | 1,000,000 |
| 1,123,017 | |
| Food Products 1.5% |
|
|
|
|
| B&G Foods, Inc., Senior Note, 5.25%, 9/15/27. . . . . . . . . . . . . . . . | United States | 1,500,000 |
| 1,596,210 |
| Bunge Ltd. Finance Corp., Senior Note, 3.25%, 8/15/26. . . . . . . . . | United States | 200,000 |
| 222,379 |
gChobani LLC / Chobani Finance Corp., Inc., Senior Secured Note, |
|
|
|
| |
| 144A, 4.625%, 11/15/28.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,200,000 |
| 1,221,000 |
gKraft Heinz Foods Co., Senior Note, 144A, 3.875%, 5/15/27. . . . . . | United States | 1,200,000 |
| 1,294,109 | |
gMHP Lux SA, Senior Note, 144A, 6.95%, 4/03/26. . . . . . . . . . . . . . | Ukraine | 1,100,000 |
| 1,213,355 | |
gPost Holdings, Inc., Senior Bond, 144A, 4.625%, 4/15/30. . . . . . . . | United States | 700,000 |
| 737,247 | |
|
|
|
|
| 6,284,300 |
| Gas Utilities 0.1% |
|
|
|
|
| Piedmont Natural Gas Co., Inc., Senior Bond, 3.35%, 6/01/50.. . . . | United States | 300,000 |
| 335,237 |
| Health Care Providers & Services 1.1% |
|
|
|
|
| Anthem, Inc., Senior Bond, 3.7%, 9/15/49.. . . . . . . . . . . . . . . . . . . | United States | 150,000 |
| 179,406 |
| Centene Corp., |
|
|
|
|
g | Senior Note, 144A, 5.375%, 6/01/26 .. . . . . . . . . . . . . . . . . . . . . | United States | 324,000 |
| 342,131 |
| Senior Note, 4.25%, 12/15/27 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 318,694 |
| Senior Note, 4.625%, 12/15/29 .. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 222,301 |
| Senior Note, 3.375%, 2/15/30 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 600,000 |
| 632,193 |
gCHS/Community Health Systems, Inc., Senior Secured Note, 144A, |
|
|
|
| |
| 5.625%, 3/15/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 700,000 |
| 753,550 |
| Cigna Corp., Senior Bond, 4.9%, 12/15/48. . . . . . . . . . . . . . . . . . . | United States | 150,000 |
| 206,280 |
| HCA, Inc., Senior Note, 5.375%, 9/01/26.. . . . . . . . . . . . . . . . . . . . | United States | 713,000 |
| 820,859 |
gMolina Healthcare, Inc., Senior Note, 144A, 3.875%, 11/15/30.. . . . | United States | 500,000 |
| 537,500 | |
| Orlando Health Obligated Group, 3.777%, 10/01/28. . . . . . . . . . . . | United States | 330,000 |
| 374,600 |
| Quest Diagnostics, Inc., Senior Bond, 2.8%, 6/30/31.. . . . . . . . . . . | United States | 200,000 |
| 219,435 |
|
|
|
|
| 4,606,949 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Hotels, Restaurants & Leisure 2.3% |
|
|
|
|
| g1011778 BC ULC / New Red Finance, Inc., Secured Bond, 144A, |
|
|
|
|
| 4%, 10/15/30.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 1,200,000 |
| $1,218,492 |
| gCaesars Entertainment, Inc., Senior Secured Note, 144A, 6.25%, |
|
|
|
|
| 7/01/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 426,502 |
| gCaesars Resort Collection LLC / CRC Finco, Inc., Senior Secured |
|
|
|
|
| Note, 144A, 5.75%, 7/01/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,000,000 |
| 1,060,827 |
| gCarnival Corp., Senior Note, 144A, 7.625%, 3/01/26.. . . . . . . . . . . | United States | 400,000 |
| 436,546 |
| gGolden Nugget, Inc., Senior Note, 144A, 6.75%, 10/15/24.. . . . . . . | United States | 1,132,000 |
| 1,125,287 |
| gInternational Game Technology plc, Senior Secured Note, 144A, |
|
|
|
|
| 5.25%, 1/15/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,300,000 |
| 1,402,837 |
| MGM Resorts International, Senior Note, 4.75%, 10/15/28. . . . . . . | United States | 1,000,000 |
| 1,073,745 |
| gNCL Corp. Ltd., Senior Note, 144A, 5.875%, 3/15/26.. . . . . . . . . . . | United States | 1,100,000 |
| 1,161,188 |
| gWynn Las Vegas LLC / Wynn Las Vegas Capital Corp., |
|
|
|
|
| Senior Bond, 144A, 5.5%, 3/01/25 . . . . . . . . . . . . . . . . . . . . . . . | United States | 670,000 |
| 701,269 |
| Senior Note, 144A, 5.25%, 5/15/27 .. . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 206,525 |
| gWynn Macau Ltd., Senior Note, 144A, 5.625%, 8/26/28.. . . . . . . . . | Macau | 600,000 |
| 629,958 |
|
|
|
|
| 9,443,176 |
| Household Durables 0.9% |
|
|
|
|
| KB Home, Senior Note, 7%, 12/15/21.. . . . . . . . . . . . . . . . . . . . . . | United States | 570,000 |
| 591,019 |
| Mohawk Industries, Inc., Senior Note, 3.625%, 5/15/30.. . . . . . . . . | United States | 1,300,000 |
| 1,455,701 |
| Toll Brothers Finance Corp., Senior Bond, 5.625%, 1/15/24.. . . . . . | United States | 689,000 |
| 763,856 |
| gWilliams Scotsman International, Inc., Senior Secured Note, 144A, |
|
|
|
|
| 4.625%, 8/15/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,000,000 |
| 1,036,875 |
|
|
|
|
| 3,847,451 |
| Household Products 0.4% |
|
|
|
|
| gEnergizer Holdings, Inc., Senior Note, 144A, 4.375%, 3/31/29.. . . . | United States | 1,300,000 |
| 1,348,126 |
| gKimberly-Clark de Mexico SAB de CV, Senior Bond, 144A, 2.431%, |
|
|
|
|
| 7/01/31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Mexico | 300,000 |
| 310,336 |
| gSpectrum Brands, Inc., Senior Bond, 144A, 5.5%, 7/15/30.. . . . . . . | United States | 200,000 |
| 215,875 |
|
|
|
|
| 1,874,337 |
| Independent Power and Renewable Electricity Producers 1.6% |
|
|
|
|
| gCalpine Corp., |
|
|
|
|
| Senior Bond, 144A, 5%, 2/01/31 .. . . . . . . . . . . . . . . . . . . . . . . . | United States | 600,000 |
| 627,900 |
| Senior Note, 144A, 5.125%, 3/15/28 .. . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 210,677 |
| Senior Note, 144A, 4.625%, 2/01/29 .. . . . . . . . . . . . . . . . . . . . . | United States | 700,000 |
| 720,846 |
| Clearway Energy Operating LLC, Senior Note, 5.75%, 10/15/25. . . | United States | 1,132,000 |
| 1,193,552 |
| gColbun SA, |
|
|
|
|
| Senior Note, 144A, 3.95%, 10/11/27 .. . . . . . . . . . . . . . . . . . . . . | Chile | 800,000 |
| 901,408 |
| Senior Note, 144A, 3.15%, 3/06/30 .. . . . . . . . . . . . . . . . . . . . . . | Chile | 300,000 |
| 324,000 |
| gInterGen NV, Senior Secured Bond, 144A, 7%, 6/30/23.. . . . . . . . . | Netherlands | 1,100,000 |
| 1,071,125 |
| gTalen Energy Supply LLC, Senior Secured Note, 144A, 7.25%, |
|
|
|
|
| 5/15/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,300,000 |
| 1,386,697 |
|
|
|
|
| 6,436,205 |
| Insurance 0.5% |
|
|
|
|
| gAlliant Holdings Intermediate LLC / Alliant Holdings Co-Issuer, Senior |
|
|
|
|
| Note, 144A, 6.75%, 10/15/27.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 214,338 |
| Arch Capital Group Ltd., Senior Bond, 3.635%, 6/30/50.. . . . . . . . . | United States | 1,000,000 |
| 1,166,014 |
| gFive Corners Funding Trust II, Senior Note, 144A, 2.85%, 5/15/30.. | United States | 500,000 |
| 553,255 |
|
|
|
|
| 1,933,607 |
FSI-16
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Interactive Media & Services 0.5% |
|
|
|
|
gTencent Holdings Ltd., Senior Note, 144A, 2.39%, 6/03/30. . . . . . . | China | 2,100,000 |
| $2,155,545 | |
| Internet & Direct Marketing Retail 0.3% |
|
|
|
|
| JD.com, Inc., Senior Note, 3.375%, 1/14/30. . . . . . . . . . . . . . . . . . | China | 1,200,000 |
| 1,305,807 |
| IT Services 1.0% |
|
|
|
|
gCablevision Lightpath LLC, Senior Secured Note, 144A, 3.875%, |
|
|
|
| |
| 9/15/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 900,000 |
| 906,750 |
| Fiserv, Inc., Senior Bond, 2.65%, 6/01/30. . . . . . . . . . . . . . . . . . . . | United States | 600,000 |
| 649,594 |
gGartner, Inc., Senior Note, 144A, 4.5%, 7/01/28. . . . . . . . . . . . . . . | United States | 700,000 |
| 739,375 | |
gPresidio Holdings, Inc., Senior Secured Note, 144A, 4.875%, 2/01/27. | United States | 1,200,000 |
| 1,275,000 | |
gTempo Acquisition LLC / Tempo Acquisition Finance Corp., Senior |
|
|
|
| |
| Note, 144A, 6.75%, 6/01/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 600,000 |
| 620,880 |
|
|
|
|
| 4,191,599 |
| Machinery 1.1% |
|
|
|
|
gATS Automation Tooling Systems, Inc., Senior Note, 144A, 4.125%, |
|
|
|
| |
| 12/15/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 1,400,000 |
| 1,428,000 |
| CNH Industrial NV, Senior Note, 3.85%, 11/15/27. . . . . . . . . . . . . . | United Kingdom | 566,000 |
| 638,337 |
gNavistar International Corp., Senior Note, 144A, 6.625%, 11/01/25. | United States | 900,000 |
| 944,010 | |
gVertical US Newco, Inc., Senior Secured Note, 144A, 5.25%, 7/15/27. | Germany | 1,100,000 |
| 1,168,063 | |
| Westinghouse Air Brake Technologies Corp., Senior Note, 3.2%, |
|
|
|
|
| 6/15/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 215,950 |
|
|
|
|
| 4,394,360 |
| Marine 0.3% |
|
|
|
|
gICTSI Treasury BV, Senior Note, Reg S, 4.625%, 1/16/23. . . . . . . . | Philippines | 1,200,000 |
| 1,267,218 | |
| Media 2.9% |
|
|
|
|
gAltice Financing SA, Senior Secured Bond, 144A, 7.5%, 5/15/26.. . | Luxembourg | 600,000 |
| 633,930 | |
| Charter Communications Operating LLC / Charter Communications |
|
|
|
|
| Operating Capital, Senior Secured Bond, 2.8%, 4/01/31.. . . . . . . | United States | 1,800,000 |
| 1,903,958 |
gClear Channel International BV, Senior Secured Note, 144A, |
|
|
|
| |
| 6.625%, 8/01/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 317,625 |
| Clear Channel Worldwide Holdings, Inc., |
|
|
|
|
| Senior Note, 9.25%, 2/15/24 .. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 856,000 |
| 868,930 |
g | Senior Secured Note, 144A, 5.125%, 8/15/27 .. . . . . . . . . . . . . . | United States | 300,000 |
| 303,375 |
gCSC Holdings LLC, Senior Note, 144A, 5.5%, 5/15/26. . . . . . . . . . | United States | 1,378,000 |
| 1,434,843 | |
gDiamond Sports Group LLC / Diamond Sports Finance Co., |
|
|
|
| |
| Senior Note, 144A, 6.625%, 8/15/27 .. . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 181,875 |
| Senior Secured Note, 144A, 5.375%, 8/15/26 .. . . . . . . . . . . . . . | United States | 400,000 |
| 325,750 |
| DISH DBS Corp., |
|
|
|
|
| Senior Note, 6.75%, 6/01/21 .. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,000 |
| 5,106 |
| Senior Note, 5.875%, 11/15/24 .. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 570,000 |
| 598,500 |
| Senior Note, 7.375%, 7/01/28 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 533,125 |
| Fox Corp., Senior Note, 3.5%, 4/08/30. . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 454,836 |
gGray Television, Inc., Senior Note, 144A, 4.75%, 10/15/30.. . . . . . . | United States | 1,000,000 |
| 1,016,875 | |
gNexstar Broadcasting, Inc., Senior Note, 144A, 4.75%, 11/01/28.. . | United States | 800,000 |
| 838,500 | |
gSinclair Television Group, Inc., |
|
|
|
| |
| Senior Bond, 144A, 5.5%, 3/01/30 . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 313,257 |
| Senior Secured Note, 144A, 4.125%, 12/01/30 . . . . . . . . . . . . . . | United States | 800,000 |
| 820,804 |
gUnivision Communications, Inc., Senior Secured Note, 144A, |
|
|
|
| |
| 5.125%, 2/15/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,321,000 |
| 1,333,384 |
|
|
|
|
| 11,884,673 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Metals & Mining 0.7% |
|
|
|
|
gCSN Inova Ventures, Senior Note, 144A, 6.75%, 1/28/28. . . . . . . . | Brazil | 800,000 | $867,200 |
gFMG Resources August 2006 Pty. Ltd., |
|
|
|
Senior Note, 144A, 5.125%, 3/15/23 .. . . . . . . . . . . . . . . . . . . . . | Australia | 324,000 | 343,035 |
Senior Note, 144A, 5.125%, 5/15/24 .. . . . . . . . . . . . . . . . . . . . . | Australia | 647,000 | 703,208 |
gNovelis Corp., Senior Bond, 144A, 5.875%, 9/30/26. . . . . . . . . . . . | United States | 1,059,000 | 1,107,979 |
|
|
| 3,021,422 |
Multiline Retail 0.1% |
|
|
|
Dollar Tree, Inc., Senior Bond, 4.2%, 5/15/28. . . . . . . . . . . . . . . . . | United States | 300,000 | 357,126 |
a,e,gK2016470219 South Africa Ltd., Senior Secured Note, 144A, PIK, |
|
|
|
3%, 12/31/22.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | South Africa | 976,441 | — |
a,e,gK2016470260 South Africa Ltd., Senior Secured Note, 144A, PIK, |
|
|
|
25%, 12/31/22.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | South Africa | 396,604 | 1,738 |
|
|
| 358,864 |
Multi-Utilities 0.4% |
|
|
|
Dominion Energy, Inc., C, Senior Note, 3.375%, 4/01/30.. . . . . . . . | United States | 1,300,000 | 1,481,794 |
Oil, Gas & Consumable Fuels 5.2% |
|
|
|
gAker BP ASA, |
|
|
|
Senior Bond, 144A, 4%, 1/15/31 .. . . . . . . . . . . . . . . . . . . . . . . . | Norway | 400,000 | 433,946 |
Senior Note, 144A, 4.75%, 6/15/24 .. . . . . . . . . . . . . . . . . . . . . . | Norway | 600,000 | 620,877 |
gAntero Resources Corp., Senior Note, 144A, 8.375%, 7/15/26.. . . . | United States | 200,000 | 204,638 |
Apache Corp., |
|
|
|
Senior Note, 4.625%, 11/15/25 .. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 600,000 | 630,750 |
Senior Note, 4.875%, 11/15/27 .. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 | 530,750 |
Canadian Natural Resources Ltd., Senior Bond, 2.95%, 7/15/30. . . | Canada | 450,000 | 481,874 |
Cenovus Energy, Inc., Senior Note, 5.375%, 7/15/25.. . . . . . . . . . . | Canada | 1,100,000 | 1,240,922 |
Cheniere Energy Partners LP, Senior Secured Note, 5.25%, |
|
|
|
10/01/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 970,000 | 996,433 |
Comstock Resources, Inc., Senior Note, 9.75%, 8/15/26.. . . . . . . . | United States | 600,000 | 644,250 |
gContinental Resources, Inc., Senior Bond, 144A, 5.75%, 1/15/31. . | United States | 600,000 | 667,113 |
gCVR Energy, Inc., Senior Note, 144A, 5.25%, 2/15/25.. . . . . . . . . . | United States | 500,000 | 483,438 |
gEndeavor Energy Resources LP / EER Finance, Inc., Senior Bond, |
|
|
|
144A, 5.75%, 1/30/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 600,000 | 648,120 |
Energy Transfer Operating LP, Senior Note, 4.05%, 3/15/25. . . . . . | United States | 200,000 | 219,479 |
EnLink Midstream LLC, |
|
|
|
Senior Bond, 5.375%, 6/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,100,000 | 1,071,812 |
g Senior Note, 144A, 5.625%, 1/15/28 .. . . . . . . . . . . . . . . . . . . . . | United States | 100,000 | 102,399 |
e,gEnQuest plc, Senior Note, 144A, Reg S, PIK, 7%, 10/15/23.. . . . . . | United Kingdom | 878,999 | 571,379 |
Enterprise Products Operating LLC, Senior Bond, 4.8%, 2/01/49.. . | United States | 150,000 | 189,649 |
EOG Resources, Inc., Senior Note, 4.375%, 4/15/30.. . . . . . . . . . . | United States | 100,000 | 121,660 |
EQT Corp., Senior Note, 5%, 1/15/29. . . . . . . . . . . . . . . . . . . . . . . | United States | 900,000 | 951,138 |
gMartin Midstream Partners LP / Martin Midstream Finance Corp., |
|
|
|
Secured Note, 144A, 10%, 2/29/24 .. . . . . . . . . . . . . . . . . . . . . . | United States | 307,101 | 314,011 |
Secured Note, 144A, 11.5%, 2/28/25 .. . . . . . . . . . . . . . . . . . . . . | United States | 1,394,630 | 1,349,304 |
MPLX LP, Senior Note, 2.65%, 8/15/30.. . . . . . . . . . . . . . . . . . . . . | United States | 1,500,000 | 1,573,760 |
Occidental Petroleum Corp., |
|
|
|
Senior Bond, 6.125%, 1/01/31 . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 600,000 | 643,620 |
Senior Bond, 6.45%, 9/15/36 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 | 524,250 |
Senior Note, 8.875%, 7/15/30 .. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 700,000 | 822,938 |
FSI-18
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Oil, Gas & Consumable Fuels (continued) |
|
|
|
|
gRattler Midstream LP, Senior Note, 144A, 5.625%, 7/15/25. . . . . . . | United States | 1,400,000 |
| $1,481,375 | |
gSabine Pass Liquefaction LLC, Senior Secured Note, 144A, 4.5%, |
|
|
|
| |
| 5/15/30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,600,000 |
| 1,897,626 |
gSeven Generations Energy Ltd., Senior Note, 144A, 5.375%, 9/30/25. | Canada | 200,000 |
| 204,123 | |
| Sunoco LP / Sunoco Finance Corp., |
|
|
|
|
| Senior Note, 6%, 4/15/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 532,135 |
g | Senior Note, 144A, 4.5%, 5/15/29 .. . . . . . . . . . . . . . . . . . . . . . . | United States | 1,200,000 |
| 1,250,250 |
|
|
|
|
| 21,404,019 |
| Paper & Forest Products 0.1% |
|
|
|
|
| Suzano Austria GmbH, Senior Bond, 3.75%, 1/15/31.. . . . . . . . . . . | Brazil | 400,000 |
| 424,900 |
| Pharmaceuticals 1.1% |
|
|
|
|
gBausch Health Americas, Inc., Senior Note, 144A, 8.5%, 1/31/27. . | United States | 809,000 |
| 900,890 | |
gBausch Health Cos., Inc., |
|
|
|
| |
| Senior Bond, 144A, 6.125%, 4/15/25 .. . . . . . . . . . . . . . . . . . . . . | United States | 243,000 |
| 250,693 |
| Senior Bond, 144A, 5.25%, 2/15/31 . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 313,979 |
| Senior Note, 144A, 5%, 2/15/29 . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 206,015 |
gBayer US Finance II LLC, Senior Bond, 144A, 4.375%, 12/15/28.. . | Germany | 889,000 |
| 1,045,889 | |
gEndo Dac / Endo Finance LLC / Endo Finco, Inc., |
|
|
|
| |
| Secured Note, 144A, 9.5%, 7/31/27 . . . . . . . . . . . . . . . . . . . . . . | United States | 652,000 |
| 729,018 |
| Senior Note, 144A, 6%, 6/30/28 . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 659,000 |
| 560,809 |
gPar Pharmaceutical, Inc., Senior Secured Note, 144A, 7.5%, 4/01/27. | United States | 184,000 |
| 199,881 | |
gRoyalty Pharma plc, Senior Bond, 144A, 3.3%, 9/02/40.. . . . . . . . . | United States | 500,000 |
| 526,501 | |
|
|
|
|
| 4,733,675 |
| Real Estate Management & Development 0.7% |
|
|
|
|
gChina Overseas Finance Cayman VI Ltd., Senior Note, Reg S, |
|
|
|
| |
| 5.95%, 5/08/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 700,000 |
| 795,102 |
gFive Point Operating Co. LP / Five Point Capital Corp., Senior Note, |
|
|
|
| |
| 144A, 7.875%, 11/15/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 800,000 |
| 848,340 |
gHoward Hughes Corp. (The), Senior Note, 144A, 5.375%, 8/01/28. | United States | 1,000,000 |
| 1,077,375 | |
|
|
|
|
| 2,720,817 |
| Road & Rail 0.8% |
|
|
|
|
| Burlington Northern Santa Fe LLC, Senior Bond, 4.15%, 4/01/45.. . | United States | 400,000 |
| 523,317 |
| CSX Corp., Senior Bond, 4.1%, 3/15/44. . . . . . . . . . . . . . . . . . . . . | United States | 150,000 |
| 187,698 |
gKazakhstan Temir Zholy Finance BV, Senior Bond, 144A, 6.95%, |
|
|
|
| |
| 7/10/42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Kazakhstan | 1,500,000 |
| 2,219,940 |
a,eOnsite Rental Group Operations Pty. Ltd., PIK, 6.1%, 10/26/23.. . . | Australia | 262,519 |
| 238,337 | |
|
|
|
|
| 3,169,292 |
| Semiconductors & Semiconductor Equipment 0.3% |
|
|
|
|
| Maxim Integrated Products, Inc., Senior Note, 3.375%, 3/15/23.. . . | United States | 100,000 |
| 105,329 |
gON Semiconductor Corp., Senior Note, 144A, 3.875%, 9/01/28.. . . | United States | 1,300,000 |
| 1,343,875 | |
|
|
|
|
| 1,449,204 |
| Software 0.3% |
|
|
|
|
| Anagram, Inc., 10%, 8/15/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 127,650 |
| 127,012 |
gBlackboard, Inc., Secured Note, 144A, 10.375%, 11/15/24. . . . . . . | United States | 200,000 |
| 210,625 | |
gNortonLifeLock, Inc., Senior Note, 144A, 5%, 4/15/25. . . . . . . . . . . | United States | 978,000 |
| 1,000,005 | |
|
|
|
|
| 1,337,642 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds (continued) |
|
|
|
|
| Specialty Retail 0.4% |
|
|
|
|
| AutoNation, Inc., Senior Bond, 4.75%, 6/01/30. . . . . . . . . . . . . . . . | United States | 200,000 |
| $240,820 |
| L Brands, Inc., |
|
|
|
|
| Senior Bond, 5.25%, 2/01/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 522,187 |
g | Senior Note, 144A, 6.625%, 10/01/30 .. . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 222,875 |
gLithia Motors, Inc., Senior Bond, 144A, 4.375%, 1/15/31. . . . . . . . . | United States | 500,000 |
| 537,188 | |
| Party City Holdings, Inc., 5.318%, 7/15/25.. . . . . . . . . . . . . . . . . . . | United States | 236,150 |
| 213,716 |
|
|
|
|
| 1,736,786 |
| Textiles, Apparel & Luxury Goods 0.4% |
|
|
|
|
gHanesbrands, Inc., Senior Bond, 144A, 4.875%, 5/15/26.. . . . . . . . | United States | 1,382,000 |
| 1,502,925 | |
| Thrifts & Mortgage Finance 1.1% |
|
|
|
|
| MGIC Investment Corp., Senior Note, 5.25%, 8/15/28.. . . . . . . . . . | United States | 800,000 |
| 857,500 |
gPennyMac Financial Services, Inc., Senior Note, 144A, 5.375%, |
|
|
|
| |
| 10/15/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,200,000 |
| 1,270,500 |
gQuicken Loans LLC / Quicken Loans Co-Issuer, Inc., |
|
|
|
| |
| Senior Bond, 144A, 3.875%, 3/01/31 .. . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 520,000 |
| Senior Note, 144A, 3.625%, 3/01/29 .. . . . . . . . . . . . . . . . . . . . . | United States | 800,000 |
| 817,500 |
gUnited Shore Financial Services LLC, Senior Note, 144A, 5.5%, |
|
|
|
| |
| 11/15/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,100,000 |
| 1,161,875 |
|
|
|
|
| 4,627,375 |
| Tobacco 0.4% |
|
|
|
|
| Altria Group, Inc., Senior Note, 3.4%, 5/06/30.. . . . . . . . . . . . . . . . | United States | 1,200,000 |
| 1,347,815 |
| BAT Capital Corp., Senior Bond, 4.54%, 8/15/47.. . . . . . . . . . . . . . | United Kingdom | 50,000 |
| 55,525 |
| Reynolds American, Inc., Senior Note, 4.45%, 6/12/25. . . . . . . . . . | United Kingdom | 200,000 |
| 227,845 |
|
|
|
|
| 1,631,185 |
| Trading Companies & Distributors 1.1% |
|
|
|
|
gBeacon Roofing Supply, Inc., Senior Note, 144A, 4.875%, 11/01/25. | United States | 1,094,000 |
| 1,121,968 | |
gH&E Equipment Services, Inc., Senior Note, 144A, 3.875%, 12/15/28. | United States | 1,200,000 |
| 1,210,536 | |
gHerc Holdings, Inc., Senior Note, 144A, 5.5%, 7/15/27. . . . . . . . . . | United States | 1,000,000 |
| 1,061,875 | |
gWESCO Distribution, Inc., |
|
|
|
| |
| Senior Note, 144A, 7.125%, 6/15/25 .. . . . . . . . . . . . . . . . . . . . . | United States | 700,000 |
| 770,808 |
| Senior Note, 144A, 7.25%, 6/15/28 .. . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 569,348 |
|
|
|
|
| 4,734,535 |
| Wireless Telecommunication Services 1.1% |
|
|
|
|
e,gDigicel Group 0.5 Ltd., Senior Note, 144A, PIK, 8%, 4/01/25.. . . . . | Bermuda | 158,906 |
| 80,177 | |
| Hughes Satellite Systems Corp., Senior Note, 6.625%, 8/01/26.. . . | United States | 800,000 |
| 908,024 |
| Sprint Communications, Inc., Senior Note, 6%, 11/15/22.. . . . . . . . | United States | 405,000 |
| 438,919 |
| Sprint Corp., Senior Note, 7.875%, 9/15/23.. . . . . . . . . . . . . . . . . . | United States | 405,000 |
| 469,415 |
| T-Mobile USA, Inc., |
|
|
|
|
| Senior Note, 6%, 4/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 200,000 |
| 202,702 |
g | Senior Secured Bond, 144A, 3.3%, 2/15/51 .. . . . . . . . . . . . . . . . | United States | 500,000 |
| 515,352 |
g | Senior Secured Note, 144A, 3.875%, 4/15/30 .. . . . . . . . . . . . . . | United States | 1,300,000 |
| 1,507,038 |
gVmed O2 UK Financing I plc, Senior Secured Bond, 144A, 4.25%, |
|
|
|
| |
| 1/31/31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 300,000 |
| 307,242 |
|
|
|
|
| 4,428,869 |
| Total Corporate Bonds (Cost $197,522,500). . . . . . . . . | . . . . . . . . . . . . . . . . . . | . . . . . . . . . . |
| 204,697,374 |
|
|
|
|
|
|
FSI-20
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| hSenior Floating Rate Interests 4.7% |
|
|
|
|
| iAerospace & Defense 0.1% |
|
|
|
|
| eAlloy FinCo Ltd., Facility Term Loan, B, 10.082%, PIK, (1-month USD |
|
|
|
|
| LIBOR + 0.5%; 3-month USD LIBOR + 0.5%), 3/06/25.. . . . . . . . | United Kingdom | 240,376 |
| $98,214 |
| jDynasty Acquisition Co., Inc., 2020 Term Loan, |
|
|
|
|
| B1, 3.754%, (3-month USD LIBOR + 3.5%), 4/06/26. . . . . . . . . . | United States | 189,622 |
| 181,195 |
| B2, 3.754%, (3-month USD LIBOR + 3.5%), 4/06/26. . . . . . . . . . | United States | 101,947 |
| 97,416 |
|
|
|
|
| 376,825 |
| Airlines 0.0%† |
|
|
|
|
| iDelta Air Lines, Inc. / SkyMiles IP Ltd., Initial Term Loan, 4.75%, |
|
|
|
|
| (6-month USD LIBOR + 3.75%), 10/20/27. . . . . . . . . . . . . . . . . . | United States | 71,737 |
| 74,562 |
| iAuto Components 0.3% |
|
|
|
|
| Adient US LLC, Initial Term Loan, 4.414%, (1-month USD LIBOR + |
|
|
|
|
| 4.25%; 3-month USD LIBOR + 4.25%), 5/06/24.. . . . . . . . . . . . . | United States | 1,152,450 |
| 1,154,127 |
| Highline Aftermarket Acquisition LLC, First Lien, Term Loan, 5.25%, |
|
|
|
|
| (3-month USD LIBOR + 4.5%), 11/09/27. . . . . . . . . . . . . . . . . . . | United States | 27,689 |
| 27,965 |
| TRICO Group LLC, First Lien, Term Loan, B3, 8.5%, (3-month USD |
|
|
|
|
| LIBOR + 7.5%), 2/02/24.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 129,604 |
| 129,483 |
|
|
|
|
| 1,311,575 |
| Automobiles 0.3% |
|
|
|
|
| iThor Industries, Inc., Initial USD Term Loan, 3.938%, (1-month USD |
|
|
|
|
| LIBOR + 3.75%), 2/01/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,225,864 |
| 1,226,820 |
| Capital Markets 0.3% |
|
|
|
|
| iRussell Investments US Institutional Holdco, Inc., 2025 Term Loan, |
|
|
|
|
| 4%, (3-month USD LIBOR + 3%), 5/30/25. . . . . . . . . . . . . . . . . . | United States | 1,036,127 |
| 1,034,940 |
| iCommercial Services & Supplies 0.1% |
|
|
|
|
| j,kCCI Buyer, Inc., Term Loan, TBD, 12/10/27.. . . . . . . . . . . . . . . . . . | United States | 14,357 |
| 14,369 |
| Prime Security Services Borrower LLC, First Lien, 2019 Refinancing |
|
|
|
|
| Term Loan, B1, 4.25%, (1-month USD LIBOR + 3.25%; 3-month |
|
|
|
|
| USD LIBOR + 3.25%), 9/23/26.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 111,692 |
| 112,547 |
| Staples, Inc., 2019 Refinancing New Term Loan, B1, 5.214%, |
|
|
|
|
| (3-month USD LIBOR + 5%), 4/16/26.. . . . . . . . . . . . . . . . . . . . . | United States | 140,000 |
| 135,990 |
|
|
|
|
| 262,906 |
| Containers & Packaging 0.1% |
|
|
|
|
| i,jBWay Holding Co., Initial Term Loan, 3.48%, (3-month USD LIBOR + |
|
|
|
|
| 3.25%), 4/03/24.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 288,122 |
| 279,118 |
| iDiversified Financial Services 0.1% |
|
|
|
|
| First Eagle Holdings, Inc., 2020 Refinancing Term Loan, 2.754%, |
|
|
|
|
| (3-month USD LIBOR + 2.5%), 2/01/27. . . . . . . . . . . . . . . . . . . . | United States | 109,447 |
| 108,558 |
| Jefferies Finance LLC, 2020 Term Loan, 4.5%, (1-month USD LIBOR |
|
|
|
|
| + 3.75%), 9/30/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 39,973 |
| 40,024 |
| Verscend Holding Corp., Term Loan, B, 4.647%, (1-month USD |
|
|
|
|
| LIBOR + 4.5%), 8/27/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 119,694 |
| 119,873 |
|
|
|
|
| 268,455 |
| Diversified Telecommunication Services 0.2% |
|
|
|
|
| Global Tel Link, First Lien, Term Loan, 4.397%, (1-month USD |
|
|
|
|
| LIBOR + 4.25%), 11/29/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 392,982 |
| 365,648 |
| Zayo Group Holdings, Inc., Initial Dollar Term Loan, 3.147%, |
|
|
|
|
| (1-month USD LIBOR + 3%), 3/09/27.. . . . . . . . . . . . . . . . . . . . . | United States | 303,628 |
| 302,462 |
|
|
|
|
| 668,110 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| hSenior Floating Rate Interests (continued) |
|
|
|
|
| iElectric Utilities 0.1% |
|
|
|
|
| Astoria Energy LLC, Advance (2020) Term Loan, B, 4.5%, (6-month |
|
|
|
|
| USD LIBOR + 3.5%), 12/10/27.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 11,306 |
| $11,257 |
| EFS Cogen Holdings I LLC, Term Loan, 4.5%, (3-month USD LIBOR |
|
|
|
|
| + 3.5%), 10/01/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 217,315 |
| 216,697 |
|
|
|
|
| 227,954 |
| Entertainment 0.2% |
|
|
|
|
| Banijay Entertainment SAS, Facility USD Term Loan, B, 3.903%, |
|
|
|
|
| (1-month USD LIBOR + 3.75%), 3/01/25. . . . . . . . . . . . . . . . . . . | France | 249,375 |
| 246,778 |
| jDiamond Sports Group LLC, Term Loan, 3.4%, (1-month USD |
|
|
|
|
| LIBOR + 3.25%), 8/24/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 449,425 |
| 399,988 |
| jWilliam Morris Endeavor Entertainment LLC (IMG Worldwide |
|
|
|
|
| Holdings LLC), First Lien, Term Loan, B-1, 2.9%, (1-month USD |
|
|
|
|
| LIBOR + 2.75%), 5/18/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 299,200 |
| 277,382 |
|
|
|
|
| 924,148 |
| Food & Staples Retailing 0.0%† |
|
|
|
|
| iGNC Holdings, Inc., Second Lien, Term Loan, 6.234%, (3-month |
|
|
|
|
| USD LIBOR), 10/30/26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 215,167 |
| 157,072 |
| iFood Products 0.1% |
|
|
|
|
| B&G Foods, Inc., Term Loan, B4, 2.647%, (1-month USD LIBOR + |
|
|
|
|
| 2.5%), 10/10/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 58,841 |
| 58,893 |
| eCSM Bakery Solutions Ltd., Second Lien, Term Loan, 8.75%, PIK, |
|
|
|
|
| (3-month USD LIBOR + 7.75%), 7/05/21. . . . . . . . . . . . . . . . . . . | United States | 234,460 |
| 226,253 |
| JBS USA Lux SA, New Term Loan, 2.147%, (1-month USD LIBOR + |
|
|
|
|
| 2%), 5/01/26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Luxembourg | 206,930 |
| 205,654 |
|
|
|
|
| 490,800 |
| Health Care Providers & Services 0.1% |
|
|
|
|
| j,kADMI Corp., Amendment No. 3 Incremental Term Loan, TBD, |
|
|
|
|
| 12/23/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 36,863 |
| 36,964 |
| CNT Holdings I Corp., First Lien, Term Loan Facility, 4.5%, (3-month |
|
|
|
|
| USD LIBOR + 3.75%), 11/08/27.. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 14,379 |
| 14,416 |
| j,kNational Mentor Holdings, Inc., Incremental Term Loan, |
| �� |
|
|
| B, TBD, 3/09/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 41,675 |
| 41,693 |
| C, TBD, 3/09/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,609 |
| 1,609 |
| Navicure, Inc., First Lien, Initial Term Loan, 4.147%, (1-month USD |
|
|
|
|
| LIBOR + 4%), 10/22/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 69,824 |
| 69,825 |
| jPathway Vet Alliance LLC, First Lien, Initial Delayed Draw Term |
|
|
|
|
| Loan, 4.146%, (1-month USD LIBOR + 4%), 3/31/27.. . . . . . . . . | United States | 15,030 |
| 15,047 |
| jPathway Vet Alliance LLC, First Lien, Initial Term Loan, 4.147%, |
|
|
|
|
| (1-month USD LIBOR + 4%), 3/31/27.. . . . . . . . . . . . . . . . . . . . . | United States | 184,005 |
| 184,212 |
| j,kPluto Acquisition I, Inc., Incremental Term Loan, TBD, 6/22/26.. . . . | United States | 25,556 |
| 25,652 |
|
|
|
|
| 389,418 |
| Hotels, Restaurants & Leisure 0.1% |
|
|
|
|
| Caesars Resort Collection LLC, Term Loan, |
|
|
|
|
| B, 2.897%, (1-month USD LIBOR + 2.75%), 12/23/24. . . . . . . . . | United States | 316,582 |
| 311,360 |
| B1, 4.647%, (1-month USD LIBOR + 4.5%), 7/21/25. . . . . . . . . . | United States | 23,440 |
| 23,517 |
| jIRB Holding Corp., Fourth Amendment Incremental Term Loan, |
|
|
|
|
| 4.25%, (3-month USD LIBOR + 3.25%), 12/15/27. . . . . . . . . . . . | United States | 26,488 |
| 26,566 |
|
|
|
|
| 361,443 |
FSI-22
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| hSenior Floating Rate Interests (continued) |
|
|
|
|
| Household Durables 0.0%† |
|
|
|
|
| iPlaytika Holding Corp., Term Loan, B, 7%, (3-month USD LIBOR + |
|
|
|
|
| 6%), 12/10/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 76,000 |
| $76,609 |
| Household Products 0.1% |
|
|
|
|
| a,i,lFGI Operating Co. LLC, Term Loan, 12%, (3-month USD LIBOR + |
|
|
|
|
| 11%), 5/16/22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 856,240 |
| 451,602 |
| iInsurance 0.1% |
|
|
|
|
| Alliant Holdings Intermediate LLC, 2018 Initial Term Loan, 3.397%, |
|
|
|
|
| (1-month USD LIBOR + 3.25%), 5/09/25. . . . . . . . . . . . . . . . . . . | United States | 272,732 |
| 268,868 |
| Alliant Holdings Intermediate LLC, Term Loan, B3, 4.25%, (1-month |
|
|
|
|
| USD LIBOR + 3.75%), 11/05/27.. . . . . . . . . . . . . . . . . . . . . . . . . | United States | 11,183 |
| 11,210 |
| AssuredPartners, Inc., 2020 February Refinancing Term Loan, |
|
|
|
|
| 3.647%, (1-month USD LIBOR + 3.5%), 2/12/27. . . . . . . . . . . . . | United States | 99,497 |
| 98,199 |
| jAsurion LLC, New Term Loan, B-8, 3.397%, (1-month USD LIBOR + |
|
|
|
|
| 3.25%), 12/23/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,244 |
| 13,128 |
|
|
|
|
| 391,405 |
| Internet & Direct Marketing Retail 0.0%† |
|
|
|
|
| iMH Sub I LLC (Micro Holding Corp.), First Lien, 2020 June New |
|
|
|
|
| Term Loan, 4.75%, (1-month USD LIBOR + 3.75%), 9/13/24. . . . | United States | 22,018 |
| 22,018 |
| iIT Services 0.5% |
|
|
|
|
| Arches Buyer, Inc., Initial Term Loan, 4.5%, (1-month USD LIBOR + |
|
|
|
|
| 4%), 12/06/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 45,406 |
| 45,553 |
| Aventiv Technologies LLC, First Lien, Initial Term Loan, 5.5%, |
|
|
|
|
| (3-month USD LIBOR + 4.5%), 11/01/24. . . . . . . . . . . . . . . . . . . | United States | 245,570 |
| 231,144 |
| Aventiv Technologies LLC, Second Lien, Initial Term Loan, 9.25%, |
|
|
|
|
| (6-month USD LIBOR + 8.25%), 11/01/25. . . . . . . . . . . . . . . . . . | United States | 597,127 |
| 464,266 |
| Barracuda Networks, Inc., First Lien, 2020 Term Loan, 4.5%, |
|
|
|
|
| (3-month USD LIBOR + 3.75%), 2/12/25. . . . . . . . . . . . . . . . . . . | United States | 45,489 |
| 45,478 |
| Milano Acquisition Corp., Term Loan, B, 4.75%, (3-month USD |
|
|
|
|
| LIBOR + 4%), 10/01/27.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 161,895 |
| 162,266 |
| Pitney Bowes, Inc., Incremental Term Loan, B, 5.65%, (1-month USD |
|
|
|
|
| LIBOR + 5.5%), 1/07/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 314,945 |
| 313,370 |
| TIBCO Software, Inc., Term Loan, B3, 3.9%, (1-month USD LIBOR + |
|
|
|
|
| 3.75%), 6/30/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 99,500 |
| 97,914 |
| WEX, Inc., Term Loan, B3, 2.397%, (1-month USD LIBOR + 2.25%), |
|
|
|
|
| 5/15/26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 633,678 |
| 630,953 |
|
|
|
|
| 1,990,944 |
| Leisure Products 0.1% |
|
|
|
|
| jHercules Achievement, Inc. (Varsity Brands Holding Co., Inc.), First |
|
|
|
|
| Lien, Initial Term Loan, 4.5%, (1-month USD LIBOR + 3.5%), |
|
|
|
|
| 12/16/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 149,615 |
| 144,432 |
| NASCAR Holdings LLC, Initial Term Loan, 2.897%, (1-month USD |
|
|
|
|
| LIBOR + 2.75%), 10/19/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 359,832 |
| 358,904 |
|
|
|
|
| 503,336 |
| Machinery 0.1% |
|
|
|
|
| iAltra Industrial Motion Corp., Term Loan, 2.147%, (1-month USD |
|
|
|
|
| LIBOR + 2%), 10/01/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 242,201 |
| 242,504 |
| iMedia 0.5% |
|
|
|
|
| jCengage Learning, Inc., 2016 Refinancing Term Loan, Cengage |
|
|
|
|
| Learning Holdco Inc Note, 5.25%, (3-month USD LIBOR + 4.25%), |
|
|
|
|
| 6/07/23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 69,817 |
| 67,159 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| hSenior Floating Rate Interests (continued) |
|
|
|
|
| iMedia (continued) |
|
|
|
|
| Clear Channel Outdoor Holdings, Inc., Term Loan, B, 3.714%, |
|
|
|
|
| (3-month USD LIBOR + 3.5%), 8/21/26. . . . . . . . . . . . . . . . . . . . | United States | 49,874 |
| $48,142 |
| CSC Holdings LLC, March 2017 Refinancing Term Loan, 2.409%, |
|
|
|
|
| (1-month USD LIBOR + 2.25%), 7/17/25. . . . . . . . . . . . . . . . . . . | United States | 442,941 |
| 437,404 |
| Gray Television, Inc., Term Loan, |
|
|
|
|
| B2, 2.405%, (1-month USD LIBOR + 2.25%), 2/07/24. . . . . . . . . | United States | 843,033 |
| 837,840 |
| C, 2.655%, (1-month USD LIBOR + 2.5%), 1/02/26. . . . . . . . . . . | United States | 336,353 |
| 334,671 |
| Radiate HoldCo LLC, Term Loan, B, 4.25%, (1-month USD LIBOR + |
|
|
|
|
| 3.5%), 9/25/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 70,930 |
| 71,140 |
| Univision Communications, Inc., First Lien, 2020 Replacement Term |
|
|
|
|
| Loan, 4.75%, (1-month USD LIBOR + 3.75%), 3/15/26.. . . . . . . . | United States | 98,886 |
| 99,291 |
| j,kVirgin Media Bristol LLC, Term Loan, Q, TBD, 1/31/29.. . . . . . . . . . | United States | 223,464 |
| 223,772 |
|
|
|
|
| 2,119,419 |
| Multiline Retail 0.1% |
|
|
|
|
| iHarbor Freight Tools USA, Inc., Initial Term Loan (2020), 4%, |
|
|
|
|
| (1-month USD LIBOR + 3.25%), 10/19/27. . . . . . . . . . . . . . . . . . | United States | 275,272 |
| 275,773 |
| iOil, Gas & Consumable Fuels 0.2% |
|
|
|
|
| j,mFieldwood Energy LLC, Debtor-in-possession Facility Term Loan, |
|
|
|
|
| 9.75%, (1-month USD LIBOR + 8.75%), 8/04/21. . . . . . . . . . . . . | United States | 29,900 |
| 29,826 |
| lFieldwood Energy LLC, First Lien, Closing Date Term Loan, (3-month |
|
|
|
|
| USD LIBOR + 4.25%), 4/11/22.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,507,941 |
| 587,799 |
| UTEX Industries, Inc., First Out Term Loan, 8.5%, (1-month USD |
|
|
|
|
| LIBOR), 12/03/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 58,816 |
| 59,478 |
| UTEX Industries, Inc., Second Out Term Loan, 10.5%, (1-month USD |
|
|
|
|
| LIBOR), 12/03/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 27,761 |
| 27,483 |
|
|
|
|
| 704,586 |
| Paper & Forest Products 0.1% |
|
|
|
|
| iAppvion Operations, Inc., Term Loan, 7%, (3-month USD LIBOR + |
|
|
|
|
| 6%), 6/12/26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 259,513 |
| 258,215 |
| Pharmaceuticals 0.0%† |
|
|
|
|
| iCatalent Pharma Solutions, Inc., Dollar Term Loan, B2, 3.25%, |
|
|
|
|
| (1-month USD LIBOR + 2.25%), 5/18/26. . . . . . . . . . . . . . . . . . . | United States | 195,980 |
| 196,470 |
| Professional Services 0.0%† |
|
|
|
|
| iDun & Bradstreet Corp. (The), Initial Term Loan Borrowing, B, |
|
|
|
|
| 3.898%, (1-month USD LIBOR + 3.75%), 2/06/26. . . . . . . . . . . . | United States | 4,827 |
| 4,838 |
| Real Estate Management & Development 0.0%† |
|
|
|
|
| iCushman & Wakefield U.S. Borrower LLC, Replacement Term Loan, |
|
|
|
|
| 2.897%, (1-month USD LIBOR + 2.75%), 8/21/25. . . . . . . . . . . . | United States | 99,250 |
| 97,749 |
| iRoad & Rail 0.2% |
|
|
|
|
| Avis Budget Car Rental LLC, New Term Loan, B, 2.4%, (1-month |
|
|
|
|
| USD LIBOR + 2.25%), 8/06/27.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 716,540 |
| 693,926 |
| aOnsite Rental Group Operations Pty. Ltd., Term Loan, B, 5.5%, |
|
|
|
|
| (1-month USD LIBOR + 4.5%), 10/26/22. . . . . . . . . . . . . . . . . . . | Australia | 192,010 |
| 178,343 |
| Ventia Midco Pty. Ltd., 2017 Refinancing USD Term Loan, B, 5%, |
|
|
|
|
| (3-month USD LIBOR + 4%), 5/21/26.. . . . . . . . . . . . . . . . . . . . . | Australia | 155,774 |
| 155,384 |
|
|
|
|
| 1,027,653 |
| Software 0.5% |
|
|
|
|
| Aristocrat Leisure Ltd., Term Loan, B3, 1.959%, (3-month USD |
|
|
|
|
| LIBOR + 1.75%), 10/19/24.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Australia | 425,372 |
| 422,250 |
| athenahealth, Inc., First Lien, Term Loan, B, 4.648%, (1-month USD |
|
|
|
|
| LIBOR + 4.5%), 2/11/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 209,467 |
| 209,729 |
FSI-24
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| hSenior Floating Rate Interests (continued) |
|
|
|
|
| iSoftware (continued) |
|
|
|
|
| Blackboard, Inc., First Lien, Term Loan, B5, 7%, (3-month USD |
|
|
|
|
| LIBOR + 6%), 6/30/24.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 318,664 |
| $317,788 |
| Ceridian HCM Holding, Inc., Initial Term Loan, 2.601%, (1-week USD |
|
|
|
|
| LIBOR + 2.5%), 4/30/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 179,033 |
| 177,094 |
| DCert Buyer, Inc., First Lien, Initial Term Loan, 4.147%, (1-month |
|
|
|
|
| USD LIBOR + 4%), 10/16/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 109,724 |
| 109,792 |
| Epicor Software Corp., Term Loan, B, 5.25%, (1-month USD LIBOR |
|
|
|
|
| + 4.25%), 7/30/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 35,772 |
| 36,050 |
| jGreeneden U.S. Holdings I LLC, Term Loan, B, 4.75%, (1-month |
|
|
|
|
| USD LIBOR + 4%), 12/01/27.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 48,391 |
| 48,565 |
| Ivanti Software, Inc., First Lien, Initial Term Loan, 5.75%, (1-month |
|
|
|
|
| USD LIBOR), 12/01/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 70,000 |
| 69,956 |
| LogMeIn, Inc., First Lien, Initial Term Loan, 4.903%, (1-month USD |
|
|
|
|
| LIBOR + 4.75%), 8/31/27.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 102,166 |
| 102,038 |
| Mitchell International, Inc., First Lien, Amendment No. 2 New Term |
|
|
|
|
| Loan Facility, 4.75%, (1-month USD LIBOR + 4.25%), 11/29/24. . | United States | 49,875 |
| 50,012 |
| Perforce Software, Inc., First Lien, New Term Loan, 3.897%, |
|
|
|
|
| (1-month USD LIBOR + 3.75%), 7/01/26. . . . . . . . . . . . . . . . . . . | United States | 92,898 |
| 91,330 |
| Quest Software US Holdings, Inc., First Lien, Initial Term Loan, |
|
|
|
|
| 4.464%, (3-month USD LIBOR + 4.25%), 5/16/25. . . . . . . . . . . . | United States | 259,338 |
| 255,708 |
| Surf Holdings SARL, First Lien, Dollar Term Loan, 3.726%, (3-month |
|
|
|
|
| USD LIBOR + 3.5%), 3/05/27. . . . . . . . . . . . . . . . . . . . . . . . . . . | Luxembourg | 149,250 |
| 148,168 |
| Veritas US, Inc., Term Loan, B, 6.5%, (3-month USD LIBOR + 5.5%), |
|
|
|
|
| 9/01/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 209,475 |
| 209,187 |
|
|
|
|
| 2,247,667 |
| Specialty Retail 0.1% |
|
|
|
|
| jPetco Animal Supplies, Inc., Term Loan, 4.25%, (3-month USD |
|
|
|
|
| LIBOR + 3.25%), 1/26/23.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 390,000 |
| 374,509 |
| jWoof Holdings, Inc., First Lien, Initial Term Loan, 4.5%, (1-year USD |
|
|
|
|
| LIBOR), 12/21/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 23,675 |
| 23,685 |
|
|
|
|
| 398,194 |
| Technology Hardware, Storage & Peripherals 0.0%† |
|
|
|
|
| Amentum Government Services Holdings LLC, Incremental Term |
|
|
|
|
| Loan, 5.5%, (3-month USD LIBOR + 4.75%), 1/29/27.. . . . . . . . . | United States | 40,000 |
| 40,400 |
| Cardtronics USA, Inc., Initial Term Loan, 5%, (1-month USD LIBOR + |
|
|
|
|
| 4%), 6/29/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 120,319 |
| 120,670 |
|
|
|
|
| 161,070 |
| Wireless Telecommunication Services 0.0%† |
|
|
|
|
| iAltice France SA, USD Incremental Term Loan, B-13, 4.237%, |
|
|
|
|
| (3-month USD LIBOR + 4%), 8/14/26.. . . . . . . . . . . . . . . . . . . . . | France | 39,575 |
| 39,505 |
| Total Senior Floating Rate Interests (Cost $22,304,442) | .. . . . . . . . . . . . . . . . | . . . . . . . . . . |
| 19,263,703 |
| nMarketplace Loans 0.3% |
|
|
|
|
|
|
|
|
| |
| Diversified Financial Services 0.3% |
|
|
|
|
| aLending Club - LCX PM, 8.46% - 18.24%, 10/08/23 - 12/24/25. . . . | United States | 154,160 |
| 146,510 |
| aLending Club - LCX, 6.46% - 25.65%, 8/22/22 - 2/28/25. . . . . . . . . | United States | 1,014,431 |
| 911,812 |
|
|
|
|
| 1,058,322 |
| Total Marketplace Loans (Cost $1,124,821).. . . . . . . . . . . | . . . . . . . . . . |
| 1,058,322 | |
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-25
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
oLoan Participations and Assignments 0.4% |
|
|
|
| |
b,gRussian Railways Via RZD Capital plc, Senior Note, Reg S, 5.7%, |
|
|
|
| |
| 4/05/22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Russia | 1,500,000 |
| $1,588,495 |
| .. . . . . .Total Loan Participations and Assignments (Cost $1,540,890) | . . . . . . . . . . . . | . . | 1,588,495 | |
| Foreign Government and Agency Securities 14.1% |
|
|
|
|
|
|
|
|
| |
gAfrican Export-Import Bank (The), Senior Note, 144A, 3.994%, |
|
|
|
| |
| 9/21/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Supranationalp | 2,000,000 |
| 2,149,200 |
gAngola Government Bond, Senior Note, 144A, 8.25%, 5/09/28. . . . | Angola | 2,900,000 |
| 2,789,580 | |
gBanque Centrale de Tunisie, Senior Note, Reg S, 5.625%, 2/17/24. | Tunisia | 2,300,000 | EUR | 2,607,818 | |
gBanque Ouest Africaine de Developpement, Senior Note, 144A, 5%, |
|
|
|
| |
| 7/27/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Supranationalp | 1,200,000 |
| 1,346,232 |
gBelarus Government Bond, |
|
|
|
| |
| Senior Note, 144A, 7.625%, 6/29/27. . . . . . . . . . . . . . . . . . . . . . | Belarus | 1,200,000 |
| 1,326,120 |
| Senior Bond, 144A, 6.2%, 2/28/30.. . . . . . . . . . . . . . . . . . . . . . . | Belarus | 1,200,000 |
| 1,218,984 |
| Colombia Government Bond, |
|
|
|
|
| Senior Bond, 3.875%, 4/25/27.. . . . . . . . . . . . . . . . . . . . . . . . . . | Colombia | 1,400,000 |
| 1,563,184 |
| Senior Bond, 9.85%, 6/28/27.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Colombia | 5,315,000,000 | COP | 2,027,512 |
| Senior Bond, 4.5%, 3/15/29.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Colombia | 500,000 |
| 579,905 |
| Senior Bond, 5%, 6/15/45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Colombia | 1,900,000 |
| 2,325,125 |
gDominican Republic Government Bond, Senior Note, 144A, 8.9%, | Dominican |
|
|
| |
| 2/15/23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Republic | 81,500,000 | DOP | 1,446,712 |
| Ecopetrol SA, Senior Bond, 4.125%, 1/16/25.. . . . . . . . . . . . . . . . . | Colombia | 800,000 |
| 871,008 |
f,gElectricite de France SA, Junior Sub. Bond, 144A, 5.25% to 1/29/23, |
|
|
|
| |
| FRN thereafter, Perpetual. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 2,425,000 |
| 2,575,398 |
| Equinor ASA, Senior Note, 2.375%, 5/22/30. . . . . . . . . . . . . . . . . . | Norway | 700,000 |
| 749,760 |
gExport-Import Bank of India, Senior Note, 144A, 3.875%, 2/01/28. . | India | 1,655,000 |
| 1,827,880 | |
gGabon Government Bond, |
|
|
|
| |
| 144A, 6.375%, 12/12/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Gabon | 837,538 |
| 874,180 |
| Senior Bond, 144A, 6.625%, 2/06/31.. . . . . . . . . . . . . . . . . . . . . | Gabon | 1,600,000 |
| 1,656,092 |
gIndonesia Asahan Aluminium Persero PT, Senior Note, 144A, 5.45%, |
|
|
|
| |
| 5/15/30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Indonesia | 1,000,000 |
| 1,204,398 |
| Indonesia Government Bond, |
|
|
|
|
| FR70, 8.375%, 3/15/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Indonesia | 19,648,000,000 | IDR | 1,540,668 |
g | Senior Bond, 144A, 4.35%, 1/08/27.. . . . . . . . . . . . . . . . . . . . . . | Indonesia | 900,000 |
| 1,049,314 |
g | Senior Note, 144A, 3.85%, 7/18/27. . . . . . . . . . . . . . . . . . . . . . . | Indonesia | 2,200,000 |
| 2,517,809 |
| FR64, 6.125%, 5/15/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Indonesia | 26,500,000,000 | IDR | 1,915,922 |
gIraq Government Bond, Senior Bond, 144A, 5.8%, 1/15/28. . . . . . . | Iraq | 2,531,250 |
| 2,380,780 | |
gIsrael Electric Corp. Ltd., Senior Secured Bond, 144A, Reg S, 4.25%, |
|
|
|
| |
| 8/14/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Israel | 1,000,000 |
| 1,157,500 |
gKazakhstan Government Bond, Senior Bond, 144A, 4.875%, |
|
|
|
| |
| 10/14/44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Kazakhstan | 1,800,000 |
| 2,446,146 |
| Mexican Bonos Desarr Fixed Rate, M, 6.5%, 6/10/21. . . . . . . . . . . | Mexico | 29,300,000 | MXN | 1,486,084 |
| Mexico Government Bond, |
|
|
|
|
| Senior Note, 4.15%, 3/28/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Mexico | 3,200,000 |
| 3,698,000 |
| Senior Note, 3.75%, 1/11/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Mexico | 500,000 |
| 562,873 |
| Panama Notas del Tesoro, Senior Note, 3.75%, 4/17/26. . . . . . . . . | Panama | 600,000 |
| 657,819 |
| Peru Government Bond, Senior Bond, 6.55%, 3/14/37. . . . . . . . . . | Peru | 800,000 |
| 1,217,436 |
gRussia Government Bond, |
|
|
|
| |
| Senior Note, 144A, 4.875%, 9/16/23. . . . . . . . . . . . . . . . . . . . . . | Russia | 800,000 |
| 880,417 |
| Senior Note, Reg S, 4.75%, 5/27/26.. . . . . . . . . . . . . . . . . . . . . . | Russia | 1,200,000 |
| 1,388,273 |
| Turkey Government Bond, Senior Bond, 4.875%, 10/09/26.. . . . . . | Turkey | 800,000 |
| 810,905 |
gTurkiye Vakiflar Bankasi TAO, Covered Note, Reg S, 2.375%, |
|
|
|
| |
| 5/04/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Turkey | 500,000 | EUR | 610,826 |
gUkraine Government Bond, |
|
|
|
| |
| Senior Note, 144A, 7.75%, 9/01/22. . . . . . . . . . . . . . . . . . . . . . . | Ukraine | 200,000 |
| 214,355 |
FSI-26
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Foreign Government and Agency Securities (continued) |
|
|
|
|
gUkraine Government Bond, (continued) |
|
|
|
| |
| Senior Note, 144A, 7.75%, 9/01/23. . . . . . . . . . . . . . . . . . . . . . . | Ukraine | 369,000 |
| $406,500 |
| Senior Note, 144A, 7.75%, 9/01/24. . . . . . . . . . . . . . . . . . . . . . . | Ukraine | 369,000 |
| 411,141 |
| Senior Bond, 144A, 7.375%, 9/25/32.. . . . . . . . . . . . . . . . . . . . . | Ukraine | 500,000 |
| 550,938 |
q | VRI, GDP Linked Security, Senior Bond, 144A, Reg S, 5/31/40.. . | Ukraine | 978,000 |
| 1,011,149 |
rUruguay Government Bond, |
|
|
|
| |
| Index Linked, Senior Bond, 4.375%, 12/15/28. . . . . . . . . . . . . . . | Uruguay | 5,175,408 | UYU | 140,886 |
| Index Linked, Senior Bond, 3.7%, 6/26/37. . . . . . . . . . . . . . . . . . | Uruguay | 86,381,752 | UYU | 2,306,641 |
| . . .Total Foreign Government and Agency Securities (Cost $55,820,228) | . . . . . . . . . | . . | 58,501,470 | |
| U.S. Government and Agency Securities 2.8% |
|
|
|
|
|
|
|
|
| |
| U.S. Treasury Bonds, 7.875%, 2/15/21. . . . . . . . . . . . . . . . . . . . . . | United States | 728,000 |
| 734,422 |
| U.S. Treasury Notes, |
|
|
|
|
| 1.5%, 11/30/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,000,000 |
| 3,037,774 |
| 0.25%, 6/30/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,100,000 |
| 4,089,109 |
r | 0.375%, 7/15/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,200,000 |
| 3,860,115 |
| .. . . . . .Total U.S. Government and Agency Securities (Cost $11,326,478) | . . . . . . . . . | . . | 11,721,420 | |
| Asset-Backed Securities 7.4% |
|
|
|
|
|
|
|
|
| |
| Capital Markets 0.1% |
|
|
|
|
g,sMountain View CLO XIV Ltd., 2019-1A, C, 144A, FRN, 3.137%, |
|
|
|
| |
| (3-month USD LIBOR + 2.9%), 4/15/29. . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 501,254 |
| Consumer Finance 0.4% |
|
|
|
|
sCitibank Credit Card Issuance Trust, 2017-A7, A7, FRN, 0.522%, |
|
|
|
| |
| (1-month USD LIBOR + 0.37%), 8/08/24. . . . . . . . . . . . . . . . . . . | United States | 1,494,000 |
| 1,502,418 |
| Diversified Financial Services 6.9% |
|
|
|
|
g,sAMMC CLO XI Ltd., 2012-11A, BR2, 144A, FRN, 1.814%, (3-month |
|
|
|
| |
| USD LIBOR + 1.6%), 4/30/31. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 350,000 |
| 344,496 |
g,sAntares CLO Ltd., 2018-1A, B, 144A, FRN, 1.868%, (3-month USD |
|
|
|
| |
| LIBOR + 1.65%), 4/20/31.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,455,000 |
| 1,397,324 |
g,sAres L CLO Ltd., 2018-50A, B, 144A, FRN, 1.937%, (3-month USD |
|
|
|
| |
| LIBOR + 1.7%), 1/15/32.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 500,000 |
| 500,127 |
g,sBCC Middle Market CLO LLC, 2018-1A, A2, 144A, FRN, 2.368%, |
|
|
|
| |
| (3-month USD LIBOR + 2.15%), 10/20/30. . . . . . . . . . . . . . . . . . | United States | 700,000 |
| 683,735 |
g,sBlueMountain CLO Ltd., |
|
|
|
| |
| 2012-2A, BR2, 144A, FRN, 1.674%, (3-month USD LIBOR + |
|
|
|
|
| 1.45%), 11/20/28.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 510,000 |
| 504,939 |
| 2012-2A, CR2, 144A, FRN, 2.224%, (3-month USD LIBOR + 2%), |
|
|
|
|
| 11/20/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 270,000 |
| 265,332 |
| 2018-1A, D, 144A, FRN, 3.264%, (3-month USD LIBOR + 3.05%), |
|
|
|
|
| 7/30/30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,000,000 |
| 970,105 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-27
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Asset-Backed Securities (continued) |
|
|
|
|
| Diversified Financial Services (continued) |
|
|
|
|
| g,sBlueMountain Fuji EUR CLO V DAC, 5A, B, 144A, FRN, 1.55%, |
|
|
|
|
| (3-month EURIBOR + 1.55%), 1/15/33.. . . . . . . . . . . . . . . . . . . . | Ireland | 600,000 | EUR | $735,141 |
| g,sBurnham Park CLO Ltd., 2016-1A, BR, 144A, FRN, 1.718%, |
|
|
|
|
| (3-month USD LIBOR + 1.5%), 10/20/29. . . . . . . . . . . . . . . . . . . | United States | 460,000 |
| 457,804 |
| g,sButtermilk Park CLO Ltd., 2018-1A, C, 144A, FRN, 2.337%, |
|
|
|
|
| (3-month USD LIBOR + 2.1%), 10/15/31. . . . . . . . . . . . . . . . . . . | United States | 1,408,860 |
| 1,406,889 |
| g,sCarlyle Global Market Strategies CLO Ltd., 2014-4RA, C, 144A, |
|
|
|
|
| FRN, 3.137%, (3-month USD LIBOR + 2.9%), 7/15/30.. . . . . . . . | United States | 300,000 |
| 274,620 |
| g,sCarlyle GMS Finance MM CLO LLC, 2015-1A, A2R, 144A, FRN, |
|
|
|
|
| 2.437%, (3-month USD LIBOR + 2.2%), 10/15/31. . . . . . . . . . . . | United States | 1,213,000 |
| 1,190,157 |
| gCF Hippolyta LLC, 2020-1, A1, 144A, 1.69%, 7/15/60. . . . . . . . . . . | United States | 400,839 |
| 409,396 |
| g,sCole Park CLO Ltd., 2015-1A, BR, 144A, FRN, 1.818%, (3-month |
|
|
|
|
| USD LIBOR + 1.6%), 10/20/28.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 270,000 |
| 269,625 |
| g,tConsumer Loan Underlying Bond Certificate Issuer Trust I, |
|
|
|
|
| 2019-51, PT, 144A, FRN, 16.982%, 1/15/45.. . . . . . . . . . . . . . . . | United States | 708,828 |
| 648,805 |
| 2019-52, PT, 144A, FRN, 16.935%, 1/15/45.. . . . . . . . . . . . . . . . | United States | 763,700 |
| 700,499 |
| 2019-S8, PT, 144A, FRN, 10.802%, 1/15/45.. . . . . . . . . . . . . . . . | United States | 521,690 |
| 464,500 |
| 2020-2, PT, 144A, FRN, 17.002%, 3/15/45.. . . . . . . . . . . . . . . . . | United States | 719,410 |
| 653,540 |
| 2020-7, PT, 144A, FRN, 16.864%, 4/17/45.. . . . . . . . . . . . . . . . . | United States | 437,411 |
| 396,887 |
| tCWABS Asset-Backed Certificates Trust, 2005-11, AF4, FRN, 5.21%, |
|
|
|
|
| 3/25/34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 173,415 |
| 174,012 |
| g,sDryden 38 Senior Loan Fund, 2015-38A, CR, 144A, FRN, 2.237%, |
|
|
|
|
| (3-month USD LIBOR + 2%), 7/15/30.. . . . . . . . . . . . . . . . . . . . . | United States | 863,000 |
| 855,927 |
| g,sDryden 55 CLO Ltd., 2018-55A, D, 144A, FRN, 3.087%, (3-month |
|
|
|
|
| USD LIBOR + 2.85%), 4/15/31.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 300,000 |
| 289,420 |
| g,sEaton Vance CLO Ltd., 2014-1RA, C, 144A, FRN, 2.337%, (3-month |
|
|
|
|
| USD LIBOR + 2.1%), 7/15/30. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 315,610 |
| 311,691 |
| g,sGalaxy XVIII CLO Ltd., 2018-28A, C, 144A, FRN, 2.187%, (3-month |
|
|
|
|
| USD LIBOR + 1.95%), 7/15/31.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 250,000 |
| 246,117 |
| g,sGalaxy XXVII CLO Ltd., 2018-27A, C, 144A, FRN, 2.021%, (3-month |
|
|
|
|
| USD LIBOR + 1.8%), 5/16/31. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,000 |
| 393,561 |
| g,sLCM 26 Ltd., 26A, B, 144A, FRN, 1.618%, (3-month USD LIBOR + |
|
|
|
|
| 1.4%), 1/20/31.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 250,000 |
| 245,072 |
| g,sLCM XVI LP, 16A, BR2, 144A, FRN, 1.987%, (3-month USD LIBOR |
|
|
|
|
| + 1.75%), 10/15/31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 351,320 |
| 350,138 |
| g,sLCM XVII LP, |
|
|
|
|
| 17A, BRR, 144A, FRN, 1.837%, (3-month USD LIBOR + 1.6%), |
|
|
|
|
| 10/15/31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 350,000 |
| 345,715 |
| 17A, CRR, 144A, FRN, 2.337%, (3-month USD LIBOR + 2.1%), |
|
|
|
|
| 10/15/31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 320,000 |
| 313,869 |
FSI-28
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Asset-Backed Securities (continued) |
|
|
|
|
| Diversified Financial Services (continued) |
|
|
|
|
| g,sLCM XVIII LP, 18A, DR, 144A, FRN, 3.018%, (3-month USD LIBOR |
|
|
|
|
| + 2.8%), 4/20/31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 770,000 |
| $720,136 |
| g,sMadison Park Euro Funding VIII DAC, 8A, BRN, 144A, FRN, 1.7%, |
|
|
|
|
| (3-month EURIBOR + 1.7%), 4/15/32.. . . . . . . . . . . . . . . . . . . . . | Ireland | 400,000 | EUR | 487,070 |
| g,tMill City Mortgage Loan Trust, 2018-4, A1B, 144A, FRN, 3.5%, |
|
|
|
|
| 4/25/66. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,295,400 |
| 1,380,073 |
| g,sNZCG Funding Ltd., 2015-1A, A2R, 144A, FRN, 1.783%, (3-month |
|
|
|
|
| USD LIBOR + 1.55%), 2/26/31.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,182,000 |
| 2,157,945 |
| g,sOctagon Investment Partners 28 Ltd., 2016-1A, BR, 144A, FRN, |
|
|
|
|
| 2.015%, (3-month USD LIBOR + 1.8%), 10/24/30. . . . . . . . . . . . | United States | 250,000 |
| 250,450 |
| g,sOctagon Investment Partners 36 Ltd., 2018-1A, A1, 144A, FRN, |
|
|
|
|
| 1.207%, (3-month USD LIBOR + 0.97%), 4/15/31. . . . . . . . . . . . | United States | 500,000 |
| 496,500 |
| g,sOctagon Investment Partners 37 Ltd., 2018-2A, C, 144A, FRN, |
|
|
|
|
| 3.065%, (3-month USD LIBOR + 2.85%), 7/25/30. . . . . . . . . . . . | United States | 400,000 |
| 385,314 |
| g,sOctagon Investment Partners 38 Ltd., 2018-1A, C, 144A, FRN, |
|
|
|
|
| 3.168%, (3-month USD LIBOR + 2.95%), 7/20/30. . . . . . . . . . . . | United States | 1,000,000 |
| 970,204 |
| g,sOctagon Investment Partners XVI Ltd., 2013-1A, DR, 144A, FRN, |
|
|
|
|
| 3.218%, (3-month USD LIBOR + 3%), 7/17/30.. . . . . . . . . . . . . . | United States | 400,000 |
| 389,323 |
| g,sOctagon Investment Partners XXIII Ltd., 2015-1A, BR, 144A, FRN, |
|
|
|
|
| 1.437%, (3-month USD LIBOR + 1.2%), 7/15/27. . . . . . . . . . . . . | United States | 400,000 |
| 395,986 |
| g,tProsper Pass-Thru Trust III, |
|
|
|
|
| 2020-PT1, A, 144A, FRN, 8.796%, 3/15/26. . . . . . . . . . . . . . . . . | United States | 466,317 |
| 459,362 |
| 2020-PT2, A, 144A, FRN, 9.444%, 4/15/26. . . . . . . . . . . . . . . . . | United States | 505,280 |
| 496,413 |
| 2020-PT3, A, 144A, FRN, 7.183%, 5/15/26. . . . . . . . . . . . . . . . . | United States | 137,464 |
| 138,797 |
| g,sStrata CLO I Ltd., 2018-1A, B, 144A, FRN, 2.437%, (3-month USD |
|
|
|
|
| LIBOR + 2.2%), 1/15/31.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,300,000 |
| 1,261,259 |
| gUpgrade Master Pass-Thru Trust, 2019-PT2, A, 144A, 7.727%, |
|
|
|
|
| 2/15/26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 400,840 |
| 395,389 |
| g,sVoya CLO Ltd., |
|
|
|
|
| 2013-2A, BR, 144A, FRN, 2.065%, (3-month USD LIBOR + |
|
|
|
|
| 1.85%), 4/25/31.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 780,000 |
| 763,576 |
| 2014-1A, CR2, 144A, FRN, 3.018%, (3-month USD LIBOR + |
|
|
|
|
| 2.8%), 4/18/31.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,000,000 |
| 961,898 |
| 2015-2A, BR, 144A, FRN, 1.709%, (3-month USD LIBOR + 1.5%), |
|
|
|
|
| 7/23/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 820,000 |
| 819,081 |
|
|
|
|
| 28,728,219 |
| Total Asset-Backed Securities (Cost $31,155,171).. . . . . | . . . . . . . . . . . . . . . . | . . . . . . . . | . . | 30,731,891 |
| Commercial Mortgage-Backed Securities 0.0% |
|
|
|
|
|
|
|
|
| |
| Diversified Financial Services 0.0%† |
|
|
|
|
| tCommercial Mortgage Trust, 2006-GG7, AJ, FRN, 6.012%, 7/10/38. | United States | 187,688 |
| 168,966 |
| .. . . . . . . . .Total Commercial Mortgage-Backed Securities (Cost $181,026) | . . . . . . . . | . . | 168,966 | |
| Mortgage-Backed Securities 4.4% |
|
|
|
|
|
|
|
|
| |
| uFederal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.0%† |
|
|
|
|
| FHLMC, 3.848%, (1-year CMT T-Note +/- MBS Margin), 1/01/33.. . | United States | 5,225 |
| 5,215 |
| Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 0.1% |
|
|
|
|
| FHLMC Gold Pools, 20 Year, 7%, 9/01/21.. . . . . . . . . . . . . . . . . . . | United States | 789 |
| 799 |
| FHLMC Gold Pools, 30 Year, 5%, 4/01/34 - 8/01/35.. . . . . . . . . . . . | United States | 156,020 |
| 180,992 |
| FHLMC Gold Pools, 30 Year, 5.5%, 3/01/33 - 1/01/35. . . . . . . . . . . | United States | 94,440 |
| 108,044 |
| FHLMC Gold Pools, 30 Year, 6%, 4/01/33 - 2/01/36.. . . . . . . . . . . . | United States | 75,245 |
| 87,536 |
| FHLMC Gold Pools, 30 Year, 6.5%, 11/01/27 - 7/01/32. . . . . . . . . . | United States | 12,952 |
| 14,529 |
| FHLMC Gold Pools, 30 Year, 7%, 4/01/30.. . . . . . . . . . . . . . . . . . . | United States | 1,509 |
| 1,712 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-29
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Mortgage-Backed Securities (continued) |
|
|
|
|
| Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate (continued) |
|
|
|
|
| FHLMC Gold Pools, 30 Year, 7.5%, 8/01/30. . . . . . . . . . . . . . . . . . | United States | 151 |
| $181 |
|
|
|
|
| 393,793 |
| uFederal National Mortgage Association (FNMA) Adjustable Rate 0.0%† |
|
|
| |
| FNMA, 2.329%, (1-year CMT T-Note +/- MBS Margin), 12/01/34.. . | United States | 52,104 |
| 53,256 |
| Federal National Mortgage Association (FNMA) Fixed Rate 3.8% |
|
|
|
|
| FNMA, 10 Year, 2.5%, 7/01/22. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,959 |
| 3,083 |
| FNMA, 20 Year, 5%, 4/01/30.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 30,810 |
| 34,968 |
| FNMA, 30 Year, 3%, 9/01/48 - 9/01/50. . . . . . . . . . . . . . . . . . . . . . | United States | 3,302,928 |
| 3,484,965 |
| FNMA, 30 Year, 4.5%, 5/01/48. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,137,703 |
| 3,472,138 |
| FNMA, 30 Year, 6.5%, 6/01/28 - 10/01/37. . . . . . . . . . . . . . . . . . . . | United States | 90,432 |
| 105,082 |
| vFNMA, Single-family, 15 Year, 1.5%, 1/25/36.. . . . . . . . . . . . . . . . . | United States | 608,000 |
| 625,532 |
| vFNMA, Single-family, 15 Year, 2%, 1/25/36. . . . . . . . . . . . . . . . . . . | United States | 1,791,000 |
| 1,872,307 |
| vFNMA, Single-family, 30 Year, 2%, 1/25/51. . . . . . . . . . . . . . . . . . . | United States | 2,016,000 |
| 2,094,039 |
| vFNMA, Single-family, 30 Year, 2.5%, 1/25/51.. . . . . . . . . . . . . . . . . | United States | 3,948,000 |
| 4,161,433 |
|
|
|
|
| 15,853,547 |
| Government National Mortgage Association (GNMA) Fixed Rate 0.5% |
|
|
|
|
| GNMA I, Single-family, 30 Year, 5%, 11/15/33 - 7/15/34.. . . . . . . . . | United States | 130,258 |
| 149,004 |
| GNMA I, Single-family, 30 Year, 7%, 10/15/28 - 6/15/32.. . . . . . . . . | United States | 12,077 |
| 12,179 |
| GNMA I, Single-family, 30 Year, 7.5%, 9/15/30.. . . . . . . . . . . . . . . . | United States | 1,046 |
| 1,233 |
| GNMA II, 30 Year, 6.5%, 2/20/34.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,167 |
| 3,390 |
| vGNMA II, Single-family, 30 Year, 2%, 1/15/51. . . . . . . . . . . . . . . . . | United States | 797,000 |
| 833,393 |
| vGNMA II, Single-family, 30 Year, 2.5%, 1/15/51.. . . . . . . . . . . . . . . | United States | 789,000 |
| 835,138 |
| GNMA II, Single-family, 30 Year, 5%, 9/20/33 - 11/20/33. . . . . . . . . | United States | 35,633 |
| 40,628 |
| GNMA II, Single-family, 30 Year, 6%, 11/20/34.. . . . . . . . . . . . . . . . | United States | 52,258 |
| 61,262 |
| GNMA II, Single-family, 30 Year, 6.5%, 4/20/31 - 1/20/33.. . . . . . . . | United States | 21,619 |
| 25,518 |
| GNMA II, Single-family, 30 Year, 7.5%, 1/20/28 - 4/20/32.. . . . . . . . | United States | 7,444 |
| 8,627 |
|
|
|
|
| 1,970,372 |
| Total Mortgage-Backed Securities (Cost $17,822,728). . . | . . . . . . . . . . |
| 18,276,183 | |
| Municipal Bonds 1.9% |
|
|
|
|
|
|
|
|
| |
| California 0.3% |
|
|
|
|
| City of San Francisco, Public Utilities Commission Water, Revenue, |
|
|
|
|
| 2019 A, Refunding, 3.473%, 11/01/43. . . . . . . . . . . . . . . . . . . . . | United States | 230,000 |
| 245,969 |
| San Bernardino Community College District, GO, 2019 A-1, 3.271%, |
|
|
|
|
| 8/01/39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 210,000 |
| 225,128 |
| San Diego County Regional Transportation Commission, Revenue, |
|
|
|
|
| 2019 A, Refunding, 3.248%, 4/01/48. . . . . . . . . . . . . . . . . . . . . . | United States | 230,000 |
| 241,880 |
| San Jose Redevelopment Agency Successor Agency, Tax Allocation, |
|
|
|
|
| Senior Lien, 2017A-T, Refunding, 3.25%, 8/01/29.. . . . . . . . . . . . | United States | 440,000 |
| 484,981 |
|
|
|
|
| 1,197,958 |
| Colorado 0.1% |
|
|
|
|
| Metro Wastewater Reclamation District, Revenue, 2019 B, |
|
|
|
|
| Refunding, 3.158%, 4/01/41.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 475,000 |
| 507,405 |
| Hawaii 0.0%† |
|
|
|
|
| City & County Honolulu, Wastewater System, Revenue, 2019 B, |
|
|
|
|
| Refunding, 2.585%, 7/01/28.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 115,000 |
| 125,289 |
| Illinois 0.2% |
|
|
|
|
| State of Illinois, GO, 2003, 5.1%, 6/01/33. . . . . . . . . . . . . . . . . . . . | United States | 695,000 |
| 748,494 |
FSI-30
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Municipal Bonds (continued) |
|
|
|
|
| Massachusetts 0.1% |
|
|
|
|
| Massachusetts School Building Authority, Revenue, 2019 B, |
|
|
|
|
| Refunding, 3.395%, 10/15/40.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 285,000 |
| $306,820 |
| New Jersey 0.3% |
|
|
|
|
| New Jersey Transportation Trust Fund Authority, Revenue, 2019 B, |
|
|
|
|
| Refunding, 4.131%, 6/15/42.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 345,000 |
| 358,848 |
| State of New Jersey, GO, 2020 A, 3%, 6/01/32. . . . . . . . . . . . . . . . | United States | 670,000 |
| 758,876 |
|
|
|
|
| 1,117,724 |
| New York 0.2% |
|
|
|
|
| Metropolitan Transportation Authority, Revenue, 2020 E, Refunding, |
|
|
|
|
| 4%, 11/15/45.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 535,000 |
| 594,358 |
| New York State Dormitory Authority, State University of New York, |
|
|
|
|
| Revenue, 2019B, Refunding, 3.142%, 7/01/43.. . . . . . . . . . . . . . | United States | 305,000 |
| 321,690 |
|
|
|
|
| 916,048 |
| Ohio 0.0%† |
|
|
|
|
| State of Ohio, Cleveland Clinic Health System Obligated Group, |
|
|
|
|
| Revenue, 2019G, Refunding, 3.276%, 1/01/42.. . . . . . . . . . . . . . | United States | 190,000 |
| 217,673 |
| Oregon 0.1% |
|
|
|
|
| State of Oregon, Department of Transportation, Revenue, Senior |
|
|
|
|
| Lien, 2019 B, Refunding, 3.168%, 11/15/38. . . . . . . . . . . . . . . . . | United States | 380,000 |
| 415,188 |
| Pennsylvania 0.1% |
|
|
|
|
| University of Pittsburgh-of the Commonwealth System of Higher |
|
|
|
|
| Education, Revenue, 2017 C, Refunding, 3.005%, 9/15/41.. . . . . | United States | 535,000 |
| 577,484 |
| Texas 0.3% |
|
|
|
|
| State of Texas, GO, 2019, Refunding, 3.211%, 4/01/44. . . . . . . . . . | United States | 575,000 |
| 628,688 |
| Texas State University System, |
|
|
|
|
| Revenue, 2019 B, Refunding, 2.938%, 3/15/33. . . . . . . . . . . . . . | United States | 225,000 |
| 241,420 |
| Revenue, 2019 B, Refunding, 3.289%, 3/15/40. . . . . . . . . . . . . . | United States | 190,000 |
| 202,622 |
|
|
|
|
| 1,072,730 |
| Utah 0.2% |
|
|
|
|
| Salt Lake City Corp., Revenue, 2019B, Refunding, 3.102%, 4/01/38. | United States | 270,000 |
| 288,700 |
| Utah Transit Authority, Revenue, Senior Lien, 2019 B, Refunding, |
|
|
|
|
| 3.443%, 12/15/42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 380,000 |
| 404,936 |
|
|
|
|
| 693,636 |
| . . .Total Municipal Bonds (Cost $7,317,208).. . . . . . . . . . | . . . . . . . . . . . . . . . . . | . . . . . . . . . |
| 7,896,449 |
| Residential Mortgage-Backed Securities 9.2% |
|
|
|
|
|
|
|
|
| |
| Capital Markets 0.0%† |
|
|
|
|
sMerrill Lynch Mortgage Investors Trust, 2005-A6, 2A3, FRN, 0.908%, |
|
|
|
| |
| (1-month USD LIBOR + 0.76%), 8/25/35. . . . . . . . . . . . . . . . . . . | United States | 21,117 |
| 21,198 |
| Diversified Financial Services 1.0% |
|
|
|
|
gBRAVO Residential Funding Trust, |
|
|
|
| |
| 2019-1, A1C, 144A, 3.5%, 3/25/58.. . . . . . . . . . . . . . . . . . . . . . . | United States | 613,889 |
| 634,560 |
t | 2019-2, A3, 144A, FRN, 3.5%, 10/25/44.. . . . . . . . . . . . . . . . . . . | United States | 768,053 |
| 805,331 |
g,tCIM Trust, |
|
|
|
| |
| 2019-INV1, A1, 144A, FRN, 4%, 2/25/49. . . . . . . . . . . . . . . . . . . | United States | 600,708 |
| 619,320 |
| 2019-INV2, A3, 144A, FRN, 4%, 5/25/49. . . . . . . . . . . . . . . . . . . | United States | 907,672 |
| 936,065 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-31
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Residential Mortgage-Backed Securities (continued) |
|
|
|
|
| Diversified Financial Services (continued) |
|
|
|
|
| sOpteum Mortgage Acceptance Corp., 2005-4, 1APT, FRN, 0.768%, |
|
|
|
|
| (1-month USD LIBOR + 0.62%), 11/25/35. . . . . . . . . . . . . . . . . . | United States | 67,520 |
| $67,920 |
| g,tProvident Funding Mortgage Trust, |
|
|
|
|
| 2019-1, A2, 144A, FRN, 3%, 12/25/49.. . . . . . . . . . . . . . . . . . . . | United States | 465,351 |
| 474,318 |
| 2020-1, A3, 144A, FRN, 3%, 2/25/50.. . . . . . . . . . . . . . . . . . . . . | United States | 375,964 |
| 380,316 |
|
|
|
|
| 3,917,830 |
| Thrifts & Mortgage Finance 8.2% |
|
|
|
|
| sFHLMC Structured Agency Credit Risk Debt Notes, |
|
|
|
|
| 2013-DN2, M2, FRN, 4.398%, (1-month USD LIBOR + 4.25%), |
|
|
|
|
| 11/25/23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,345,934 |
| 1,343,078 |
| 2014-DN1, M2, FRN, 2.348%, (1-month USD LIBOR + 2.2%), |
|
|
|
|
| 2/25/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 22,416 |
| 22,422 |
| 2014-DN2, M3, FRN, 3.748%, (1-month USD LIBOR + 3.6%), |
|
|
|
|
| 4/25/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,892,663 |
| 1,886,781 |
| 2014-DN3, M3, FRN, 4.148%, (1-month USD LIBOR + 4%), |
|
|
|
|
| 8/25/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 102,845 |
| 105,317 |
| 2014-DN4, M3, FRN, 4.698%, (1-month USD LIBOR + 4.55%), |
|
|
|
|
| 10/25/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 689,967 |
| 710,297 |
| 2014-HQ1, M3, FRN, 4.248%, (1-month USD LIBOR + 4.1%), |
|
|
|
|
| 8/25/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 136,762 |
| 138,585 |
| 2014-HQ3, M3, FRN, 4.898%, (1-month USD LIBOR + 4.75%), |
|
|
|
|
| 10/25/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 254,633 |
| 257,957 |
| 2015-DNA1, M3, FRN, 3.448%, (1-month USD LIBOR + 3.3%), |
|
|
|
|
| 10/25/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 223,860 |
| 230,332 |
| 2015-DNA3, M3, FRN, 4.848%, (1-month USD LIBOR + 4.7%), |
|
|
|
|
| 4/25/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,696,952 |
| 1,773,752 |
| 2015-HQ1, M3, FRN, 3.948%, (1-month USD LIBOR + 3.8%), |
|
|
|
|
| 3/25/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 45,611 |
| 45,687 |
| 2015-HQA1, M3, FRN, 4.848%, (1-month USD LIBOR + 4.7%), |
|
|
|
|
| 3/25/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,342,225 |
| 1,398,629 |
| 2016-DNA2, M3, FRN, 4.798%, (1-month USD LIBOR + 4.65%), |
|
|
|
|
| 10/25/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,166,344 |
| 1,218,721 |
| 2017-DNA1, M2, FRN, 3.398%, (1-month USD LIBOR + 3.25%), |
|
|
|
|
| 7/25/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 951,707 |
| 978,330 |
| 2017-DNA2, M2, FRN, 3.598%, (1-month USD LIBOR + 3.45%), |
|
|
|
|
| 10/25/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,340,000 |
| 1,390,235 |
| 2017-DNA3, M2, FRN, 2.648%, (1-month USD LIBOR + 2.5%), |
|
|
|
|
| 3/25/30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,920,000 |
| 2,973,134 |
| 2017-HQA1, M2, FRN, 3.698%, (1-month USD LIBOR + 3.55%), |
|
|
|
|
| 8/25/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,005,103 |
| 1,036,194 |
| 2017-HQA2, M2, FRN, 2.798%, (1-month USD LIBOR + 2.65%), |
|
|
|
|
| 12/25/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 241,238 |
| 244,015 |
| sFNMA Connecticut Avenue Securities, |
|
|
|
|
| 2013-C01, M2, FRN, 5.398%, (1-month USD LIBOR + 5.25%), |
|
|
|
|
| 10/25/23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 214,448 |
| 220,182 |
| 2014-C01, M2, FRN, 4.548%, (1-month USD LIBOR + 4.4%), |
|
|
|
|
| 1/25/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 347,157 |
| 351,179 |
| 2014-C02, 1M2, FRN, 2.748%, (1-month USD LIBOR + 2.6%), |
|
|
|
|
| 5/25/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 978,969 |
| 957,220 |
| 2014-C02, 2M2, FRN, 2.748%, (1-month USD LIBOR + 2.6%), |
|
|
|
|
| 5/25/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 444,575 |
| 442,325 |
| 2014-C03, 1M2, FRN, 3.148%, (1-month USD LIBOR + 3%), |
|
|
|
|
| 7/25/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,931,764 |
| 1,882,261 |
| 2014-C03, 2M2, FRN, 3.048%, (1-month USD LIBOR + 2.9%), |
|
|
|
|
| 7/25/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 81,831 |
| 82,299 |
FSI-32
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CONSOLIDATED STATEMENT OF INVESTMENTS
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a | ||
| Residential Mortgage-Backed Securities (continued) |
|
|
|
|
|
|
| Thrifts & Mortgage Finance (continued) |
|
|
|
|
|
|
| sFNMA Connecticut Avenue Securities, (continued) |
|
|
|
|
|
|
| 2015-C01, 1M2, FRN, 4.448%, (1-month USD LIBOR + 4.3%), |
|
|
|
|
|
|
| 2/25/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 531,192 |
|
| $543,650 | |
| 2015-C01, 2M2, FRN, 4.698%, (1-month USD LIBOR + 4.55%), |
|
|
|
|
|
|
| 2/25/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 234,859 |
| 239,036 | ||
| 2015-C02, 1M2, FRN, 4.148%, (1-month USD LIBOR + 4%), |
|
|
|
|
|
|
| 5/25/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,203,085 |
| 1,229,346 | ||
| 2015-C02, 2M2, FRN, 4.148%, (1-month USD LIBOR + 4%), |
|
|
|
|
|
|
| 5/25/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 366,794 |
| 373,938 | ||
| 2015-C03, 1M2, FRN, 5.148%, (1-month USD LIBOR + 5%), |
|
|
|
|
|
|
| 7/25/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,739,745 |
| 1,795,648 | ||
| 2015-C03, 2M2, FRN, 5.148%, (1-month USD LIBOR + 5%), |
|
|
|
|
|
|
| 7/25/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 542,653 |
| 552,706 | ||
| 2016-C02, 1M2, FRN, 6.148%, (1-month USD LIBOR + 6%), |
|
|
|
|
|
|
| 9/25/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 429,054 |
| 456,534 | ||
| 2016-C04, 1M2, FRN, 4.398%, (1-month USD LIBOR + 4.25%), |
|
|
|
|
|
|
| 1/25/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,044,857 |
| 1,091,766 | ||
| 2016-C05, 2M2, FRN, 4.598%, (1-month USD LIBOR + 4.45%), |
|
|
|
|
|
|
| 1/25/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 883,907 |
| 923,805 | ||
| 2016-C06, 1M2, FRN, 4.398%, (1-month USD LIBOR + 4.25%), |
|
|
|
|
|
|
| 4/25/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 327,468 |
| 344,228 | ||
| 2016-C07, 2M2, FRN, 4.498%, (1-month USD LIBOR + 4.35%), |
|
|
|
|
|
|
| 5/25/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 651,875 |
| 681,900 | ||
| 2017-C01, 1M2, FRN, 3.698%, (1-month USD LIBOR + 3.55%), |
|
|
|
|
|
|
| 7/25/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,300,637 |
| 1,343,672 | ||
| 2017-C03, 1M2, FRN, 3.148%, (1-month USD LIBOR + 3%), |
|
|
|
|
|
|
| 10/25/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,474,115 |
| 2,512,265 | ||
| 2017-C04, 2M2, FRN, 2.998%, (1-month USD LIBOR + 2.85%), |
|
|
|
|
|
|
| 11/25/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 543,795 |
| 549,738 | ||
| 2017-C05, 1M2, FRN, 2.348%, (1-month USD LIBOR + 2.2%), |
|
|
|
|
|
|
| 1/25/30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,582,605 |
| 1,587,189 | ||
|
|
|
|
|
|
| 33,914,353 |
| .. . . . . . . . . . . . . .Total Residential Mortgage-Backed Securities (Cost $39,920,163) | . . . |
| 37,853,381 | |||
| Escrows and Litigation Trusts 0.0%† |
|
| Shares/Units |
|
| |
|
|
|
|
| |||
|
|
|
|
|
|
| |
| a,bMillennium Corporate Claim Trust, Escrow Account.. . . . . . . . . . . . | United States | 950,432 |
|
| — | |
| a,bMillennium Lender Claim Trust, Escrow Account. . . . . . . . . . . . . . . | United States | 950,432 |
|
| — | |
| a,bRemington Outdoor Co., Inc., Litigation Units. . . . . . . . . . . . . . . . . | United States | 7,021 |
|
| — | |
| bSanchez Energy Corp., Escrow Account.. . . . . . . . . . . . . . . . . . . . | United States | 243,000 |
|
| 2,430 | |
| a,bVistra Energy Corp., Escrow Account. . . . . . . . . . . . . . . . . . . . . . . | United States | 3,000,000 |
|
| 4,500 | |
| .. . .Total Escrows and Litigation Trusts (Cost $325,648) | . . . . . . . . . . . . . . | . . . . . . . . . | . . . |
| 6,930 | |
| Total Long Term Investments (Cost $400,257,843).. . |
|
|
|
|
|
|
| . . . . . . . . . . . . . . | . . . . . . . . . | . . . |
| 401,502,481 | ||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-33
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
Short Term Investments 3.1%
a | a | Country | Shares | a |
| a |
|
|
|
Value
Money Market Funds 3.1%
d,wInstitutional Fiduciary Trust - Money Market Portfolio, 0%. . . . . . . . | United States | 12,853,316 | $12,853,316 |
Total Money Market Funds (Cost $12,853,316).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Short Term Investments (Cost $12,853,316). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Investments (Cost $413,111,159) 100.1%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities (0.1)%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,853,316
12,853,316
$414,355,797 (479,329)
$413,876,468
*The principal amount is stated in U.S. dollars unless otherwise indicated.
† Rounds to less than 0.1% of net assets.
a Fair valued using significant unobservable inputs. See Note 13 regarding fair value measurements. b Non-income producing.
c See Note 9 regarding restricted securities.
d See Note 3(e) regarding investments in affiliated management investment companies. e Income may be received in additional securities and/or cash.
f Perpetual security with no stated maturity date.
g Security was purchased pursuant to Rule 144A or Regulation S under the Securities Act of 1933. 144A securities may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. Regulation S securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At December 31, 2020, the aggregate value of these securities was $197,936,278, representing 47.8% of net assets.
hSee Note 1(i) regarding senior floating rate interests.
iThe coupon rate shown represents the rate at period end.
jA portion or all of the security purchased on a delayed delivery basis. See Note 1(c).
kA portion or all of the security represents an unsettled loan commitment. The coupon rate is to-be determined (TBD) at the time of the settlement and will be based upon a reference index/floor plus a spread.
lSee Note 7 regarding credit risk and defaulted securities.
mSee Note 10 regarding unfunded loan commitments.
nSee Note 1(j) regarding Marketplace Lending.
oSee Note 1(e) regarding loan participations and assignments.
pA supranational organization is an entity formed by two or more central governments through international treaties.
qThe principal represents the notional amount. See Note 1(d) regarding value recovery instruments.
rPrincipal amount of security is adjusted for inflation. See Note 1(l).
sThe coupon rate shown represents the rate inclusive of any caps or floors, if applicable, in effect at period end.
tAdjustable rate security with an interest rate that is not based on a published reference index and spread. The rate is based on the structure of the agreement and current market conditions. The coupon rate shown represents the rate at period end.
uAdjustable Rate Mortgage-Backed Security (ARM); the rate shown is the effective rate at period end. ARM rates are not based on a published reference rate and spread, but instead pass-through weighted average interest income inclusive of any caps or floors, if applicable, from the underlying mortgage loans in which the majority of mortgages pay interest based on the index shown at their designated reset dates plus a spread, less the applicable servicing and guaranty fee (MBS margin).
vSecurity purchased on a to-be-announced (TBA) basis. See Note 1(c).
wThe rate shown is the annualized seven-day effective yield at period end.
FSI-34
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
At December 31, 2020, the Fund had the following futures contracts outstanding. See Note 1(d).
Futures Contracts
|
|
|
|
| Value/ |
|
|
|
|
| Unrealized |
|
| Number of | Notional | Expiration | Appreciation |
Description | Type | Contracts | Amount* | Date | (Depreciation) |
Interest rate contracts |
|
|
|
|
|
Australia 3 Year Bonds.. . . . . . . . . . . . . . . . . . . . . . . . | Long | 114 | $10,321,435 | 3/15/21 | $8,233 |
U.S. Treasury 10 Year Notes.. . . . . . . . . . . . . . . . . . . . | Long | 15 | 2,071,172 | 3/22/21 | 1,620 |
U.S. Treasury 10 Year Ultra Notes.. . . . . . . . . . . . . . . . | Short | 4 | 625,438 | 3/22/21 | 1,593 |
U.S. Treasury 5 Year Notes.. . . . . . . . . . . . . . . . . . . . . | Long | 128 | 16,149,000 | 3/31/21 | 27,524 |
U.S. Treasury Ultra Bonds. . . . . . . . . . . . . . . . . . . . . . | Long | 4 | 854,250 | 3/22/21 | (4,006) |
Total Futures Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $34,964 |
*As of period end.
At December 31, 2020, the Fund had the following forward exchange contracts outstanding. See Note 1(d).
Forward Exchange Contracts
| Counter- |
|
| Contract | Settlement | Unrealized | Unrealized |
Currency | partya | Type | Quantity | Amount* | Date | Appreciation | Depreciation |
a | a | a | a | a | a | a | a |
OTC Forward Exchange Contracts |
|
|
|
|
|
| |
Canadian Dollar. . . . . | JPHQ | Buy | 1,400,000 | 1,099,480 | 1/11/21 | $2,315 | $(1,173) |
Canadian Dollar. . . . . | JPHQ | Sell | 3,300,000 | 2,486,250 | 1/11/21 | — | (108,073) |
Turkish Lira. . . . . . . . | JPHQ | Buy | 5,800,000 | 726,817 | 1/11/21 | 51,590 | — |
Japanese Yen.. . . . . . | CITI | Buy | 558,485,200 | 5,289,045 | 1/12/21 | 120,229 | — |
Japanese Yen.. . . . . . | CITI | Sell | 446,300,000 | 4,304,923 | 1/12/21 | — | (17,768) |
Japanese Yen.. . . . . . | JPHQ | Buy | 13,000,000 | 123,599 | 1/12/21 | 2,314 | — |
Singapore Dollar.. . . . | JPHQ | Sell | 1,400,000 | 1,039,771 | 1/12/21 | — | (20,240) |
Mexican Peso.. . . . . . | JPHQ | Buy | 18,000,000 | 837,449 | 1/19/21 | 66,275 | — |
Australian Dollar.. . . . | JPHQ | Buy | 3,740,000 | 2,752,652 | 1/25/21 | 131,735 | — |
Australian Dollar.. . . . | JPHQ | Sell | 7,250,000 | 5,126,240 | 1/25/21 | — | (465,154) |
South African Rand.. . | JPHQ | Buy | 6,200,000 | 391,983 | 2/16/21 | 27,564 | — |
South African Rand.. . | JPHQ | Sell | 6,200,000 | 396,546 | 2/16/21 | — | (23,000) |
Canadian Dollar. . . . . | JPHQ | Sell | 2,000,000 | 1,526,013 | 2/25/21 | — | (46,811) |
Indonesian Rupiah. . . | JPHQ | Sell | 7,200,000,000 | 506,686 | 3/01/21 | — | (8,712) |
Euro.. . . . . . . . . . . . . | JPHQ | Buy | 570,000 | 698,906 | 3/15/21 | — | (1,442) |
Euro.. . . . . . . . . . . . . | JPHQ | Sell | 3,250,000 | 3,952,991 | 3/15/21 | — | (23,777) |
Japanese Yen.. . . . . . | JPHQ | Buy | 366,000,000 | 3,525,448 | 3/15/21 | 21,974 | — |
Total Forward Exchange Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $423,996 | $(716,150) | |||||
Net unrealized appreciation (depreciation). . . . . | . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . | . . . . . . . . |
| $(292,154) |
*In U.S. dollars unless otherwise indicated.
aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.
At December 31, 2020, the Fund had the following credit default swap contracts outstanding. See Note 1(d).
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-35
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS
Franklin Strategic Income VIP Fund (continued)
Credit Default Swap Contracts
| Periodic |
|
|
|
|
|
|
|
|
|
|
| Payment |
|
|
|
|
|
| Unamortized |
|
|
|
| Rate |
|
|
|
|
|
| Upfront | Unrealized |
| |
| Received | Payment | Counter- | Maturity | Notional |
| Payments | Appreciation |
| ||
Description | (Paid) | Frequency | party | Date | Amount(a) | Value | (Receipts) | (Depreciation) | Rating(b) | ||
Centrally Cleared Swap Contracts |
|
|
|
|
|
|
|
|
|
| |
Contracts to Sell Protection(c)(d) |
|
|
|
|
|
|
|
|
|
| |
Traded Index |
|
|
|
|
|
|
|
|
|
| Investment |
|
|
|
|
|
|
|
|
|
|
| |
CDX.NA.EM.33.. . . . . | 1.00% | Quarterly |
| 6/20/25 | $2,150,000 |
| $(1,980) | $(74,019) | $72,039 |
| Grade |
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
|
|
| Investment |
CDX.NA.HY.35. . . . . . | 5.00% | Quarterly |
| 12/20/25 | 6,500,000 |
| 616,115 | 385,807 | 230,308 |
| Grade |
Total Centrally Cleared Swap Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $614,135 | $311,788 | $302,347 |
|
| ||||||
OTC Swap Contracts |
|
|
|
|
|
|
|
|
|
|
|
Contracts to Buy Protection(c) |
|
|
|
|
|
|
|
|
|
| |
Single Name |
|
|
|
|
|
|
|
|
|
|
|
Ally Financial, Inc... . . | (5.00)% | Quarterly | JPHQ | 12/20/24 | 1,810,000 | (307,511) | (268,424) | (39,087) |
| ||
Contracts to Sell Protection(c)(d) |
|
|
|
|
|
|
|
|
|
| |
Single Name |
|
|
|
|
|
|
|
|
|
|
|
Air France-KLM.. . . . . | 5.00% | Quarterly | MSCO | 12/20/25 | 660,000 | (12,517) | 782 | (13,299) | NR | ||
American Airlines |
|
|
|
|
|
|
|
|
|
|
|
Group, Inc.. . . . . . . | 5.00% | Quarterly | CITI | 12/20/21 | 800,000 | (51,644) | (51,885) | 241 | CCC | ||
Carnival Corp... . . . . . | 1.00% | Quarterly | CITI | 12/20/25 | 800,000 | (132,993) | (124,287) | (8,706) | B | ||
Macy's, Inc.. . . . . . . . | 1.00% | Quarterly | JPHQ | 12/20/25 | 800,000 | (151,097) | (148,042) | (3,055) | B | ||
Royal Caribbean |
|
|
|
|
|
|
|
|
|
|
|
Cruises Ltd.. . . . . . | 5.00% | Quarterly | BZWS | 12/20/25 | 800,000 | (54,781) | (23,674) | (31,107) | B+ | ||
United Airlines Holdings, |
|
|
|
|
|
|
|
|
|
|
|
Inc.. . . . . . . . . . . . | 5.00% | Quarterly | FBCO | 12/20/25 | 584,000 | (18,145) | (2,786) | (15,359) | B | ||
Traded Index |
|
|
|
|
|
|
|
|
|
|
|
(e)Citibank Bespoke |
|
|
|
|
|
|
|
|
|
|
|
Palma Index, |
|
|
|
|
|
|
|
|
|
| Non- |
Mezzanine Tranche |
|
|
|
|
|
|
|
|
|
| Investment |
5-7%. . . . . . . . . . . | 2.30% | Quarterly | CITI | 6/20/21 | 620,000 | 3,402 | — | 3,402 | Grade | ||
|
|
|
|
|
|
|
|
|
|
| Investment |
MCDX.NA.MAIN.31.. . | 1.00% | Quarterly | CITI | 12/20/23 | 2,270,000 |
| 2,301 | 13,636 | (11,335) |
| Grade |
(e)Morgan Stanley |
|
|
|
|
|
|
|
|
|
|
|
Bespoke Pecan |
|
|
|
|
|
|
|
|
|
| Non- |
Index, Mezzanine |
|
|
|
|
|
|
|
|
|
| Investment |
Tranche 5-10%. . . . | 3.98% | Quarterly | MSCO | 12/20/21 | 850,000 | (73,154) | — | (73,154) | Grade | ||
(e)Morgan Stanley |
|
|
|
|
|
|
|
|
|
|
|
Bespoke Pecan |
|
|
|
|
|
|
|
|
|
| Non- |
Index, Mezzanine |
|
|
|
|
|
|
|
|
|
| Investment |
Tranche 5-10%. . . . | 4.10% | Quarterly | MSCO | 12/20/21 | 850,000 | (72,174) | — | (72,174) | Grade | ||
Total OTC Swap Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| $(868,313) | $(604,680) | $(263,633) |
|
| |||||
Total Credit Default Swap Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| $(254,178) | $(292,892) | $38,714 |
|
|
(a)In U.S. dollars unless otherwise indicated. For contracts to sell protection, the notional amount is equal to the maximum potential amount of the future payments and no recourse provisions have been entered into in association with the contracts.
(b)Based on Standard and Poor's (S&P) Rating for single name swaps and internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from external vendors.
(c)Performance triggers for settlement of contract include default, bankruptcy or restructuring for single name swaps, and failure to pay or bankruptcy of the underlying securities for traded index swaps.
(d)The fund enters contracts to sell protection to create a long credit position.
(e)Represents a custom index comprised of a basket of underlying instruments.
FSI-36
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS
At December 31, 2020, the Fund had the following cross-currency swap contracts outstanding. See Note 1(d).
Cross-Currency Swap Contracts
|
|
|
|
|
| Value/ |
|
|
|
|
|
| Unrealized |
| Payment | Counter- | Maturity | Notional |
| Appreciation |
Description | Frequency | party | Date | Amount |
| (Depreciation) |
OTC Swap Contracts |
|
|
|
|
|
|
Receive Floating 3-month USD LIBOR + 2.87%. . . . . . | Quarterly |
|
| 464,800 | USD |
|
Pay Fixed 2.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Annual | CITI | 5/04/21 | 400,000 | EUR | $(30,316) |
Total Cross Currency Swap Contracts. . . . . . . . . . . . . . | . . . . . . . . . . | . . . . . . . . . . . | . . . . . . . . . . . . . . | . . . . . . . . | . . . | $(30,316) |
At December 31, 2020, the Fund had the following inflation index swap contracts outstanding. See Note 1(d).
Inflation Index Swap Contracts
|
|
|
|
|
| Unamortized |
|
|
|
|
|
|
| Upfront | Unrealized |
| Payment | Counter- | Maturity | Notional |
| Payments | Appreciation |
Description | Frequency | party | Date | Amount | Value | (Receipts) | (Depreciation) |
Centrally Cleared Swap Contracts |
|
|
|
|
|
| |
Receive variable change |
|
|
|
|
|
|
|
in USA CPI-U.. . . . . . . . | At Maturity |
|
|
|
|
|
|
Pay Fixed 1.943%. . . . . | At Maturity |
| 1/15/29 | $6,100,000 | $65,742 | $— | $65,742 |
Total Inflation Index Swap Contracts. | . . . . . . . . . . | . . . . . . . . . . . | . . . . . . . . . . . . | $65,742 | $— | $65,742 |
At December 31, 2020, the Fund had the following total return swap contracts outstanding. See Note 1(d).
Total Return Swap Contracts
|
|
|
|
|
| Value/ |
|
|
|
|
|
| Unrealized |
| Financing | Payment | Counter- | Maturity | Notional | Appreciation |
Underlying Instruments | Rate | Frequency | party | Date | Value* | (Depreciation) |
OTC Swap Contracts |
|
|
|
|
|
|
Long(a) |
|
|
|
|
|
|
Markit iBoxx USD Liquid Leveraged Loans Total | 3-month |
|
|
|
|
|
Return Index.. . . . . . . . . . . . . . . . . . . . . . . . . . . | USD LIBOR | Quarterly | MSCO | 6/20/21 | 325,000 | $2,065 |
Markit iBoxx USD Liquid Leveraged Loans Total | 3-month |
|
|
|
|
|
Return Index.. . . . . . . . . . . . . . . . . . . . . . . . . . . | USD LIBOR | Quarterly | MSCO | 6/20/21 | 325,000 | 1,611 |
Markit iBoxx USD Liquid Leveraged Loans Total | 3-month |
|
|
|
|
|
Return Index.. . . . . . . . . . . . . . . . . . . . . . . . . . . | USD LIBOR | Quarterly | MSCO | 6/20/21 | 240,000 | 989 |
Markit iBoxx USD Liquid Leveraged Loans Total | 3-month |
|
|
|
|
|
Return Index.. . . . . . . . . . . . . . . . . . . . . . . . . . . | USD LIBOR | Quarterly | MSCO | 9/20/21 | 410,000 | 2,777 |
Total Return Swap Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $7,442 |
*In U.S. dollars unless otherwise indicated.
(a)The Fund receives the total return on the underlying instrument and pays a variable financing rate. See Note 11 regarding other derivative information.
See Abbreviations on page FSI-61.
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-37
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Consolidated Statement of Assets and Liabilities
December 31, 2020
| Franklin |
| Strategic |
| Income VIP |
| Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $389,185,698 |
Cost - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 23,925,461 |
Value - Unaffiliated issuers .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $393,020,829 |
Value - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 21,334,968 |
Cash.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 6,629,818 |
Receivables: |
|
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 268,490 |
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,810,835 |
Deposits with brokers for: |
|
OTC derivative contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,909,876 |
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 193,518 |
Centrally cleared swap contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,152,977 |
Variation margin on futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 10,949 |
OTC swap contracts (upfront payments $23,539).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 14,418 |
Unrealized appreciation on OTC forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 423,996 |
Unrealized appreciation on OTC swap contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 11,085 |
Unrealized appreciation on unfunded loan commitments (Note 10).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,400 |
FT Subsidiary deferred tax benefit (Note 1g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 137,222 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 80 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 428,926,461 |
Liabilities: |
|
Payables: |
|
Investment securities purchased.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 12,298,976 |
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 62,132 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 213,179 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 36,379 |
Variation margin on centrally cleared swap contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 538,561 |
OTC swap contracts (upfront receipts $714,124). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 619,098 |
Unrealized depreciation on OTC swap contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 297,592 |
Unrealized depreciation on OTC forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 716,150 |
Deferred tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 54,261 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 213,665 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 15,049,993 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $413,876,468 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $450,218,963 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (36,342,495) |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $413,876,468 |
FSI-38
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Consolidated Statement of Assets and Liabilities (continued)
December 31, 2020
| Franklin |
| Strategic |
| Income VIP |
| Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $261,409,346 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 24,302,005 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $10.76 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $100,757,697 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 9,721,802 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $10.36 |
Class 4: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $51,709,425 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 4,848,769 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $10.66 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-39
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Consolidated Statement of Operations
for the year ended December 31, 2020
Franklin
Strategic
Income VIP
Fund
Investment income:
Dividends:
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest: (net of foreign taxes of $25,586)
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from securities loaned:
Unaffiliated entities (net of fees and rebates).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution fees: (Note 3c)
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketplace lending fees (Note 1j).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expense reductions (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses waived/paid by affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments: (net of foreign taxes of $898)
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Written options.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Futures contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TBA sale commitments.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swap contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlled affiliates (Note 3e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation of other assets and liabilities denominated in foreign currencies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Futures contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swap contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in deferred taxes on unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in unrealized appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$483,339
16,703,285
336
17,186,960
2,556,654
235,921
179,018
9,943
142,435
104,525
2,416
120,881
147,228
3,499,021
(11,119)
(71,858)
3,416,044
13,770,916
(4,616,127)
(523,154)
(171,172)
(2,799,147)
(744,280)
5,817
(2,569,623)
(11,417,686)
10,510,494
(783,266)
(86,172)
488,142
198,223
(5,714)
(28,061)
10,293,646
(1,124,040)
$12,646,876
FSI-40
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Consolidated Statements of Changes in Net Assets
| Franklin Strategic Income VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $13,770,916 | $17,904,759 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (11,417,686) | (907,193) |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | 10,293,646 | 18,715,962 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | 12,646,876 | 35,713,528 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (13,266,507) | (16,055,733) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (4,661,916) | (4,608,498) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2,304,505) | (2,951,572) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (20,232,928) | (23,615,803) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (18,953,107) | (25,284,669) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,309,317 | 3,227,556 |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,743,816) | (7,826,645) |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (13,387,606) | (29,883,758) |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | (20,973,658) | (17,786,033) |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 434,850,126 | 452,636,159 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $413,876,468 | $434,850,126 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FSI-41
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Notes to Consolidated Financial Statements
Franklin Strategic Income VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Strategic Income VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At December 31, 2020, 76.3% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could
have a material impact on the Fund. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust's Board of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities and derivative financial instruments listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities
are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is
determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund's pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.
Investments in open-end mutual funds are valued at the closing NAV.
Certain derivative financial instruments are centrally cleared or trade in the OTC market. The Fund's pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund's net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate
FSI-42
Annual Report
Franklin Strategic Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
a. Financial Instrument Valuation (continued)
fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Events can occur between the time at which trading in a foreign security
is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund's portfolio securities as determined at the foreign market close and the latest indications of value at
4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund's securities to the latest indications of fair value at 4 p.m. Eastern time. At December 31, 2020, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy. See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result in differences between the value of the Fund's portfolio securities on the last business day and the last calendar day of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Consolidated Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Securities Purchased on a Delayed Delivery and TBA Basis
The Fund purchases securities on a delayed delivery and to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities and collateral has been pledged and/or received for open TBA trades.
d. Derivative Financial Instruments
The Fund invested in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response
Annual Report
FSI-43
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
d. Derivative Financial Instruments (continued)
to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Consolidated Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Consolidated Statement of Operations.
Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements
with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination.
Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure
of the Fund to maintain certain net asset levels and/ or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.
Collateral requirements differ by type of derivative. Collateral terms are contract specific for OTC derivatives. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to
$250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values
may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund, if any, is held in segregated accounts with the Fund's custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund's investment objectives. To the extent that the amounts
due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.
The Fund entered into exchange traded futures contracts primarily to manage and/or gain exposure to interest rate risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable.
The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.
The Fund entered into credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-the- counter market (OTC credit default swaps) or may be executed in a multilateral trade facility platform, such as
a registered exchange (centrally cleared credit default swaps). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, a basket of issuers or indices, or a tranche of a credit index or basket of issuers or indices. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other
FSI-44
Annual Report
Franklin Strategic Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
d. Derivative Financial Instruments (continued)
agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Consolidated Statement of Assets and Liabilities. Over the term of the contract,
the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected
in the Consolidated Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Consolidated Statement of Operations.
The Fund entered into OTC cross currency swap contracts primarily to manage and/or gain exposure to certain foreign currencies. A cross currency swap is an agreement between the Fund and a counterparty to exchange cash flows (determined using either a fixed or floating rate) based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the opening of the contract. Cross currency swaps may require the exchange of notional amounts at the opening and/or closing of the contract. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Consolidated Statement of Assets and Liabilities and represent compensating factors between stated terms of the cross currency swap contract and prevailing market conditions (interest rate spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Consolidated Statement of Operations.
The Fund entered into inflation index swap contracts primarily to manage and/or gain exposure to inflation risk. An inflation index swap is an agreement between the Fund and a counterparty to exchange cash flows whereby one
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
party makes payments based on the percentage change in an index that serves as a measure of inflation and the other party makes a regular payment based on a compounded fixed rate, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC inflation index swap) or may be executed on a registered exchange (centrally cleared inflation index swap). For centrally cleared inflation index swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable
or receivable. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized. Typically, an inflation index swap has payment obligations netted and exchanged upon maturity.
The Fund entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is
an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional amount. These agreements may be privately negotiated in the over-the- counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps). For centrally cleared interest rate swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Consolidated Statement of Assets and Liabilities . Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized. The Fund did not hold any interest rate swap contracts at period end.
The Fund entered into OTC total return swap contracts primarily to manage and/or gain exposure to credit and other market risks of an underlying instrument such as a stock, bond, index or basket of securities or indices. A total return swap is an agreement between the Fund and a counterparty to exchange a return linked to an underlying instrument for a floating or fixed rate payment, both based upon a notional amount. Over the term of the contract, contractually required payments to be paid or received are accrued daily and recorded as unrealized appreciation or depreciation until the payments are made, at which time they are recognized as realized gain or loss.
Annual Report
FSI-45
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
d. Derivative Financial Instruments (continued)
The Fund purchased or wrote OTC option contracts primarily to manage and/or gain exposure to interest rate and credit risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset
or notional amount of a swap (swaption), at a specified price. When an option is purchased or written, an amount equal to the premium paid or received is recorded as an asset or liability, respectively. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium received or paid and the cost to close the position is recorded as a realized gain or loss. The Fund did not hold any option contracts at period end.
The Fund invests in value recovery instruments (VRI) primarily to gain exposure to economic growth. Periodic payments from VRI are dependent on established benchmarks for underlying variables. VRI has a notional amount, which is used to calculate amounts of payments to holders. Payments are recorded upon receipt as realized gains in the Consolidated Statement of Operations. The risks of investing in VRI include growth risk, liquidity, and the potential loss of investment.
See Note 10 regarding other derivative information.
Participation. The Participations may also involve interest rate risk and liquidity risk, including the potential default or insolvency of the borrower and/or the Lender.
f. Securities Lending
The Fund participates in an agency based securities lending program to earn additional income. The Fund receives collateral in the form of cash and/or U.S. Government
and Agency securities against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. Any cash collateral received is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, in the Statement of Assets and Liabilities. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/ or third-party vendor, is reported separately in the Statement of Operations. The Fund bears the market risk with respect to any cash collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. At December 31, 2020, the Fund had no securities on loan.
e. Loan Participation Notes
The Fund invests in loan participation notes (Participations). Participations are loans originally issued to a borrower
by one or more financial institutions (the Lender) and subsequently sold to other investors, such as the Fund. Participations typically result in the Fund having a contractual relationship only with the Lender and not with the borrower. The Fund has the right to receive from the Lender any payments of principal, interest and fees which the Lender received from the borrower. The Fund generally has no rights to either enforce compliance by the borrower with the terms of the loan agreement or to any collateral relating to the original loan. As a result, the Fund assumes the credit risk of both the borrower and the Lender that is selling the
g.Investments in FT Holdings Corporation III (FT Subsidiary)
The Fund invested in a certain financial instrument through its investment in FT Subsidiary. FT Subsidiary is a Delaware Corporation, is a wholly-owned subsidiary of the Fund, and is able to invest in certain financial instruments consistent with the investment objective of the Fund. Prior to December 31, 2020, FT Subsidiary’s investment, Turtle Bay Resort, liquidated and paid a final distribution. At December 31, 2020, other assets and liabilities of FT Subsidiary are reflected in the Fund’s Consolidated Statement of Assets and Liabilities.
Prior to December 31, 2020, FT Subsidiary, which is a tax paying entity, recognized a realized loss on its Turtle Bay investment. An estimated deferred tax asset based on
FSI-46
Annual Report
Franklin Strategic Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
g.Investments in FT Holdings Corporation III (FT Subsidiary) (continued)
such realized loss is reflected as FT Subsidiary deferred tax benefit in the Consolidated Statement of Assets and Liabilities. The estimated benefit was calculated using a federal rate of 21%. The capital loss will be carried-back to offset prior year capital gains, resulting in a tax refund which will relieve the estimated deferred tax asset currently reflected in the Consolidated Statement of Assets and Liabilities once the final tax return is completed.
All intercompany transactions and balances have been eliminated. At December 31, 2020, the net assets of the FT Subsidiary were $6,319,678, representing 1.5% of the Fund's consolidated net assets.
h. Mortgage Dollar Rolls
The Fund enters into mortgage dollar rolls, typically on a TBA basis. Mortgage dollar rolls are agreements between the Fund and a financial institution where the Fund sells (or buys) mortgage-backed securities for delivery on a specified date and simultaneously contracts to repurchase (or sell) substantially similar (same type, coupon, and maturity) securities at a future date and at a predetermined price. Gains or losses are realized on the initial sale, and the difference between the repurchase price and the sale price is recorded as an unrealized gain or loss to the Fund upon entering into the mortgage dollar roll. In addition, the Fund may invest the cash proceeds that are received from the initial sale. During the period between the sale and repurchase, the Fund is not entitled to principal and interest paid on the mortgage backed securities. Transactions in mortgage dollar rolls are accounted for as purchases and sales and may result in an increase to the Fund's portfolio turnover rate. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill its obligations.
i. Senior Floating Rate Interests
The Fund invests in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity. Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to certain restrictions on resale. On July 27, 2017, the United Kingdom's Financial Conduct Authority announced its intention to cease sustaining LIBOR after 2021. There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate. As such, the potential effect of a transition away from LIBOR on the Fund or the Fund's investments that use or may use a floating rate based on LIBOR cannot yet be determined.
j. Marketplace Lending
The Fund invests in loans obtained through marketplace lending. Marketplace lending, sometimes referred to as peer-to-peer lending, is a method of financing in which a platform facilitates the borrowing and lending of money. It is considered an alternative to more traditional forms of debt financing. Prospective borrowers are required to provide certain financial information to the platform, including, but not limited to, the intended purpose of the loan, income, employment information, credit score, debt-to-income ratio, credit history (including defaults and delinquencies) and home ownership status. Based on this and other information, the platform assigns its own credit rating to the borrower and sets the interest rate for the requested loan. The platform then posts the borrowing requests online, giving investors the opportunity to purchase the loans based on factors such as the interest rates and expected yields of the loans, the borrower background data, and the credit rating assigned by the platform.
When the Fund invests in these loans, it usually purchases all rights, title and interest in the loans pursuant to a loan purchase agreement directly from the platform. The platform or a third-party servicer typically continues to service the loans, collecting payments and distributing them to the Fund, less any servicing fees assessed. The servicer is typically responsible for taking actions against a borrower in the event of a default on the loan. Servicing fees, along with other administration fees, are included in marketplace lending fees in the Consolidated Statement of Operations. The Fund, as an investor in a loan, would be entitled to receive payment only from the borrower and would not be able to recover any deficiency from the platform, except under very narrow circumstances. The loans in which the Fund may invest are unsecured.
Annual Report
FSI-47
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
k. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its consolidated financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
Inflation-indexed bonds are adjusted for inflation through periodic increases or decreases in the security's interest accruals, face amount, or principal redemption value, by amounts corresponding to the rate of inflation as measured by an index. Any increase or decrease in the face amount or principal redemption value will be included as interest income in the Consolidated Statement of Operations.
l. 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 estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Paydown gains and losses are recorded as an adjustment to interest income. Facility fees are recognized as income over the expected term of the loan. Dividend income is recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex- dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received
m. Accounting Estimates
The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
n. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service
FSI-48
Annual Report
Franklin Strategic Income VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
n. Guarantees and Indemnifications (continued)
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
|
| Year Ended |
| Year Ended |
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 2 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 4 Shares:
1,267,496 | $13,449,214 | 671,682 | $7,349,679 |
1,318,738 | 13,266,507 | 1,499,135 | 16,055,733 |
(4,401,405) | (45,668,828) | (4,454,817) | (48,690,081) |
(1,815,171) | $(18,953,107) | (2,284,000) | $(25,284,669) |
2,449,602 | $24,706,622 | 1,948,126 | $20,598,257 |
480,115 | 4,661,916 | 445,266 | 4,608,498 |
(2,205,780) | (22,059,221) | (2,080,736) | (21,979,199) |
723,937 | $7,309,317 | 312,656 | $3,227,556 |
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 667,460 | $6,966,802 | 332,522 | $3,653,954 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 230,681 | 2,304,505 | 277,403 | 2,951,572 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,079,161) | (11,015,123) | (1,334,939) | (14,432,171) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | (181,020) | $(1,743,816) | (725,014) | $(7,826,645) |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Advisers, Inc. (Advisers) | Investment manager |
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
|
|
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
|
|
Annual Report
FSI-49
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
3. Transactions with Affiliates (continued)
a. Management Fees
The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
0.625% | Up to and including $500 million |
0.525% | Over $500 million, up to and including $1 billion |
|
|
0.480% | Over $1 billion, up to and including $1.5 billion |
0.435% | Over $1.5 billion, up to and including $6.5 billion |
|
|
0.415% | Over $6.5 billion, up to and including $11.5 billion |
0.400% | Over $11.5 billion, up to and including $16.5 billion |
|
|
0.390% | Over $16.5 billion, up to and including $19 billion |
0.380% | Over $19 billion, up to and including $21.5 billion |
0.370% | In excess of $21.5 billion |
|
|
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.25% and 0.35% per year of its average daily net assets of Class 2 and Class 4, respectively. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Consolidated Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
|
|
|
|
| Net Change in |
| Number of |
|
| Value at |
|
|
| Unrealized | Value | Shares Held |
|
| Beginning |
|
| Realized Gain | Appreciation | at End | at End | Investment |
| of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Franklin Strategic Income VIP Fund |
|
|
|
|
|
|
|
|
Non-Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividends |
Franklin Floating Rate Income Fund. | $9,264,918 | $— | $— | $— | $(783,266) | $8,481,652 | 1,118,951 | $453,950 |
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Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
3. Transactions with Affiliates (continued)
e. Investments in Affiliated Management Investment Companies (continued)
|
|
|
|
| Net Change in |
| Number of |
|
| Value at |
|
|
| Unrealized | Value | Shares Held |
|
| Beginning |
|
| Realized Gain | Appreciation | at End | at End | Investment |
| of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Franklin Strategic Income VIP Fund (continued) |
|
|
|
|
|
|
| |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
|
Market Portfolio, 0%.. . . . . . . . . | $11,463,714 | $186,235,625 | $(184,846,023) | $— | $— | $12,853,316 | 12,853,316 | $29,389 |
Total Non-Controlled Affiliates. | $20,728,632 | $186,235,625 | $(184,846,023) | $— | $(783,266) | $21,334,968 |
| $483,339 |
Non-Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income from |
|
|
|
|
|
|
|
| securities |
|
|
|
|
|
|
|
| loaned |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
|
Market Portfolio, 0%.. . . . . . . . . | $— | $8,000 | $(8,000) | $— | $— | $—a | — | $— |
Total Affiliated Securities. . . . . | $20,728,632 | $186,243,625 | $(184,854,023) | $— | $(783,266) | $21,334,968 |
| $483,339 |
aAs of December 31, 2020, no longer held by the fund.
f. Interfund Transactions
The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended December 31, 2020, these purchase and sale transactions aggregated $0 and $4,384,452, respectively.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, the custodian fees were reduced as noted in the Consolidated Statement of Operations.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains.
At December 31, 2020, the capital loss carryforwards were as follows:
Capital loss carryforwards not subject to expiration: |
|
|
|
Short term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,303,755 | ||
Long term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . |
| 49,881,582 |
Total capital loss carryforwards.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . |
| $52,185,337 |
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows: |
| ||
| 2020 |
| 2019 |
Distributions paid from: |
|
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $20,232,928 |
| $23,615,803 |
Annual Report
FSI-51
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
5. Income Taxes (continued)
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$414,559,515
$18,888,934 (19,561,152)
$(672,218)
$12,469,053
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, bond discounts and premiums, swaps and investments in FT Subsidiary.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $468,263,225 and $494,986,718 respectively.
7. Credit Risk and Defaulted Securities
At December 31, 2020, the Fund had 50.2% of its portfolio invested in high yield, senior secured floating rate loans, or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.
The Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At December 31, 2020, the aggregate value of these securities was $1,039,401, representing 0.3% of the Fund's net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate
for losses on interest receivable. The securities have been identified in the accompanying Consolidated Statement of Investments.
8. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
9. Restricted Securities
The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act). Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.
FSI-52
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
9. Restricted Securities (continued)
At December 31, 2020, investments in restricted securities, excluding securities exempt from registration under the 1933 Act, were as follows:
|
| Acquisition |
|
|
Shares | Issuer | Date | Cost | Value |
Franklin Strategic Income VIP Fund |
|
|
| |
18,684 | aAppvion Operations, Inc. . . . . . . . . . . . . . . . . . . . . . . . | 4/12/19 | $252,712 | $322,094 |
14,792,309 | K2016470219 South Africa Ltd., A . . . . . . . . . . . . . . . . | 2/01/17 | 114,768 | — |
1,472,041 | K2016470219 South Africa Ltd., B . . . . . . . . . . . . . . . . | 2/01/17 | 1,093 | — |
74,576 | Remington Outdoor Co., Inc. . . . . . . . . . . . . . . . . . . . . | 4/12/19 | 95,085 | — |
| . . . .Total Restricted Securities (Value is 0.08% of Net Assets) | . . . . . . . . . | $463,658 | $322,094 |
aThe Fund also invests in unrestricted securities of the issuer, valued at $258,215 as of December 31, 2020.
10. Unfunded Loan Commitments
The Fund enters into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrowers’ discretion. Unfunded loan commitments and funded portions of credit agreements are marked to market daily and any unrealized appreciation or depreciation is included in the Consolidated Statement of Assets and Liabilities and the Consolidated Statement of Operations. Funded portions of credit agreements are presented in the Consolidated Statement of Investments.
At December 31, 2020, unfunded commitments were as follows:
Borrower | Unfunded Commitment |
Franklin Strategic Income VIP Fund |
|
Fieldwood Energy LLC | $268,429 |
Annual Report
FSI-53
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
11. Other Derivative Information
At December 31, 2020, investments in derivative contracts are reflected in the Consolidated Statement of Assets and Liabilities as follows:
| Asset Derivatives |
|
| Liability Derivatives |
|
| ||
Derivative Contracts | Consolidated Statement of |
|
| Consolidated Statement of |
|
| ||
Not Accounted for as | Assets and Liabilities |
|
| Assets and Liabilities |
|
| ||
Hedging Instruments | Location | Fair Value | Location | Fair Value | ||||
Franklin Strategic Income VIP Fund |
|
|
|
|
|
| ||
Interest rate contracts.. . . . . . . |
|
|
|
|
|
|
|
|
| Variation margin on futures | $38,970a | Variation margin on futures | $4,006a | ||||
| contracts |
|
| contracts |
|
| ||
| Variation margin on centrally | 65,742a | Variation margin on centrally | — | ||||
| cleared swap contracts |
|
| cleared swap contracts |
|
| ||
Foreign exchange contracts. . . |
|
|
|
|
|
|
|
|
| Unrealized appreciation on OTC | 423,996 |
| Unrealized depreciation on OTC | 716,150 |
| ||
| forward exchange contracts |
|
| forward exchange contracts |
|
| ||
| Unrealized appreciation on OTC | — | Unrealized depreciation on OTC | 30,316 |
| |||
| swap contracts |
|
| swap contracts |
|
| ||
Credit contracts. . . . . . . . . . . . |
|
|
|
|
|
|
|
|
| Variation margin on centrally | 302,347a | Variation margin on centrally | — | ||||
| cleared swap contracts |
|
| cleared swap contracts |
|
| ||
| OTC swap contracts (upfront | 14,418 |
| OTC swap contracts (upfront | 619,098 |
| ||
| payments) |
|
| receipts) |
|
| ||
| Unrealized appreciation on OTC | 11,085 |
| Unrealized depreciation on OTC | 267,276 |
| ||
| swap contracts |
|
| swap contracts |
|
| ||
Value recovery instruments.. . . |
|
|
|
|
|
|
|
|
| Investments in securities, at value | 1,011,149b | Options written, at value | — | ||||
Total.. . . . . . . . . . . . . . . . . . . . |
|
| $1,867,707 |
|
|
| $1,636,846 |
|
aThis amount reflects the cumulative appreciation (depreciation) of futures contracts and centrally cleared swap contracts as reported in the Consolidated Statement of Investments. Only the variation margin receivable/payable at year end is separately reported within the Consolidated Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.
bVRI are included in investments in securities, at value in the Consolidated Statement of Assets and Liabilities.
FSI-54
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
11. Other Derivative Information (continued)
For the year ended December 31, 2020, the effect of derivative contracts in the Consolidated Statement of Operations was as follows:
|
|
|
| Net Change in |
|
|
|
| Unrealized |
Derivative Contracts |
| Net Realized |
| Appreciation |
Not Accounted for as | Consolidated Statement of | Gain (Loss) for | Consolidated Statement of | (Depreciation) |
Hedging Instruments | Operations Location | the Year | Operations Location | for the Year |
| Net realized gain (loss) from: |
| Net change in unrealized |
|
|
|
| appreciation (depreciation) on: |
|
Franklin Strategic Income VIP Fund
Interest rate contracts.. . . . . . . |
|
|
|
|
|
| Investments | $(474,306)a | Investments | $— | |
| Written options | 190,296 |
| Written options | — |
| Futures contracts | (744,280) |
| Futures contracts | 198,223 |
| Swap contracts | (391,429) |
| Swap contracts | 120,225 |
Foreign exchange contracts. . . |
|
|
|
|
|
| Investments | 86,372a | Investments | — | |
| Swaps contracts | (54,285) |
| Swap contracts | (47,038) |
| Forward exchange contracts | (2,799,147) |
| Forward exchange contracts | 488,142 |
Credit contracts. . . . . . . . . . . . |
|
|
|
|
|
| Written options | (713,450) |
| Written options | — |
| Swaps contracts | (2,123,909) |
| Swap contracts | (78,901) |
Value recovery instruments | Investments | — | Investments | $73,492a | |
Total.. . . . . . . . . . . . . . . . . . . . |
| $(7,024,138) |
|
| $754,143 |
aPurchased option contracts and VRI are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Consolidated Statement of Operations.
For the year ended December 31, 2020, the average month end notional amount of futures contracts, swap contracts and options, and the average month end contract value for forward exchange contracts, and average month end fair value of VRI, were as follows:
| Franklin |
| Strategic |
| Income VIP |
| Fund |
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . | $77,554,046 |
Swap contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 43,911,612 |
Forward exchange contracts.. . . . . . . . . . . . . . . . . | 71,979,363 |
VRI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 893,200 |
Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,884,615 |
Annual Report
FSI-55
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
11. Other Derivative Information (continued)
At December 31, 2020, the Fund's OTC derivative assets and liabilities are as follows:
|
| Gross Amounts of |
|
| Assets and Liabilities Presented |
| |
| in the Consolidated Statement of Assets and Liabilities | ||
| Assetsa | Liabilitiesa |
|
Franklin Strategic Income VIP Fund |
|
| |
Derivatives |
|
| |
Forward exchange contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $423,996 | $716,150 | |
Swap contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| 25,503 | 916,690 |
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| $449,499 | $1,632,840 |
aAbsent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities.
At December 31, 2020, OTC derivative assets, which may be offset against OTC derivative liabilities and collateral received from the counterparty, are as follows:
|
| Amounts Not Offset in the |
|
|
| |
|
| Consolidated Statement of Assets and Liabilities |
| |||
| Gross |
|
|
|
|
|
| Amounts of |
|
|
|
|
|
| Assets Presented in | Financial | Financial |
|
|
|
| the Consolidated | Instruments | Instruments | Cash | Net Amount | |
| Statement of | Available for | Collateral | Collateral | (Not less | |
| Assets and Liabilities | Offset | Received | Received | than zero) | |
Franklin Strategic Income VIP Fund |
|
|
|
|
| |
Counterparty |
|
|
|
|
|
|
BZWS.. . . . . . . . . . . . . . . . . . . | $— | $— | $— | $— | $— | |
CITI.. . . . . . . . . . . . . . . . . . . . . | 137,508 | (137,508) | — | — | — | |
FBCO.. . . . . . . . . . . . . . . . . . . | — | — | — | — | — | |
JPHQ. . . . . . . . . . . . . . . . . . . . | 303,767 | (303,767) | — | — | — | |
MSCO.. . . . . . . . . . . . . . . . . . . | 8,224 | (8,224) | — | — | — | |
Total.. . . . . . . . . . . . . . . . . . . | $449,499 | $(449,499) | $— | $— | $— |
FSI-56
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
11. Other Derivative Information (continued)
At December 31, 2020, OTC derivative liabilities, which may be offset against OTC derivative assets and collateral pledged to the counterparty, are as follows:
|
| Amounts Not Offset in the |
|
| |
|
| Consolidated Statement of Assets and Liabilities |
| ||
| Gross |
|
|
|
|
| Amounts of |
|
|
|
|
| Liabilities |
|
|
|
|
| Presented in | Financial | Financial |
|
|
| the Consolidated | Instruments | Instruments | Cash | Net Amount |
| Statement of | Available for | Collateral | Collateral | (Not less |
| Assets and Liabilities | Offset | Pledged | Pledgeda | than zero) |
Franklin Strategic Income VIP Fund |
|
|
|
| |
Counterparty |
|
|
|
|
|
BZWS.. . . . . . . . . . . . . . . . . . . | $54,781 | $— | $— | $(30,000) | $24,781 |
CITI.. . . . . . . . . . . . . . . . . . . . . | 244,296 | (137,508) | — | — | 106,788 |
FBCO.. . . . . . . . . . . . . . . . . . . | 18,146 | — | — | — | 18,146 |
JPHQ. . . . . . . . . . . . . . . . . . . . | 1,156,990 | (303,767) | — | (853,223) | — |
MSCO.. . . . . . . . . . . . . . . . . . . | 158,627 | (8,224) | — | (150,403) | — |
Total.. . . . . . . . . . . . . . . . . . . | $1,632,840 | $(449,499) | $— | $(1,033,626) | $149,715 |
aIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit collateral amounts to avoid the effect of over collateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.
See Note 1(c) regarding derivative financial instruments.
See Abbreviations on page FSI-61.
12. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Consolidated Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
13. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
Annual Report
FSI-57
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
13.Fair Value Measurements (continued)
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments).
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
A summary of inputs used as of December 31, 2020, in valuing the Fund's assets and liabilities carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total |
Franklin Strategic Income VIP Fund |
|
|
|
|
Assets: |
|
|
|
|
Investments in Securities: |
|
|
|
|
Common Stocks: |
|
|
|
|
Aerospace & Defense .. . . . . . . . . . . . . . . . . . . | $— | $— | $—a | $— |
Energy Equipment & Services . . . . . . . . . . . . . | 82,764 | — | — | 82,764 |
Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 477,254 | — | 477,254 |
Media .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 143,151 | — | 1,714 | 144,865 |
Multiline Retail . . . . . . . . . . . . . . . . . . . . . . . . . | — | — | —a | — |
Oil, Gas & Consumable Fuels .. . . . . . . . . . . . . | 564 | — | 1,710 | 2,274 |
Paper & Forest Products . . . . . . . . . . . . . . . . . | 67,553 | — | 322,094 | 389,647 |
Road & Rail . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | — | 3,858 | 3,858 |
Specialty Retail . . . . . . . . . . . . . . . . . . . . . . . . | 147,789 | — | — | 147,789 |
Management Investment Companies .. . . . . . . . . | 8,481,652 | — | — | 8,481,652 |
Warrants: |
|
|
|
|
Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | — | 310 | 310 |
Oil, Gas & Consumable Fuels .. . . . . . . . . . . . . | — | — | 101 | 101 |
Paper & Forest Products . . . . . . . . . . . . . . . . . | — | 503 | — | 503 |
Convertible Bonds .. . . . . . . . . . . . . . . . . . . . . . . | — | 6,880 | — | 6,880 |
Corporate Bonds: |
|
|
|
|
Aerospace & Defense .. . . . . . . . . . . . . . . . . . . | — | 2,235,757 | — | 2,235,757 |
Air Freight & Logistics .. . . . . . . . . . . . . . . . . . . | — | 1,962,987 | — | 1,962,987 |
Airlines .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 2,363,609 | — | 2,363,609 |
Auto Components .. . . . . . . . . . . . . . . . . . . . . . | — | 4,025,317 | — | 4,025,317 |
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 12,287,017 | — | 12,287,017 |
Beverages .. . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 1,970,525 | — | 1,970,525 |
Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . | — | 1,098,803 | — | 1,098,803 |
Building Products .. . . . . . . . . . . . . . . . . . . . . . | — | 843,000 | — | 843,000 |
Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . | — | 4,412,146 | — | 4,412,146 |
Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 11,634,805 | — | 11,634,805 |
Commercial Services & Supplies . . . . . . . . . . . | — | 2,431,742 | — | 2,431,742 |
Communications Equipment .. . . . . . . . . . . . . . | — | 1,362,836 | — | 1,362,836 |
Construction & Engineering . . . . . . . . . . . . . . . | — | 151,000 | — | 151,000 |
Construction Materials . . . . . . . . . . . . . . . . . . . | — | 1,036,805 | — | 1,036,805 |
Consumer Finance .. . . . . . . . . . . . . . . . . . . . . | — | 2,637,859 | — | 2,637,859 |
Containers & Packaging .. . . . . . . . . . . . . . . . . | — | 6,644,124 | — | 6,644,124 |
Distributors .. . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 422,000 | — | 422,000 |
Diversified Financial Services .. . . . . . . . . . . . . | — | 1,468,125 | — | 1,468,125 |
Diversified Telecommunication Services . . . . . . | — | 4,750,498 | — | 4,750,498 |
Electric Utilities .. . . . . . . . . . . . . . . . . . . . . . . . | — | 8,530,431 | — | 8,530,431 |
Electronic Equipment, Instruments & |
|
|
|
|
Components .. . . . . . . . . . . . . . . . . . . . . . . . | — | 2,194,230 | — | 2,194,230 |
Energy Equipment & Services . . . . . . . . . . . . . | — | 1,401,006 | — | 1,401,006 |
FSI-58
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
13. Fair Value Measurements (continued)
| Level 1 | Level 2 | Level 3 | Total |
Franklin Strategic Income VIP Fund (continued) |
|
|
|
|
Assets: (continued) |
|
|
|
|
Investments in Securities: |
|
|
|
|
Corporate Bonds: |
|
|
|
|
Entertainment .. . . . . . . . . . . . . . . . . . . . . . . . . | $— | $2,868,306 | $— | $2,868,306 |
Equity Real Estate Investment Trusts (REITs) .. | — | 6,117,661 | — | 6,117,661 |
Food & Staples Retailing . . . . . . . . . . . . . . . . . | — | 1,123,017 | — | 1,123,017 |
Food Products . . . . . . . . . . . . . . . . . . . . . . . . . | — | 6,284,300 | — | 6,284,300 |
Gas Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 335,237 | — | 335,237 |
Health Care Providers & Services .. . . . . . . . . . | — | 4,606,949 | — | 4,606,949 |
Hotels, Restaurants & Leisure . . . . . . . . . . . . . | — | 9,443,176 | — | 9,443,176 |
Household Durables .. . . . . . . . . . . . . . . . . . . . | — | 3,847,451 | — | 3,847,451 |
Household Products .. . . . . . . . . . . . . . . . . . . . | — | 1,874,337 | — | 1,874,337 |
Independent Power and Renewable Electricity |
|
|
|
|
Producers .. . . . . . . . . . . . . . . . . . . . . . . . . . | — | 6,436,205 | — | 6,436,205 |
Insurance .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 1,933,607 | — | 1,933,607 |
Interactive Media & Services .. . . . . . . . . . . . . . | — | 2,155,545 | — | 2,155,545 |
Internet & Direct Marketing Retail .. . . . . . . . . . | — | 1,305,807 | — | 1,305,807 |
IT Services .. . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 4,191,599 | — | 4,191,599 |
Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 4,394,360 | — | 4,394,360 |
Marine .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 1,267,218 | — | 1,267,218 |
Media .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 11,884,673 | — | 11,884,673 |
Metals & Mining .. . . . . . . . . . . . . . . . . . . . . . . | — | 3,021,422 | — | 3,021,422 |
Multiline Retail . . . . . . . . . . . . . . . . . . . . . . . . . | — | 357,126 | 1,738a | 358,864 |
Multi-Utilities .. . . . . . . . . . . . . . . . . . . . . . . . . . | — | 1,481,794 | — | 1,481,794 |
Oil, Gas & Consumable Fuels .. . . . . . . . . . . . . | — | 21,404,019 | — | 21,404,019 |
Paper & Forest Products . . . . . . . . . . . . . . . . . | — | 424,900 | — | 424,900 |
Pharmaceuticals .. . . . . . . . . . . . . . . . . . . . . . . | — | 4,733,675 | — | 4,733,675 |
Real Estate Management & Development .. . . . | — | 2,720,817 | — | 2,720,817 |
Road & Rail . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 2,930,955 | 238,337 | 3,169,292 |
Semiconductors & Semiconductor Equipment .. | — | 1,449,204 | — | 1,449,204 |
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 1,337,642 | — | 1,337,642 |
Specialty Retail . . . . . . . . . . . . . . . . . . . . . . . . | — | 1,736,786 | — | 1,736,786 |
Textiles, Apparel & Luxury Goods .. . . . . . . . . . | — | 1,502,925 | — | 1,502,925 |
Thrifts & Mortgage Finance .. . . . . . . . . . . . . . . | — | 4,627,375 | — | 4,627,375 |
Tobacco .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 1,631,185 | — | 1,631,185 |
Trading Companies & Distributors .. . . . . . . . . . | — | 4,734,535 | — | 4,734,535 |
Wireless Telecommunication Services .. . . . . . . | — | 4,428,869 | — | 4,428,869 |
Senior Floating Rate Interests.. . . . . . . . . . . . . . . | — | 18,633,758 | 629,945 | 19,263,703 |
Marketplace Loans . . . . . . . . . . . . . . . . . . . . . . . | — | — | 1,058,322 | 1,058,322 |
Loan Participations and Assignments. . . . . . . . . . | — | 1,588,495 | — | 1,588,495 |
Foreign Government and Agency Securities. . . . . | — | 58,501,470 | — | 58,501,470 |
U.S. Government and Agency Securities.. . . . . . . | — | 11,721,420 | — | 11,721,420 |
Asset-Backed Securities . . . . . . . . . . . . . . . . . . . | — | 30,731,891 | — | 30,731,891 |
Commercial Mortgage-Backed Securities .. . . . . . | — | 168,966 | — | 168,966 |
Mortgage-Backed Securities.. . . . . . . . . . . . . . . . | — | 18,276,183 | — | 18,276,183 |
Municipal Bonds.. . . . . . . . . . . . . . . . . . . . . . . . . | — | 7,896,449 | — | 7,896,449 |
Residential Mortgage-Backed Securities . . . . . . . | — | 37,853,381 | — | 37,853,381 |
Escrows and Litigation Trusts.. . . . . . . . . . . . . . . | — | 2,430 | 4,500a | 6,930 |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | 12,853,316 | — | — | 12,853,316 |
Total Investments in Securities.. . . . . . . . . . . | $21,776,789 | $390,316,379 | $2,262,629 | $414,355,797 |
Other Financial Instruments: |
|
|
|
|
Forward exchange contracts . . . . . . . . . . . . . . . . | $— | $423,996 | $— | $423,996 |
Futures contracts .. . . . . . . . . . . . . . . . . . . . . . . . | 38,970 | — | — | 38,970 |
Swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 379,174 | — | 379,174 |
Unfunded Loan Commitments .. . . . . . . . . . . . . . | — | 7,400 | — | 7,400 |
.. . . . . . . . .Total Other Financial Instruments | $38,970 | $810,570 | $— | $849,540 |
Annual Report
FSI-59
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
13. Fair Value Measurements (continued)
| Level 1 | Level 2 | Level 3 | Total |
Franklin Strategic Income VIP Fund (continued) |
|
|
|
|
Liabilities: |
|
|
|
|
Other Financial Instruments: |
|
|
|
|
Forward exchange contracts.. . . . . . . . . . . . . . . . | $— | $716,150 | $— | $716,150 |
Futures contracts.. . . . . . . . . . . . . . . . . . . . . . . . | 4,006 | — | — | 4,006 |
Swap contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . | — | 297,592 | — | 297,592 |
Total Other Financial Instruments.. . . . . . . . . | $4,006 | $1,013,742 | $— | $1,017,748 |
aIncludes securities determined to have no value at December 31, 2020.
A reconciliation in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 assets and/or liabilities at the beginning and/or end of the year.
14. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020- 04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the consolidated financial statements.
15. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the consolidated financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the consolidated financial statements.
FSI-60
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin Strategic Income VIP Fund (continued)
Abbreviations
Currency |
|
| Counterparty | |
COP | Colombian Peso |
| BZWS | Barclays Bank PLC |
DOP | Dominican Peso |
| CITI | Citibank NA |
EUR | Euro |
| FBCO | Credit Suisse Group AG |
IDR | Indonesian Rupiah |
| JPHQ | JPMorgan Chase Bank NA |
MXN | Mexican Peso |
| MSCO | Morgan Stanley |
USD | United States Dollar |
|
|
|
UYU | Uruguayan Peso |
| Selected Portfolio | |
|
|
| ||
|
|
| CLO | Collateralized Loan Obligation |
|
|
| CMT | Constant Monthly U.S. Treasury Securities Yield |
|
|
| Curve Rate Index | |
|
|
| EURIBOR | Euro Inter-Bank Offer Rate |
|
|
| FHLMC | Federal Home Loan Mortgage Corp. |
|
|
| FNMA | Federal National Mortgage Association |
|
|
| FRN | Floating Rate Note |
|
|
| GDP | Gross Domestic Product |
|
|
| GNMA | Government National Mortgage Association |
|
|
| GO | General Obligation |
|
|
| LIBOR | London Inter-Bank Offered Rate |
|
|
| MBS | Mortgage-Backed Security |
|
|
| PIK | Payment-In-Kind |
|
|
| TBD | To Be Determined |
|
|
| T-Note | Treasury Note |
|
|
| VRI | Value Recovery Instrument |
Annual Report
FSI-61
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Franklin Strategic Income VIP Fund
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated statement of investments, of Franklin Strategic Income VIP Fund and its subsidiary (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related consolidated statements of operations for the year ended December 31, 2020, the consolidated statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the consolidated financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
FSI-62
Annual Report
Franklin U.S. Government Securities VIP Fund
This annual report for Franklin U.S. Government Securities VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | +4.08% |
5-Year | +2.52% |
10-Year | +2.29% |
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Annual Report
FUS-1
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance is compared to the performance of the Bloomberg Barclays U.S. Government - Intermediate Index and the Lipper VIP General U.S. Government Funds Classification Average. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see
Important Notes to Performance Information preceding the Fund Summaries.
$15,000 |
|
|
|
|
|
$14,000 |
|
|
|
| $13,948 |
$13,000 |
|
|
|
| $12,746 |
$12,000 |
|
|
|
| $12,537 |
|
|
|
|
| |
$11,000 |
|
|
|
|
|
$10,000 |
|
|
|
|
|
$9,000 |
|
|
|
|
|
1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
| Franklin U.S. Government | Lipper VIP General U.S. Government | |||
| Securities VIP Fund |
| Funds Classification Average** |
|
Bloomberg Barclays U.S. Government
- Intermediate Index*
*Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
**Source: Lipper, a Thomson Reuters Company. Please see Index Descriptions following the Fund Summaries.
FUS-2
Annual Report
Franklin U.S. Government Securities VIP Fund
Fund Goal and Main Investments
The Fund seeks income. Under normal market conditions, the Fund invests at least 80% of its net assets in U.S. government securities.
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. The Fund’s share price and yield will be affected by interest rate movements and mortgage prepayments. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Fund’s primary benchmark, the Bloomberg Barclays U.S. Government
-Intermediate Index, posted a +5.73% total return.1 The Fund’s secondary benchmark, the Lipper VIP General U.S. Government Funds Classification Average, posted a +6.76% total return.2 Funds in the Lipper average may allocate as much as 35% of their investments in asset types other than U.S. government and agency mortgage-backed securities.
Economic and Market Overview
The U.S. bond market, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, advanced during the 12 months ended December 31, 2020. The period was defined by the economic and social disruption that began in
Portfolio Composition 12/31/20
| % of Total |
| Net Assets |
Mortgage-Backed Securities | 77.3% |
U.S. Government and Agency Securities | 14.1% |
Corporate Bonds | 2.5% |
Foreign Government and Agency Securities | 1.7% |
Short-Term Investments & Other Net Assets | 4.4% |
the wake of the novel coronavirus (COVID-19) pandemic, which caused significant volatility in U.S. bond markets. In late February, the U.S. bond market began to anticipate the adverse economic impact of business shutdowns and social distancing measures. Higher-quality, longer-term bonds rallied, with the 10-year U.S. Treasury yield (which moves inversely to price) falling in February and March, while riskier, lower-rated corporate bonds declined sharply. U.S. Federal Reserve (Fed) action led to a recovery in the corporate bond market beginning in late March, which accelerated in subsequent months as many businesses reopened. Corporate bonds, particularly high-yield bonds, also benefited from the resolution of the U.S. election and several promising vaccine results late in the reporting period.
The Fed enacted two emergency rate cuts in March 2020, lowering the federal funds target rate to a range of 0.00%– 0.25%. In addition, the Fed announced unlimited, open- ended purchasing of government-backed and corporate bonds as necessary to help keep markets functioning. Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded the Fed’s 2% target for some time.
U.S. Treasury bonds, as measured by the Bloomberg Barclays U.S. Treasury Index, posted positive total returns during the period. The 10-year U.S. Treasury yield declined significantly during the reporting period, reaching a new record closing low in early August 2020. Bond purchasing by the Fed and robust demand for investments perceived as safe drove the U.S. Treasury market. Mortgage-backed securities (MBS), as measured by the Bloomberg Barclays MBS Index, posted positive total returns for the period amid Fed support, though lower interest rates accelerated prepayments from mortgage refinancing, restricting further gains.
1.Source: Morningstar.
2.Source: Lipper, a Thomson Reuters Company.
One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
Annual Report
FUS-3
FRANKLIN U.S. GOVERNMENT SECURITIES VIP FUND
U.S. corporate bond performance varied somewhat based on credit rating, as many investors became concerned about the potential credit downgrades of some companies. Total returns for investment-grade corporate bonds, as represented by the Bloomberg Barclays U.S. Corporate Bond Index, exceeded total returns for high-yield corporate bonds, as represented by the Bloomberg Barclays U.S. Corporate High Yield Bond Index.
Investment Strategy
Using our straightforward investment approach, we seek to produce current income with a high degree of credit safety from a conservatively managed portfolio of U.S. government securities. Analyzing securities using proprietary and nonproprietary research, we seek to identify attractive investment opportunities.
Manager’s Discussion
For the fixed income sectors in which the Fund invests, Treasury Inflation-Protected Securities (TIPS) was the best performing sector on an excess returns basis, as measured by Bloomberg Barclays indexes. The other major fixed income sectors in which the Fund allocates posted negative excess returns and underperformed similar duration U.S. Treasuries during the period. Within agency MBS, all sectors had positive total returns but underperformed similar duration U.S. Treasuries. On an excess return basis, Ginnie Mae (GNMA) was the best performing agency MBS, followed by Fannie Mae (FNMA) and Freddie Mac (FHLMC) MBS. For the GNMA coupon stack GNMA II 2.5% and 4.0% were the best performers, while GNMA I 3.0% and 5.0% coupons lagged.
The Fund maintains a consistent and disciplined approach to our investment strategy. The Fund’s investment process and strategy have not changed, and the team continues to look for strong cash flow fundamentals and valuations seeking to uncover opportunities across the agency mortgage and agency debenture universe. The Fund emphasizes agency pass-throughs and invests in other agency securities for diversification purposes.
The portfolio’s largest allocation remains in fixed-rate MBS, primarily in 30-year GNMA II securities. We added to the sector over the period, while decreasing allocation to agency debentures and adjustable-rate mortgage securities (ARMS). The Fund’s largest MBS allocation remained in 3.5% and 3.0% coupons. Over the period, we reduced our exposure to 3.0% to 4.0% coupons, while adding to 2.5% securities.
The Fund’s U.S. yield curve positioning detracted from performance, as did the Fund’s exposure to fixed-rate agency mortgage-backed securities. The Fund’s allocation to TIPS was a positive contributor relative to the benchmark. Adjustable-rate mortgage securities and U.S. Agency also contributed during the period.
Thank you for your participation in Franklin U.S. Government Securities VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
FUS-4
Annual Report
FRANKLIN U.S. GOVERNMENT SECURITIES VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
|
|
| Actual |
| Hypothetical |
|
| ||
|
|
| (actual return after expenses) |
| (5% annual return before expenses) |
|
| ||
|
|
|
| Fund-Level |
|
| Fund-Level |
|
|
|
|
|
| Expenses |
|
| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201,2 |
| Value 12/31/20 | 7/1/20–12/31/201,2 | a | Ratio2 |
1 | $1,000 |
| $1,004.87 | $2.72 | $1,022.43 | $2.74 |
| 0.54% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses
Annual Report
FUS-5
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Franklin U.S. Government Securities VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $12.34 | $12.07 | $12.36 | $12.51 | $12.74 |
Income from investment operationsa: | 0.22 | 0.27 | 0.29 | 0.25 | 0.22 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 0.28 | 0.38 | (0.22) | (0.04) | (0.10) |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.50 | 0.65 | 0.07 | 0.21 | 0.12 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.47) | (0.38) | (0.36) | (0.36) | (0.35) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $12.37 | $12.34 | $12.07 | $12.36 | $12.51 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4.08% | 5.47% | 0.60% | 1.66% | 0.90% |
Ratios to average net assets | 0.53% | 0.51% | 0.50% | 0.50% | 0.50% |
Expensesd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 1.81% | 2.23% | 2.38% | 2.00% | 1.75% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $52,307 | $54,104 | $59,213 | $66,404 | $73,695 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 56.32% | 24.16% | 22.25% | 80.49% | 86.28% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
FUS-6
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Franklin U.S. Government Securities VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $12.05 | $11.79 | $12.09 | $12.24 | $12.47 |
Income from investment operationsa: | 0.19 | 0.24 | 0.25 | 0.21 | 0.19 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 0.27 | 0.37 | (0.22) | (0.04) | (0.10) |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.46 | 0.61 | 0.03 | 0.17 | 0.09 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.43) | (0.35) | (0.33) | (0.32) | (0.32) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $12.08 | $12.05 | $11.79 | $12.09 | $12.24 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.83% | 5.23% | 0.34% | 1.34% | 0.66% |
Ratios to average net assets | 0.78% | 0.76% | 0.75% | 0.75% | 0.75% |
Expensesd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 1.56% | 1.98% | 2.13% | 1.75% | 1.50% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $771,332 | $771,866 | $1,105,627 | $1,223,491 | $1,268,963 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 56.32% | 24.16% | 22.25% | 80.49% | 86.28% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Annual Report
FUS-7
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Franklin U.S. Government Securities VIP Fund
I
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Corporate Bonds 2.5% |
|
|
|
|
| Diversified Financial Services 0.5% |
|
|
|
|
| DY9 Leasing LLC, Secured Bond, 2.372%, 3/19/27.. . . . . . . . . . . . | United States | 1,970,833 |
| $2,084,427 |
| Private Export Funding Corp., BB, Senior Bond, 4.3%, 12/15/21. . . | United States | 1,865,000 |
| 1,937,788 |
|
|
|
|
| 4,022,215 |
| Oil, Gas & Consumable Fuels 2.0% |
|
|
|
|
| Petroleos Mexicanos, Senior Bond, 2.378%, 4/15/25.. . . . . . . . . . . | Mexico | 1,480,500 |
| 1,543,581 |
| Reliance Industries Ltd., |
|
|
|
|
| Senior Bond, 2.512%, 1/15/26 . . . . . . . . . . . . . . . . . . . . . . . . . . | India | 7,218,750 |
| 7,566,224 |
| Senior Note, 1.87%, 1/15/26 .. . . . . . . . . . . . . . . . . . . . . . . . . . . | India | 4,052,632 |
| 4,181,540 |
| Senior Note, 2.06%, 1/15/26 .. . . . . . . . . . . . . . . . . . . . . . . . . . . | India | 3,437,500 |
| 3,561,600 |
|
|
|
|
| 16,852,945 |
| .Total Corporate Bonds (Cost $19,982,475).. . . . . . . . . . . | . . . . . . . . . . . . . . . | . . . . . . . . . . . |
| 20,875,160 |
| Foreign Government and Agency Securities 1.7% |
|
|
|
|
|
|
|
|
| |
| Israel Government Bond, Senior Bond, 5.5%, 9/18/23.. . . . . . . . . . | Israel | 12,000,000 |
| 13,668,404 |
| . . .Total Foreign Government and Agency Securities (Cost $12,938,938) | . . . . . . . . . . . |
| 13,668,404 | |
| U.S. Government and Agency Securities 14.1% |
|
|
|
|
|
|
|
|
| |
| FHLB, 2.625%, 9/12/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 10,000,000 |
| 11,042,640 |
| New Valley Generation IV, 4.687%, 1/15/22.. . . . . . . . . . . . . . . . . . | United States | 619,287 |
| 625,043 |
| Tennessee Valley Authority, 1.875%, 8/15/22.. . . . . . . . . . . . . . . . . | United States | 6,000,000 |
| 6,166,738 |
| U.S. Treasury Bonds, |
|
|
|
|
a | 2%, 1/15/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,500,000 |
| 2,340,429 |
a | 1.75%, 1/15/28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,000,000 |
| 12,200,832 |
| 2.5%, 2/15/46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,000,000 |
| 7,156,172 |
| U.S. Treasury Notes, |
|
|
|
|
a | 0.125%, 7/15/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 15,500,000 |
| 18,203,200 |
| 2.375%, 8/15/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 22,000,000 |
| 23,715,313 |
| 2.25%, 8/15/27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 16,000,000 |
| 17,738,125 |
a | 0.25%, 7/15/29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 8,000,000 |
| 9,222,971 |
| United States International Development Finance Corp., |
|
|
|
|
| 2.12%, 3/20/24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,500,000 |
| 5,681,284 |
| 4.01%, 5/15/30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 1,575,000 |
| 1,828,694 |
| .. . . . .Total U.S. Government and Agency Securities (Cost $106,934,434) | . . . . . . . . . . . |
| 115,921,441 | |
| Mortgage-Backed Securities 77.3% |
|
|
|
|
|
|
|
|
| |
bFederal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.9% |
|
|
|
| |
| FHLMC, 2.66% - 3.741%, (12-month USD LIBOR +/- MBS Margin), |
|
|
|
|
| 3/01/36 - 4/01/40.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,374,676 |
| 7,722,881 |
|
|
|
|
| 7,722,881 |
| Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 12.2% |
|
|
|
|
| FHLMC Gold Pools, 15 Year, 4.5%, 3/01/25 - 4/01/25. . . . . . . . . . . | United States | 483,061 |
| 508,685 |
| FHLMC Gold Pools, 20 Year, 3.5%, 3/01/32. . . . . . . . . . . . . . . . . . | United States | 2,007,085 |
| 2,155,800 |
| FHLMC Gold Pools, 30 Year, 3%, 5/01/43.. . . . . . . . . . . . . . . . . . . | United States | 290,832 |
| 310,002 |
| FHLMC Gold Pools, 30 Year, 3.5%, 5/01/43. . . . . . . . . . . . . . . . . . | United States | 48,258 |
| 52,317 |
| FHLMC Gold Pools, 30 Year, 4%, 9/01/40 - 12/01/41.. . . . . . . . . . . | United States | 4,501,918 |
| 4,962,004 |
| FHLMC Gold Pools, 30 Year, 4.5%, 5/01/40 - 7/01/41. . . . . . . . . . . | United States | 1,358,435 |
| 1,523,478 |
| FHLMC Gold Pools, 30 Year, 5%, 9/01/33 - 4/01/40.. . . . . . . . . . . . | United States | 3,638,685 |
| 4,226,981 |
| FHLMC Gold Pools, 30 Year, 5.5%, 7/01/33 - 5/01/38. . . . . . . . . . . | United States | 727,817 |
| 853,666 |
| FHLMC Gold Pools, 30 Year, 6%, 1/01/24 - 8/01/35.. . . . . . . . . . . . | United States | 543,506 |
| 627,086 |
| FHLMC Gold Pools, 30 Year, 6.5%, 12/01/23 - 5/01/35. . . . . . . . . . | United States | 205,179 |
| 231,567 |
| FHLMC Gold Pools, 30 Year, 7%, 4/01/24 - 9/01/31.. . . . . . . . . . . . | United States | 75,222 |
| 83,255 |
| FHLMC Gold Pools, 30 Year, 7.5%, 12/01/22. . . . . . . . . . . . . . . . . | United States | 149 |
| 150 |
FUS-8
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin U.S. Government Securities VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Mortgage-Backed Securities (continued) |
|
|
|
|
| Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate (continued) |
|
|
|
|
| FHLMC Gold Pools, 30 Year, 8%, 9/01/21 - 5/01/22.. . . . . . . . . . . . | United States | 584 |
| $603 |
| FHLMC Gold Pools, 30 Year, 8.5%, 7/01/31. . . . . . . . . . . . . . . . . . | United States | 143,862 |
| 167,395 |
| FHLMC Pool, 15 Year, 1.5%, 1/01/36. . . . . . . . . . . . . . . . . . . . . . . | United States | 6,000,000 |
| 6,176,845 |
| FHLMC Pool, 15 Year, 2%, 10/01/35.. . . . . . . . . . . . . . . . . . . . . . . | United States | 9,743,028 |
| 10,233,899 |
| FHLMC Pool, 30 Year, 2%, 1/01/51.. . . . . . . . . . . . . . . . . . . . . . . . | United States | 6,000,000 |
| 6,253,002 |
| FHLMC Pool, 30 Year, 2%, 11/01/50.. . . . . . . . . . . . . . . . . . . . . . . | United States | 2,493,739 |
| 2,608,739 |
| FHLMC Pool, 30 Year, 2.5%, 11/01/50.. . . . . . . . . . . . . . . . . . . . . . | United States | 14,254,536 |
| 15,041,694 |
| FHLMC Pool, 30 Year, 2.5%, 12/01/50. . . . . . . . . . . . . . . . . . . . . . | United States | 6,000,000 |
| 6,377,900 |
| FHLMC Pool, 30 Year, 3%, 8/01/50.. . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,859,000 |
| 6,325,490 |
| FHLMC Pool, 30 Year, 3%, 9/01/50.. . . . . . . . . . . . . . . . . . . . . . . . | United States | 24,146,197 |
| 25,377,965 |
| FHLMC Pool, 30 Year, 4.5%, 1/01/49. . . . . . . . . . . . . . . . . . . . . . . | United States | 5,369,882 |
| 5,951,522 |
|
|
|
|
| 100,050,045 |
| bFederal National Mortgage Association (FNMA) Adjustable Rate 2.9% |
|
|
|
|
| FNMA, 2.91%, (12-month USD LIBOR +/- MBS Margin), 9/01/37.. . | United States | 7,898,900 |
| 8,323,819 |
| FNMA, 1.415% - 5.219%, (6-month USD LIBOR +/- MBS Margin), |
|
|
|
|
| 6/01/21 - 10/01/44.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 16,102,608 |
| 16,723,462 |
|
|
|
|
| 25,047,281 |
| Federal National Mortgage Association (FNMA) Fixed Rate 11.8% |
|
|
|
|
| FNMA, 2.64%, 7/01/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 2,393,937 |
| 2,583,256 |
| FNMA, 2.77%, 4/01/25.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,500,000 |
| 3,794,805 |
| FNMA, 3.14%, 10/01/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,928,134 |
| 4,105,719 |
| FNMA, 3.28%, 7/01/27.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 4,000,000 |
| 4,533,690 |
| FNMA, 3.51%, 8/01/23.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 3,000,000 |
| 3,213,948 |
| FNMA, 5.5%, 4/01/34.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 580,526 |
| 617,294 |
| FNMA, 15 Year, 2%, 9/01/35.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 7,072,685 |
| 7,444,380 |
| FNMA, 15 Year, 5.5%, 1/01/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 288,751 |
| 302,153 |
| FNMA, 30 Year, 2.5%, 11/01/50. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 17,833,070 |
| 18,817,841 |
| FNMA, 30 Year, 3%, 7/01/50.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,064,839 |
| 13,939,975 |
| FNMA, 30 Year, 3%, 12/01/42.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 113,020 |
| 119,426 |
| FNMA, 30 Year, 3.5%, 7/01/45. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 19,138,418 |
| 20,638,295 |
| FNMA, 30 Year, 4%, 1/01/41 - 8/01/41. . . . . . . . . . . . . . . . . . . . . . | United States | 4,429,593 |
| 4,858,016 |
| FNMA, 30 Year, 4.5%, 8/01/40 - 6/01/41. . . . . . . . . . . . . . . . . . . . . | United States | 4,295,667 |
| 4,838,895 |
| FNMA, 30 Year, 5%, 3/01/34 - 7/01/41. . . . . . . . . . . . . . . . . . . . . . | United States | 2,769,769 |
| 3,202,016 |
| FNMA, 30 Year, 5.5%, 12/01/32 - 8/01/35. . . . . . . . . . . . . . . . . . . . | United States | 1,312,169 |
| 1,522,031 |
| FNMA, 30 Year, 6%, 1/01/24 - 8/01/38. . . . . . . . . . . . . . . . . . . . . . | United States | 1,429,396 |
| 1,662,055 |
| FNMA, 30 Year, 6.5%, 1/01/24 - 9/01/36. . . . . . . . . . . . . . . . . . . . . | United States | 187,992 |
| 216,848 |
| FNMA, 30 Year, 7.5%, 4/01/23 - 8/01/25. . . . . . . . . . . . . . . . . . . . . | United States | 6,495 |
| 6,704 |
| FNMA, 30 Year, 8%, 3/01/23 - 12/01/24.. . . . . . . . . . . . . . . . . . . . . | United States | 22,403 |
| 22,818 |
| FNMA, 30 Year, 8.5%, 6/01/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 9 |
| 9 |
| FNMA, 30 Year, 9%, 10/01/26.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 38,559 |
| 39,197 |
|
|
|
|
| 96,479,371 |
| Government National Mortgage Association (GNMA) Fixed Rate 49.5% |
|
|
| |
| GNMA I, 30 Year, 5%, 9/15/40.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 13,254,671 |
| 15,148,337 |
| GNMA I, 30 Year, 5.5%, 3/15/32 - 2/15/38.. . . . . . . . . . . . . . . . . . . | United States | 400,579 |
| 469,711 |
| GNMA I, 30 Year, 6%, 7/15/29 - 11/15/38.. . . . . . . . . . . . . . . . . . . . | United States | 323,232 |
| 387,448 |
| GNMA I, 30 Year, 6.5%, 12/15/28 - 1/15/33.. . . . . . . . . . . . . . . . . . | United States | 159,092 |
| 187,261 |
| GNMA I, 30 Year, 7%, 12/15/28.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 9,150 |
| 10,579 |
| GNMA I, 30 Year, 7.5%, 12/15/31 - 8/15/33.. . . . . . . . . . . . . . . . . . | United States | 175,159 |
| 206,271 |
| GNMA I, 30 Year, 10%, 8/15/21.. . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 47 |
| 47 |
| GNMA I, Single-family, 30 Year, 3%, 7/15/42.. . . . . . . . . . . . . . . . . | United States | 299,896 |
| 323,891 |
| GNMA I, Single-family, 30 Year, 4%, 10/15/40 - 8/15/46.. . . . . . . . . | United States | 5,956,547 |
| 6,537,530 |
| GNMA I, Single-family, 30 Year, 4.5%, 1/15/39 - 6/15/41. . . . . . . . . | United States | 8,639,222 |
| 9,784,189 |
| GNMA I, Single-family, 30 Year, 5.5%, 12/15/28 - 10/15/39. . . . . . . | United States | 2,930,838 |
| 3,350,232 |
| GNMA I, Single-family, 30 Year, 6%, 11/15/23 - 9/15/38.. . . . . . . . . | United States | 1,327,531 |
| 1,541,612 |
The accompanying notes are an integral part of these financial statements.
Annual Report
FUS-9
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Franklin U.S. Government Securities VIP Fund (continued)
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| Mortgage-Backed Securities (continued) |
|
|
|
|
| Government National Mortgage Association (GNMA) Fixed Rate (continued) |
|
|
| |
| GNMA I, Single-family, 30 Year, 6.5%, 7/15/23 - 5/15/37. . . . . . . . . | United States | 691,485 |
| $778,443 |
| GNMA I, Single-family, 30 Year, 7%, 10/15/22 - 1/15/32.. . . . . . . . . | United States | 146,020 |
| 151,255 |
| GNMA I, Single-family, 30 Year, 7.5%, 2/15/22 - 11/15/27. . . . . . . . | United States | 45,311 |
| 46,128 |
| GNMA I, Single-family, 30 Year, 8%, 12/15/21 - 7/15/23.. . . . . . . . . | United States | 29,092 |
| 29,686 |
| GNMA I, Single-family, 30 Year, 8.5%, 5/15/23 - 12/15/24. . . . . . . . | United States | 18,501 |
| 18,778 |
| GNMA II, 30 Year, 6.5%, 4/20/34.. . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 31,327 |
| 31,623 |
| GNMA II, Single-family, 30 Year, 2%, 11/20/50.. . . . . . . . . . . . . . . . | United States | 6,173,583 |
| 6,461,441 |
| GNMA II, Single-family, 30 Year, 2.5%, 6/20/50.. . . . . . . . . . . . . . . | United States | 38,882,013 |
| 41,184,012 |
| GNMA II, Single-family, 30 Year, 2.5%, 7/20/50.. . . . . . . . . . . . . . . | United States | 13,710,378 |
| 14,523,839 |
| GNMA II, Single-family, 30 Year, 2.5%, 10/20/50. . . . . . . . . . . . . . . | United States | 14,914,472 |
| 15,803,496 |
| GNMA II, Single-family, 30 Year, 2.5%, 11/20/50. . . . . . . . . . . . . . . | United States | 6,121,240 |
| 6,486,346 |
| GNMA II, Single-family, 30 Year, 3%, 9/20/45. . . . . . . . . . . . . . . . . | United States | 5,341,916 |
| 5,690,335 |
| GNMA II, Single-family, 30 Year, 3%, 4/20/46. . . . . . . . . . . . . . . . . | United States | 14,372,080 |
| 15,305,579 |
| GNMA II, Single-family, 30 Year, 3%, 5/20/50. . . . . . . . . . . . . . . . . | United States | 10,522,164 |
| 11,011,675 |
| GNMA II, Single-family, 30 Year, 3%, 6/20/50. . . . . . . . . . . . . . . . . | United States | 21,175,160 |
| 22,166,339 |
| GNMA II, Single-family, 30 Year, 3%, 7/20/50. . . . . . . . . . . . . . . . . | United States | 38,122,483 |
| 40,012,803 |
| GNMA II, Single-family, 30 Year, 3%, 12/20/50.. . . . . . . . . . . . . . . . | United States | 11,060,986 |
| 11,764,321 |
| GNMA II, Single-family, 30 Year, 3%, 12/20/42 - 2/20/45. . . . . . . . . | United States | 1,255,750 |
| 1,340,187 |
| GNMA II, Single-family, 30 Year, 3.5%, 8/20/42.. . . . . . . . . . . . . . . | United States | 3,980,883 |
| 4,337,028 |
| GNMA II, Single-family, 30 Year, 3.5%, 9/20/42.. . . . . . . . . . . . . . . | United States | 11,866,316 |
| 12,924,430 |
| GNMA II, Single-family, 30 Year, 3.5%, 11/20/42. . . . . . . . . . . . . . . | United States | 7,166,821 |
| 7,804,613 |
| GNMA II, Single-family, 30 Year, 3.5%, 12/20/42. . . . . . . . . . . . . . . | United States | 5,529,989 |
| 6,022,377 |
| GNMA II, Single-family, 30 Year, 3.5%, 1/20/43.. . . . . . . . . . . . . . . | United States | 9,319,318 |
| 10,148,083 |
| GNMA II, Single-family, 30 Year, 3.5%, 4/20/43.. . . . . . . . . . . . . . . | United States | 4,124,826 |
| 4,492,363 |
| GNMA II, Single-family, 30 Year, 3.5%, 5/20/43.. . . . . . . . . . . . . . . | United States | 7,627,566 |
| 8,333,630 |
| GNMA II, Single-family, 30 Year, 3.5%, 9/20/47.. . . . . . . . . . . . . . . | United States | 43,650,356 |
| 47,126,217 |
| GNMA II, Single-family, 30 Year, 3.5%, 11/20/47. . . . . . . . . . . . . . . | United States | 11,611,118 |
| 12,438,904 |
| GNMA II, Single-family, 30 Year, 3.5%, 12/20/40 - 10/20/47.. . . . . . | United States | 15,526,018 |
| 16,857,062 |
| GNMA II, Single-family, 30 Year, 4%, 11/20/41.. . . . . . . . . . . . . . . . | United States | 3,907,138 |
| 4,318,697 |
| GNMA II, Single-family, 30 Year, 4%, 11/20/39 - 2/20/44. . . . . . . . . | United States | 8,890,241 |
| 9,859,042 |
| GNMA II, Single-family, 30 Year, 4.5%, 10/20/39 - 10/20/44.. . . . . . | United States | 16,754,490 |
| 18,681,900 |
| GNMA II, Single-family, 30 Year, 5%, 9/20/33 - 6/20/44. . . . . . . . . . | United States | 6,839,129 |
| 7,823,173 |
| GNMA II, Single-family, 30 Year, 5.5%, 5/20/34 - 6/20/38.. . . . . . . . | United States | 2,817,799 |
| 3,287,996 |
| GNMA II, Single-family, 30 Year, 6%, 11/20/23 - 7/20/39. . . . . . . . . | United States | 1,825,317 |
| 2,130,861 |
| GNMA II, Single-family, 30 Year, 6.5%, 12/20/27 - 4/20/32.. . . . . . . | United States | 254,655 |
| 300,136 |
| GNMA II, Single-family, 30 Year, 7%, 5/20/32. . . . . . . . . . . . . . . . . | United States | 5,330 |
| 6,333 |
| GNMA II, Single-family, 30 Year, 7.5%, 9/20/22 - 11/20/26.. . . . . . . | United States | 34,905 |
| 38,194 |
| GNMA II, Single-family, 30 Year, 8%, 8/20/26. . . . . . . . . . . . . . . . . | United States | 2,749 |
| 3,145 |
|
|
|
|
| 407,687,578 |
| .Total Mortgage-Backed Securities (Cost $623,642,015) | . . . . . . . . . . . . . . . | . . . . . . . . . . . |
| 636,987,156 |
| Total Long Term Investments (Cost $763,497,862).. . . . |
|
|
|
|
| . . . . . . . . . . . . . . . | . . . . . . . . . . . |
| 787,452,161 | |
|
|
|
|
|
|
FUS-10
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Franklin U.S. Government Securities VIP Fund (continued)
Short Term Investments 5.0%
|
| Principal |
|
a | a | Amount* | a |
Value
a | a | a | a | a | a |
| Repurchase Agreements 5.0% |
|
|
|
|
| cJoint Repurchase Agreement, 0.054%, 1/04/21 (Maturity Value |
|
|
|
|
| $40,985,420) |
|
|
|
|
| BNP Paribas Securities Corp. (Maturity Value $26,183,126) |
|
|
|
|
| Deutsche Bank Securities, Inc. (Maturity Value $7,820,018) |
|
|
|
|
| HSBC Securities (USA), Inc. (Maturity Value $6,982,276) |
|
|
|
|
| Collateralized by U.S. Government Agency Securities, 4.00% |
|
|
|
|
| - 5.00%, 2/20/49 - 5/20/49; and U.S. Treasury Notes, 0.13% - |
|
|
|
|
| 2.63%, 1/31/21 - 12/31/25 (valued at $41,809,834).. . . . . . . . . . . | �� | 40,985,176 |
| $40,985,176 |
Total Repurchase Agreements (Cost $40,985,176).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Short Term Investments (Cost $40,985,176). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Investments (Cost $804,483,038) 100.6%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities (0.6)%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40,985,176
40,985,176
$828,437,337 (4,798,102)
$823,639,235
See Abbreviations on page FUS-21.
*The principal amount is stated in U.S. dollars unless otherwise indicated. a Principal amount of security is adjusted for inflation. See Note 1(d).
b Adjustable Rate Mortgage-Backed Security (ARM); the rate shown is the effective rate at period end. ARM rates are not based on a published reference rate and spread, but instead pass-through weighted average interest income inclusive of any caps or floors, if applicable, from the underlying mortgage loans in which the majority of mortgages pay interest based on the index shown at their designated reset dates plus a spread, less the applicable servicing and guaranty fee (MBS margin).
c See Note 1(b) regarding joint repurchase agreement.
The accompanying notes are an integral part of these financial statements.
Annual Report
FUS-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Franklin U.S. |
| Government |
| Securities VIP |
| Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $763,497,862 |
Cost - Unaffiliated repurchase agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 40,985,176 |
Value - Unaffiliated issuers .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $787,452,161 |
Value - Unaffiliated repurchase agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 40,985,176 |
Receivables: |
|
Investment securities sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 28,202,065 |
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 94,282 |
Interest.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,631,064 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 98 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 859,364,846 |
Liabilities: |
|
Payables: |
|
Investment securities purchased.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 34,367,087 |
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 603,299 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 335,982 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 163,446 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 255,797 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 35,725,611 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $823,639,235 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $885,090,636 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (61,451,401) |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $823,639,235 |
| Franklin U.S. |
| Government |
| Securities VIP |
| Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $52,307,075 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 4,227,773 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $12.37 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $771,332,160 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 63,835,614 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $12.08 |
FUS-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the year ended December 31, 2020
| Franklin U.S. |
| Government |
| Securities VIP |
| Fund |
Investment income: |
|
Interest: |
|
Unaffiliated issuers: |
|
Paydown gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $(4,331,818) |
Paid in casha.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 23,671,255 |
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 19,339,437 |
Expenses: |
|
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,964,103 |
Distribution fees: (Note 3c) |
|
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,922,842 |
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,006 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 131,539 |
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 82,576 |
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,820 |
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 221,743 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Total expenses | 6,332,629 |
Expense reductions (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (9,143) |
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 6,323,486 |
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 13,015,951 |
Realized and unrealized gains (losses): |
|
Net realized gain (loss) from: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,813,789 |
Net change in unrealized appreciation (depreciation) on: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 16,480,201 |
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 18,293,990 |
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $31,309,941 |
aIncludes amortization of premium and accretion of discount.
The accompanying notes are an integral part of these financial statements.
Annual Report
FUS-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin U.S. Government Securities VIP | |
| Fund |
|
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $13,015,951 | $21,483,343 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,813,789 | 3,865,232 |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | 16,480,201 | 32,420,343 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | 31,309,941 | 57,768,918 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2,038,214) | (1,737,360) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (26,480,204) | (31,230,563) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (28,518,418) | (32,967,923) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,952,576) | (6,397,324) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (3,169,153) | (357,273,982) |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (5,121,729) | (363,671,306) |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | (2,330,206) | (338,870,311) |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 825,969,441 | 1,164,839,752 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $823,639,235 | $825,969,441 |
FUS-14
Annual Report
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
Franklin U.S. Government Securities VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin U.S. Government Securities VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. At December 31, 2020, 52.5% of the Fund’s shares were held through one insurance company. Investment activities of these insurance company separate accounts could have a material impact on the Fund. The Fund offers two classes of shares: Class 1 and Class 2. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust's Board
of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Fund's pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market- based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.
Investments in repurchase agreements are valued at cost, which approximates fair value.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
b. Joint Repurchase Agreement
The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund's custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either
Annual Report
FUS-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Franklin U.S. Government Securities VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
b. Joint Repurchase Agreement (continued)
the seller or the Fund, certain MRAs may permit the non- defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at year end, as indicated in the Statement of Investments, had been entered into on December 31, 2020.
c. Income Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
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. Amortization
of premium and accretion of discount on debt securities are included in interest income. Paydown gains and losses are recorded separately in the Statement of Operations. Distributions to shareholders are recorded on the ex- dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may
differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
Inflation-indexed bonds are adjusted for inflation through periodic increases or decreases in the security's interest accruals, face amount, or principal redemption value, by amounts corresponding to the rate of inflation as measured by an index. Any increase or decrease in the face amount or principal redemption value will be included as interest income in the Statement of Operations.
e. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
f. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust,
on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is
FUS-16
Annual Report
Franklin U.S. Government Securities VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
f. Guarantees and Indemnifications (continued)
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
| Year Ended | Year Ended | ||
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 332,787 | $4,150,714 | 263,170 | $3,219,496 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 165,439 | 2,038,214 | 143,584 | 1,737,360 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (653,755) | (8,141,504) | (929,495) | (11,354,180) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | (155,529) | $(1,952,576) | (522,741) | $(6,397,324) |
Class 2 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 13,078,267 | $159,400,701 | 4,193,524 | $50,317,492 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 2,197,527 | 26,480,204 | 2,639,946 | 31,230,563 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (15,470,648) | (189,050,058) | (36,549,546) | (438,822,037) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | (194,854) | $(3,169,153) | (29,716,076) | $(357,273,982) |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Advisers, Inc. (Advisers) | Investment manager |
|
|
Franklin Templeton Institutional, LLC (FT Institutional) | Investment manager |
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
|
|
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
|
|
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
|
|
a. Management Fees
The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
|
|
0.625% | Up to and including $100 million |
|
|
0.500% | Over $100 million, up to and including $250 million |
|
|
|
|
|
|
0.450% | Over $250 million, up to and including $7.5 billion |
|
|
0.440% | Over $7.5 billion, up to and including $10 billion |
|
|
|
|
|
|
0.430% | Over $10 billion, up to and including $12.5 billion |
|
|
0.420% | Over $12.5 billion, up to and including $15 billion |
|
|
|
|
|
|
0.400% | In excess of $15 billion |
|
|
|
|
|
|
|
|
|
|
| Annual Report |
| FUS-17 |
|
|
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin U.S. Government Securities VIP Fund (continued)
3. Transactions with Affiliates (continued)
a. Management Fees (continued)
For the year ended December 31, 2020, the gross effective investment management fee rate was 0.480% of he Fund’s average daily net assets.
Under a subadvisory agreement, FT Institutional, an affiliate of Advisers, provides subadvisory services to the Fund. The subadvisory fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund. Effective January 31, 2020, the subadvisory agreement was terminated.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted a distribution plan for Class 2 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plan, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.35% per year of its average daily net assets. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rate, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains.
At December 31, 2020, the capital loss carryforwards were as follows:
Capital loss carryforwards not subject to expiration: |
|
Short term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $37,516,554 |
Long term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 63,317,605 |
Total capital loss carryforwards.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $100,834,159 |
The tax character of distributions paid during the years ended December 31, 2020 and December 31, 2019, was as follows:
| 2020 | 2019 |
Distributions paid from: |
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $28,518,418 | $32,967,923 |
FUS-18
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin U.S. Government Securities VIP Fund (continued)
5. Income Taxes (continued)
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$807,327,199
$25,280,001 (4,169,863)
$21,110,138
$18,272,642
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of bond discounts and premiums.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $441,523,177 and $451,485,873, respectively.
7. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
8. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers, renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
9. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
Annual Report
FUS-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin U.S. Government Securities VIP Fund (continued)
9.Fair Value Measurements (continued)
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments).
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
At December 31, 2020, all of the Fund’s Investments in financial instruments carried at fair value were valued using Level 2 inputs.
10. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020- 04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
11. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
FUS-20
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Franklin U.S. Government Securities VIP Fund (continued)
Abbreviations
Currency |
|
| Selected Portfolio | |
USD | United States Dollar |
| FHLB | Federal Home Loan Banks |
|
|
| FHLMC | Federal Home Loan Mortgage Corp. |
|
|
| FNMA | Federal National Mortgage Association |
|
|
| GNMA | Government National Mortgage Association |
|
|
| LIBOR | London Inter-Bank Offered Rate |
|
|
| MBS | Mortgage-Backed Security |
Annual Report
FUS-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Franklin U.S. Government Securities VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Franklin U.S. Government Securities VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
FUS-22
Annual Report
Templeton Developing Markets VIP Fund
This annual report for Templeton Developing Markets VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | +17.39% |
5-Year | +15.85% |
10-Year | +3.91% |
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance is compared to the performance of the MSCI Emerging Markets (EM) Index-NR and the MSCI EM Index. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund
Summaries.
$16,000 |
|
|
|
| $14,799 |
|
|
|
|
| |
$14,000 |
|
|
|
| $14,674 |
|
|
|
| $14,282 | |
|
|
|
|
| |
$12,000 |
|
|
|
|
|
$10,000 |
|
|
|
|
|
$8,000 |
|
|
|
|
|
$6,000 |
|
|
|
|
|
1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
Templeton Developing Markets | MSCI EM Index-NR* | MSCI EM Index* |
| ||
VIP Fund |
|
|
|
|
|
*Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
Annual Report
TD-1
Templeton Developing Markets VIP Fund
Fund Goal and Main Investments
The Fund seeks long-term capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in emerging market investments.
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets, of which frontier markets are a subset, involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Because these frameworks are typically even less developed in frontier markets, as well as various factors including the increased potential for extreme price volatility, illiquidity, trade barriers and exchange controls, the risks associated with developing markets are magnified in frontier markets. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. In comparison, the Fund's new benchmark, the MSCI Emerging Markets (EM) Index-NR, posted a +18.31% total return for the same period.1 The Fund’s old benchmark, the MSCI EM Index, posted a +18.69% total return.1 The investment manager believes the MSCI EM Index-NR provides a more consistent basis for comparison relative to the Fund’s peers. Please note, index performance numbers are for reference and we do not attempt to track an index but rather undertake investments on the basis of fundamental research.
Geographic Composition 12/31/20
| % of Total |
| Net Assets |
Asia | 75.6% |
Europe | 9.8% |
Latin America & Caribbean | 7.5% |
Middle East & Africa | 4.6% |
North America | 1.8% |
Short-Term Investments & Other Net Assets | 0.7% |
Economic and Market Overview
The novel coronavirus (COVID-19) pandemic pushed the economies of many emerging market countries into contractions, especially during the first two quarters of the 12 months ended December 31, 2020. In response, many emerging market central banks adopted more accommodative monetary policies in an effort to support their economies. Despite significant losses in early 2020 and renewed outbreaks throughout the year, emerging market equities posted gains for the 12-month period, as investors were buoyed by the economic reopening of several emerging market countries, notably China, and optimism about vaccine development.
Regarding individual countries, China’s economy contracted in 2020’s first quarter for the first time on record after the government shut down nonessential businesses for two months to contain the pandemic. Year-on-year growth returned in the second quarter after businesses reopened and then accelerated in the third and fourth quarters, driven by retail sales and industrial production. Taiwan’s year-on- year growth rate slowed in the first and second quarters as its export-dependent economy was impacted by decreased global demand. Government stimulus and foreign demand for electronics parts helped accelerate growth in the third and fourth quarters. South Korea’s year-on year growth rate slowed in the first quarter before contracting in the second, third and fourth quarters, partly due to negative growth in construction, consumption and exports. The year-on-year growth rates of India and Russia also slowed in the first quarter before contracting in the second and third quarters, with low oil prices particularly hurting Russia’s energy export- dependent economy. Brazil’s year-on-year growth rates contracted in the first three quarters of 2020.
1.Source: Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
TD-2
Annual Report
Turning to specific countries’ monetary policies, the People’s Bank of China lowered its benchmark loan prime rate twice during the period. Taiwan’s central bank cut its benchmark interest rate once, bringing it to a record low, and South Korea’s central bank lowered its benchmark interest rate twice, also bringing it to a record low. India’s central bank cut its benchmark rate twice. Russia’s central bank cut its key rate four times to a record low, and Brazil’s central bank cut its benchmark interest rate five times, also bringing it to a record low.
In this environment, emerging market stocks, as measured by the MSCI EM Index-NR, posted a +18.31% total return for the 12 months ended December 31, 2020.1 Chinese equities rose during the period, as investors were reassured by the government’s aggressive actions to contain the pandemic and by a sustained economic recovery as 2020 progressed. Technology-related stocks performed particularly well in the second half of the year, though gains were limited
by tensions with the U.S., which imposed sanctions on several Chinese companies. Equities in Taiwan also rose, benefiting from the government’s successful efforts to control COVID-19 and the strong performance of large technology companies. Russian equities fell during the period, largely due to low oil prices, though stocks recovered some losses late in the period when projections for global oil demand improved. Brazilian equities also declined, with an uncertain political environment and uneven economic recovery limiting gains following massive pandemic-related losses early in the period.
Investment Strategy
We employ a fundamental research, value-oriented, long- term investment approach. We focus on the market price of a company’s securities relative to our evaluation of its long-term earnings, asset value and cash flow potential. This includes an assessment of the potential impacts of material environmental, social and governance factors on the long- term risk and return profile of a company. We also consider a company’s profit and loss outlook, balance sheet strength, cash flow trends and asset value in relation to the current price of the company’s securities. Our analysis considers the company’s position in its sector, the economic framework and political environment.
Manager’s Discussion
Key contributors to absolute performance during the period were Taiwan Semiconductor Manufacturing Co. (TSMC), Samsung Electronics and Tencent Holdings.
TEMPLETON DEVELOPING MARKETS VIP FUND
Top 10 Countries 12/31/20
| % of Total |
| Net Assets |
China | 28.0% |
|
|
South Korea | 22.5% |
|
|
Taiwan | 15.8% |
|
|
Russia | 6.4% |
|
|
India | 6.1% |
|
|
Brazil | 5.7% |
|
|
South Africa | 4.5% |
|
|
United Kingdom | 2.3% |
|
|
United States | 1.8% |
|
|
Mexico | 1.5% |
|
|
TSMC is one of the world’s leading semiconductor makers and counts major technology companies among its clients. The company has been a beneficiary of increased demand from cloud applications related to remote working and online education, trends which the pandemic has accelerated.
The chip maker posted better-than-expected third-quarter 2020 earnings and provided solid revenue guidance amid strong demand for its cutting-edge chips. Although investor uncertainty increased after the U.S. tightened restrictions on TSMC customer Huawei (not a Fund holding)—prohibiting semiconductor makers that use U.S. technology from selling products to the company without U.S. government permission—shares rose after the announcement by a major American competitor of a delay in the production of its next- generation chips and the possibility of outsourcing.
A leading global semiconductor manufacturer, Samsung Electronics is also one of the world’s largest smartphone producers as well as a key supplier of organic light-emitting diode (LED) displays. Overcoming initial supply chain concerns amid the onset of the COVID-19 pandemic,
an improving outlook for the memory chip market and expectations for the company to raise its dividends boosted the stock. New foundry orders from high-profile clients lifted market confidence in its chip-making business. Investors also eyed potential market share gains for the South Korean company across the semiconductor, smartphone, and fifth generation wireless technology (5G) network equipment industries amid escalating U.S. restrictions against Chinese technology-related companies.
Tencent is one of the largest internet services companies in China. The company provides online gaming, social network, financial technology, cloud and other entertainment-related services. After declining in early 2020, shares rebounded in March due to expectations that solid growth in the mobile gaming and financial technology businesses would offset
Annual Report
TD-3
TEMPLETON DEVELOPING MARKETS VIP FUND
any short-term negative impact of COVID-19 on Tencent’s advertising, payments and cloud services. Above-consensus quarterly revenues and net profit in the first three quarters of 2020 continued to support the upward share price trend. Shares also benefited from a U.S. court ruling blocking the U.S. presidential administration from enforcing restrictions against Tencent’s WeChat messaging app in 2020. With the U.S. accounting for a small portion of Tencent’s revenues, limited impact is expected even if some type of ban takes effect. Shares faced some pressure late in the reporting period as China unveiled draft anti-monopoly rules for its internet industry.
In contrast, key detractors from absolute performance included ICICI Bank, Banco Bradesco and Itau Unibanco Holding.
ICICI Bank is one of the largest private-sector banks in India. The bank’s stock corrected substantially in the first quarter of 2020 due to concerns about COVID-19-related economic disruptions on the bank’s loans and margins. Hopes of economic normalization drove a sharp share-price recovery in the final quarter of the year, however, offsetting most of the earlier decline. ICICI Bank continued to report solid quarterly profit growth in the first three quarters of the year, with pandemic-related provisions declining in
the third quarter after increasing in the first two quarters. Investors also reacted positively to the bank’s stake sale in its insurance subsidiaries and solid participation in August from the global and domestic investor community in its multi- billion dollar equity issuance, which strengthened the bank’s balance sheet.
Itau Unibanco and Banco Bradesco are leading commercial banks in Brazil. A collapse in economic activity amid the COVID-19 pandemic and expectations of slowing loan growth, falling margins and rising bad debts have hurt both banks’ near-term earnings forecasts. Both banks also reported weak first-quarter corporate results largely due to higher-than-expected provisions related to COVID-19 and suspended guidance for 2020. Investor sentiment improved, however, after quarter-on-quarter profits rose in the second and third quarters. Shares subsequently rebounded off their lows, driven by expectations that the banks would resume secular growth once the Brazilian economy begins to recover. The banks’ sound fundamentals, attractive valuations and dominant market share provided investors with additional reasons to maintain a positive longer-term view. Credit penetration in Brazil is far below many other markets, signaling room to increase in the coming years.
Top 10 Holdings 12/31/20
Company | % of Total |
Industry, Country | Net Assets |
a | a |
Samsung Electronics Co. Ltd. | 12.2% |
Technology Hardware, Storage & Peripherals, |
|
South Korea |
|
Taiwan Semiconductor Manufacturing Co. Ltd. | 11.8% |
Semiconductors & Semiconductor Equipment, |
|
Taiwan |
|
Alibaba Group Holding Ltd. | 8.7% |
Internet & Direct Marketing Retail, China |
|
Tencent Holdings Ltd. | 7.2% |
Interactive Media & Services, China |
|
NAVER Corp. | 4.2% |
Interactive Media & Services, South Korea |
|
Naspers Ltd. | 4.0% |
Internet & Direct Marketing Retail, South Africa |
|
ICICI Bank Ltd. | 3.5% |
Banks, India |
|
LG Corp. | 2.3% |
Industrial Conglomerates, South Korea |
|
Unilever plc | 2.3% |
Personal Products, United Kingdom |
|
MediaTek, Inc. | 2.1% |
Semiconductors & Semiconductor Equipment, |
|
Taiwan
In the past 12 months, we decreased the Fund’s investments across most markets to raise funds for redemptions
and in favor of opportunities we found more compelling. Positions in Russia, India, South Korea and China were reduced the most. In terms of sectors, reductions were made in communication services, information technology, financials and health care. In terms of key sales, we closed positions in Chinese commercial bank China Construction Bank, Indian biopharmaceutical company Biocon and South Korean semiconductor company SK Hynix. We also reduced our positions in several key holdings, including the aforementioned TSMC and Tencent, leading South Korean search engine company Naver and leading Russian search engine company Yandex, to realign the portfolio following their strong share-price performance.
Meanwhile, we continued to identify what we deemed to be attractive companies with sustainable earnings power and which trade at a discount to their intrinsic worth. New additions to the portfolio included MediaTek, a major Taiwanese integrated circuit design company, and Flat Glass Group, a leading Chinese photovoltaic glass manufacturer. We also increased positions in existing high-conviction holdings with purchases in Alibaba Group Holding, the leading e-commerce company in China; Samsung Life Insurance, one of the largest insurance companies in South Korea; Bajaj Holdings and Investment, which owns significant stakes in some of India’s leading auto and financial services companies; and the aforementioned Itau Unibanco.
TD-4
Annual Report
TEMPLETON DEVELOPING MARKETS VIP FUND
Thank you for your participation in Templeton Developing Markets VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
Annual Report
TD-5
TEMPLETON DEVELOPING MARKETS VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
|
|
| Actual |
| Hypothetical |
|
| ||
|
|
| (actual return after expenses) |
| (5% annual return before expenses) |
|
| ||
|
|
|
| Fund-Level |
|
| Fund-Level |
|
|
|
|
|
| Expenses |
|
| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201,2 |
| Value 12/31/20 | 7/1/20–12/31/201,2 | a | Ratio2 |
1 | $1,000 |
| $1,316.50 | $7.01 | $1,019.08 | $6.11 |
| 1.20% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.
TD-6
Annual Report
TD P1 P2 P4 11/20
SUPPLEMENT DATED NOVEMBER 9, 2020
TO THE PROSPECTUS
DATED MAY 1, 2020 OF
TEMPLETON DEVELOPING MARKETS VIP FUND
(a series of Franklin Templeton Variable Insurance Products Trust)
The prospectus is amended as follows:
I. The following is added to the “Fund Summaries – Principal Investment Strategies” section on page TD-S1 of the prospectus:
This Fund is a “non-diversified” fund, which means it generally invests a greater portion of its assets in the securities of one or more issuers and invests overall in a smaller number of issuers than a diversified fund.
II. The following is added to the “Fund Summaries – Principal Risks” section on page TD-S3 of the prospectus:
Non-Diversification Because the Fund is non-diversified, it may be more sensitive to economic, business, political or other changes affecting individual issuers or investments than a diversified fund, which may result in greater fluctuation in the value of the Fund’s shares.
III. The following is added to the “Fund Summaries – Investment Manager” section on page TD-S5 of the prospectus:
Sub-Advisor
Franklin Templeton Investment Management Limited (“FTIML”)
IV. The portfolio management team under the “Fund Summaries – Portfolio Manager” section on page TD-S5 of the prospectus is replaced with the following:
Portfolio Managers
Chetan Sehgal, CFA Portfolio manager of Asset Management and portfolio manager of the Fund since 2017.
Andrew Ness, CFA Portfolio Manager of FTIML and portfolio manager of the Fund since November 2020.
V. The following is added under the “Fund Summaries – Performance – Average Annual Total Returns” table on page TD-S4 of the prospectus:
MSCI Emerging Markets Index-NR (index reflects no deduction for fees, expenses or taxes)1
1.The MSCI Emerging Markets Index-NR is replacing the MSCI Emerging Markets Index as the Fund’s benchmark because the investment manager believes the MSCI Emerging Markets Index-NR provides a more consistent basis for comparison relative to the Fund’s peers.
VI. The following is added to the “Fund Details – Principal Investment Policies and Practices” section on page TD-D1 of the prospectus:
The Fund is a “non-diversified” fund, which means it generally invests a greater portion of its assets in the securities of one or more issuers and invests overall in a smaller number of issuers than a diversified fund.
VII. The following is added to the “Fund Details – Principal Risks” section on page TD-D2 of the prospectus:
Non-Diversification
Annual Report
TD-7
The Fund is a “non-diversified” fund. It generally invests a greater portion of its assets in the securities of one or more issuers and invests overall in a smaller number of issuers than a diversified fund. The Fund may be more sensitive to a single economic, business, political, regulatory or other occurrence than a more diversified fund might be, which may result in greater fluctuation in the value of the Fund’s shares.
VIII. The following is added to the “Fund Details – Management” section on page TD-D7 of the prospectus:
Management
Templeton Asset Management Ltd. (Asset Management), 7 Temasek Boulevard, Suntec Tower One, #38-3, Singapore 038987, is the Fund’s investment manager. Asset Management has a branch office in Hong Kong. Asset Management an indirect subsidiary of Franklin Resources., Inc. (Resources)
Under a separate agreement with Asset Management, Franklin Templeton Investment Management Limited (FTIML), Cannon Place, 78 Cannon Street, London, EC4N 6HL, England serves as the Fund’s sub-advisor. The sub-advisor provides Asset Management with investment management advice (which may include research and analysis services). FTIML is an indirect subsidiary of Resources. For purposes of the Fund’s investment strategies, techniques and risks, the term “investment manager” includes the sub-advisor.
The Fund is managed by a team of dedicated professionals focused on investments in developing and emerging markets. The portfolio managers of the Fund are as follows:
Chetan Sehgal, CFA
Director of Global Emerging Markets/Small Cap Strategies of the Templeton Emerging Markets Group and portfolio manager of Asset Management
Mr. Sehgal has been a portfolio manager of the Fund since 2017. He joined Franklin Templeton in 1995.
Andrew Ness, CFA
Portfolio Manager of FTIML
Mr. Ness has been a portfolio manager of the Fund since November 2020. He joined Franklin Templeton in 2018. Prior to joining Franklin Templeton, he was a portfolio manager at Martin Currie Investment Management Limited, an Edinburg based asset manager.
As co-lead portfolio managers, Messrs. Sehgal and Ness are jointly and primarily responsible for the day-to-day management of the Fund’s portfolio. They have equal authority over all aspects of the Fund’s investment portfolio, including but not limited to, the implementation of the Fund’s asset allocation strategy, purchases and sales of individual securities, portfolio risk assessment, and the management of daily cash balances in accordance with anticipated investment. The degree to which they may perform these functions, and the nature of the functions, may change from time to time.
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.
Please keep this supplement with your prospectus for future reference.
TD-8
Annual Report
VIP SA1 11/20
SUPPLEMENT DATED NOVEMBER 9, 2020
TO THE STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 2020 OF
TEMPLETON DEVELOPING MARKETS VIP FUND
(a series of Franklin Templeton Variable Insurance Products Trust)
The Statement of Additional Information (SAI) is amended as follows:
I. The following is added to “Management and Other Services – Investment and Services Provided” section on page 83 of the SAI is replaced with the following:
The Templeton Developing Markets VIP Fund’s sub-advisor is Franklin Templeton Investment Management Limited, an indirect, wholly owned subsidiary of Resources. The sub-advisor has an agreement with the investment manager and provides the investment manager with investment management advice and assistance. The sub-advisor's activities are subject to the board's review and control, as well as the investment manager's instruction and supervision. The investment manager pays the sub-advisor a fee equal to 50% of the net advisory fee paid by the Fund to the investment manager. The net investment advisory fee, in this case, is defined to equal: (i) 96% of an amount equal to the total investment management fee payable to the investment manager minus any Fund fees and/or expenses waived and/or reimbursed by the investment manager, minus (ii) any amounts paid by the investment manager to Franklin Templeton Services, LLC for fund administrative services.
II.The following is added to the “Management – Portfolio Managers – Other accounts managed by the portfolio managers” section beginning on page 88 as of November 9, 2021:
Andrew Ness1 | 0 N/A | 0 N/A | 0 N/A |
1. Effective November 9, 2020, Andrew Ness was added as a portfolio manager of the Templeton Developing Markets VIP Fund.
III.The first paragraph under “Management and Other Services – Administrator and services provided” section on page
91 of the SAI is replaced with the following:
Franklin Templeton Services, LLC (FT Services) has an agreement with the investment manager to provide certain administrative services and facilities for the Fund. FT Services is an indirect, wholly owned subsidiary of Resources and is an affiliate of the Fund's investment manager, sub-advisor and principal underwriter.
IV. The first paragraph under “Organization, Voting Rights and Principal Holders” section on page 95 is revised as follows:
The Trust is an open-end management investment company, commonly called a mutual fund. The Trust was originally organized as a Massachusetts business trust on April 26, 1988 and was reorganized effective May 1, 2007, as a Delaware statutory trust on October 18, 2006, and is registered with the SEC. Each Fund, except the Developing Markets VIP Fund and Global Bond VIP Fund, are a diversified series of the Trust. Developing Markets VIP Fund and Global Bond VIP Fund are non-diversified Funds as defined under the 1940 Act.
Please keep this supplement with your SAI for future reference.
Annual Report
TD-9
VIP SA2 11/20
SUPPLEMENT DATED NOVEMBER 17, 2020
TO THE STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 2020 OF
TEMPLETON DEVELOPING MARKETS VIP FUND
(a series of Franklin Templeton Variable Insurance Products Trust)
The Statement of Additional Information (SAI) is amended as follows:
I. The “Fundamental Investment Policies – Diversification” section on page 3 of the SAI is replaced with the following:
Each Fund, except for Franklin Global Real Estate VIP Fund, Templeton Developing Markets VIP Fund and Templeton Global Bond VIP Fund, may not:
Purchase the securities of any one issuer (other than the U.S. government or any of its agencies or instrumentalities or securities of other investment companies, whether registered or excluded from registration under Section 3(c) of the 1940 Act) if immediately after such investment (a) more than 5% of the value of the Fund’s total assets would be invested in such issuer or (b) more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund’s total assets may be invested without regard to such 5% and 10% limitations.
Please keep this supplement with your SAI for future reference.
TD-10
Annual Report
TEMPLETON DEVELOPING MARKETS VIP FUND
Meeting of Shareholders: September 9, 2020 (unaudited)
A Special Meeting of Shareholders of Templeton Developing Markets VIP Fund, a series of Franklin Templeton Variable Insurance Products Trust, was held at the offices of Franklin Templeton, 300 S.E. 2nd Street, Fort Lauderdale, Florida on September 9, 2020. The purpose of the meeting was to approve a change in the Fund’s classification from a diversified to a non-diversified fund. The proposal was approved by shareholders. No other business was transacted at the meeting.
The results of the voting at the meeting are as follows:
Proposal. To approve a change in the Fund’s classification from a diversified to a non-diversified fund:
|
| % FOR of |
| % Voted | Outstanding |
For | FOR | Shares |
17,615,235 | 84.04% | 59.01% |
|
| % Against of |
| % Voted | Outstanding |
Against | Against | Shares |
2,244,680 | 10.71% | 7.52% |
|
| % Abstain of |
| % Voted | Outstanding |
Abstain | Abstain | Shares |
1,100,844 | 5.25% | 3.69% |
Annual Report
TD-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Templeton Developing Markets VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $10.80 | $8.62 | $10.31 | $7.42 | $6.37 |
Income from investment operationsa: | 0.07 | 0.18 | 0.09 | 0.08 | 0.05 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 1.57 | 2.12 | (1.67) | 2.92 | 1.08 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 1.64 | 2.30 | (1.58) | 3.00 | 1.13 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.45) | (0.12) | (0.11) | (0.11) | (0.08) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.26) | — | — | — | — |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.71) | (0.12) | (0.11) | (0.11) | (0.08) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $11.73 | $10.80 | $8.62 | $10.31 | $7.42 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 17.39% | 26.92% | (15.44)% | 40.65% | 17.79% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.19% | 1.15% | 1.24% | 1.36% | 1.38% |
Expenses net of waiver and payments by affiliates. . . . . . . | 1.19%d | 1.15%d | 1.24%d | 1.35%e | 1.36% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.73% | 1.83% | 0.99% | 0.86% | 0.79% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $89,165 | $97,271 | $85,397 | $105,493 | $82,596 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 11.60% | 18.04% | 9.22% | 10.76% | 26.78% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%. eBenefit of expense reduction rounds to less than 0.01%.
TD-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Templeton Developing Markets VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $10.71 | $8.54 | $10.23 | $7.36 | $6.32 |
Income from investment operationsa: | 0.05 | 0.15 | 0.07 | 0.05 | 0.04 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 1.56 | 2.11 | (1.68) | 2.91 | 1.06 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 1.61 | 2.26 | (1.61) | 2.96 | 1.10 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.42) | (0.09) | (0.08) | (0.09) | (0.06) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.26) | — | — | — | — |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.68) | (0.09) | (0.08) | (0.09) | (0.06) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $11.64 | $10.71 | $8.54 | $10.23 | $7.36 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 17.18% | 26.70% | (15.79)% | 40.41% | 17.44% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.45% | 1.40% | 1.49% | 1.61% | 1.63% |
Expenses net of waiver and payments by affiliates. . . . . . . | 1.44% | 1.40%d | 1.49%d | 1.60%e | 1.61% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.49% | 1.58% | 0.74% | 0.61% | 0.54% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $241,104 | $231,645 | $195,305 | $270,433 | $205,151 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 11.60% | 18.04% | 9.22% | 10.76% | 26.78% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%. eBenefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Annual Report
TD-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Templeton Developing Markets VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 4
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $10.77 | $8.59 | $10.28 | $7.39 | $6.34 |
Income from investment operationsa: | 0.04 | 0.15 | 0.06 | 0.05 | 0.03 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 1.57 | 2.11 | (1.68) | 2.92 | 1.06 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 1.61 | 2.26 | (1.62) | 2.97 | 1.09 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.41) | (0.08) | (0.07) | (0.08) | (0.04) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.26) | — | — | — | — |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.67) | (0.08) | (0.07) | (0.08) | (0.04) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $11.71 | $10.77 | $8.59 | $10.28 | $7.39 |
Total returnc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 17.05% | 26.49% | (15.81)% | 40.30% | 17.32% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.54% | 1.50% | 1.59% | 1.71% | 1.73% |
Expenses net of waiver and payments by affiliates. . . . . . . | 1.54%d | 1.50%d | 1.59%d | 1.70%e | 1.71% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.44% | 1.48% | 0.64% | 0.51% | 0.44% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $5,518 | $5,590 | $5,203 | $7,199 | $6,377 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 11.60% | 18.04% | 9.22% | 10.76% | 26.78% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%. eBenefit of expense reduction rounds to less than 0.01%.
TD-14
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Templeton Developing Markets VIP Fund
a | a | Industry | Shares | a | Value |
| a |
|
|
|
|
| Common Stocks 96.1% |
|
|
|
|
| Brazil 2.4% |
|
|
|
|
| aB2W Cia Digital. . . . . . . . . . . . . . . . . . | Internet & Direct Marketing Retail | 76,800 |
| $1,118,450 |
| B3 SA - Brasil Bolsa Balcao. . . . . . . . . | Capital Markets | 61,400 |
| 735,157 |
| aLojas Americanas SA. . . . . . . . . . . . . . | Multiline Retail | 274,360 |
| 1,081,412 |
| aM Dias Branco SA. . . . . . . . . . . . . . . . | Food Products | 106,200 |
| 697,777 |
| Vale SA. . . . . . . . . . . . . . . . . . . . . . . . | Metals & Mining | 266,919 |
| 4,492,754 |
|
|
|
|
| 8,125,550 |
| Cambodia 0.6% |
|
|
|
|
| NagaCorp Ltd.. . . . . . . . . . . . . . . . . . . | Hotels, Restaurants & Leisure | 1,525,400 |
| 2,003,524 |
| China 28.0% |
|
|
|
|
| aAlibaba Group Holding Ltd... . . . . . . . . | Internet & Direct Marketing Retail | 1,008,209 |
| 29,323,285 |
| bBAIC Motor Corp. Ltd., H, 144A, Reg S. | Automobiles | 1,686,100 |
| 625,678 |
| aBaidu, Inc., ADR.. . . . . . . . . . . . . . . . . | Interactive Media & Services | 12,923 |
| 2,794,470 |
| Brilliance China Automotive Holdings |
|
|
|
|
| Ltd... . . . . . . . . . . . . . . . . . . . . . . . . | Automobiles | 7,756,600 |
| 7,080,740 |
| China Merchants Bank Co. Ltd., A.. . . . | Banks | 340,000 |
| 2,291,681 |
| China Merchants Bank Co. Ltd., H. . . . | Banks | 606,700 |
| 3,838,011 |
| China Mobile Ltd... . . . . . . . . . . . . . . . | Wireless Telecommunication Services | 428,729 |
| 2,443,950 |
| China Resources Cement Holdings Ltd.. | Construction Materials | 2,429,000 |
| 2,713,034 |
| CNOOC Ltd... . . . . . . . . . . . . . . . . . . . | Oil, Gas & Consumable Fuels | 2,008,500 |
| 1,842,643 |
| COSCO SHIPPING Ports Ltd... . . . . . . | Transportation Infrastructure | 349,259 |
| 242,932 |
| cFlat Glass Group Co. Ltd., H.. . . . . . . . | Semiconductors & Semiconductor Equipment | 327,017 |
| 1,379,462 |
| Health & Happiness H&H International |
|
|
|
|
| Holdings Ltd... . . . . . . . . . . . . . . . . . | Food Products | 418,400 |
| 1,550,420 |
| NetEase, Inc., ADR.. . . . . . . . . . . . . . . | Entertainment | 21,265 |
| 2,036,549 |
| Ping An Bank Co. Ltd., A.. . . . . . . . . . . | Banks | 802,600 |
| 2,379,761 |
| Ping An Insurance Group Co. of China |
|
|
|
|
| Ltd., A.. . . . . . . . . . . . . . . . . . . . . . . | Insurance | 202,225 |
| 2,696,225 |
| Ping An Insurance Group Co. of China |
|
|
|
|
| Ltd., H.. . . . . . . . . . . . . . . . . . . . . . . | Insurance | 41,852 |
| 509,323 |
| aProsus NV. . . . . . . . . . . . . . . . . . . . . . | Internet & Direct Marketing Retail | 32,057 |
| 3,461,615 |
| Tencent Holdings Ltd... . . . . . . . . . . . . | Interactive Media & Services | 337,501 |
| 24,284,479 |
| Uni-President China Holdings Ltd... . . . | Food Products | 1,814,017 |
| 1,847,170 |
| Weifu High-Technology Group Co. Ltd., |
|
|
|
|
| B.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Auto Components | 306,139 |
| 587,756 |
|
|
|
|
| 93,929,184 |
| Czech Republic 0.4% |
|
|
|
|
| a,bMoneta Money Bank A/S, 144A, Reg S. | Banks | 390,403 |
| 1,236,955 |
| Hungary 0.8% |
|
|
|
|
| Richter Gedeon Nyrt.. . . . . . . . . . . . . . | Pharmaceuticals | 107,565 |
| 2,699,576 |
| India 6.1% |
|
|
|
|
| Bajaj Holdings & Investment Ltd... . . . . | Diversified Financial Services | 61,532 |
| 2,593,670 |
| Coal India Ltd.. . . . . . . . . . . . . . . . . . . | Oil, Gas & Consumable Fuels | 442,535 |
| 822,764 |
| aICICI Bank Ltd... . . . . . . . . . . . . . . . . . | Banks | 1,579,654 |
| 11,617,881 |
| Infosys Ltd... . . . . . . . . . . . . . . . . . . . . | IT Services | 306,365 |
| 5,252,887 |
| Tata Chemicals Ltd.. . . . . . . . . . . . . . . | Chemicals | 32,940 |
| 215,725 |
|
|
|
|
| 20,502,927 |
| Indonesia 0.7% |
|
|
|
|
| Astra International Tbk. PT.. . . . . . . . . | Automobiles | 5,624,400 |
| 2,417,485 |
| Kenya 0.1% |
|
|
|
|
| aEquity Group Holdings plc.. . . . . . . . . . | Banks | 764,354 |
| 255,835 |
The accompanying notes are an integral part of these financial statements.
Annual Report
TD-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Developing Markets VIP Fund (continued)
a | a | Industry | Shares | a | Value |
| a |
|
|
|
|
| Common Stocks (continued) |
|
|
|
|
| Mexico 1.5% |
|
|
|
|
| aBanco Santander Mexico SA Institucion |
|
|
|
|
| de Banca Multiple Grupo Financiero |
|
|
|
|
| Santand, ADR.. . . . . . . . . . . . . . . . . | Banks | 879,522 |
| $4,529,538 |
| bNemak SAB de CV, 144A, Reg S. . . . . | Auto Components | 1,928,900 |
| 562,645 |
|
|
|
|
| 5,092,183 |
| Pakistan 0.2% |
|
|
|
|
| Habib Bank Ltd.. . . . . . . . . . . . . . . . . . | Banks | 1,013,500 |
| 835,952 |
| Peru 0.3% |
|
|
|
|
| Intercorp Financial Services, Inc.. . . . . | Banks | 31,950 |
| 988,533 |
| Philippines 0.2% |
|
|
|
|
| BDO Unibank, Inc.. . . . . . . . . . . . . . . . | Banks | 327,469 |
| 729,150 |
| Russia 6.4% |
|
|
|
|
| Gazprom PJSC, ADR.. . . . . . . . . . . . . | Oil, Gas & Consumable Fuels | 202,485 |
| 1,130,502 |
| LUKOIL PJSC, ADR.. . . . . . . . . . . . . . | Oil, Gas & Consumable Fuels | 85,254 |
| 5,798,383 |
| a,bMail.Ru Group Ltd., GDR, Reg S. . . . . | Interactive Media & Services | 27,833 |
| 729,435 |
| Sberbank of Russia PJSC, ADR. . . . . . | Banks | 471,958 |
| 6,823,676 |
| aYandex NV, A.. . . . . . . . . . . . . . . . . . . | Interactive Media & Services | 98,891 |
| 6,880,836 |
|
|
|
|
| 21,362,832 |
| South Africa 4.5% |
|
|
|
|
| aMassmart Holdings Ltd.. . . . . . . . . . . . | Food & Staples Retailing | 580,084 |
| 1,658,759 |
| Naspers Ltd., N. . . . . . . . . . . . . . . . . . | Internet & Direct Marketing Retail | 66,341 |
| 13,585,143 |
|
|
|
|
| 15,243,902 |
| South Korea 22.5% |
|
|
|
|
| aFila Holdings Corp... . . . . . . . . . . . . . . | Textiles, Apparel & Luxury Goods | 67,366 |
| 2,712,621 |
| aKT Skylife Co. Ltd.. . . . . . . . . . . . . . . . | Media | 92,351 |
| 748,874 |
| aLG Corp.. . . . . . . . . . . . . . . . . . . . . . . | Industrial Conglomerates | 96,342 |
| 7,762,360 |
| aNAVER Corp... . . . . . . . . . . . . . . . . . . | Interactive Media & Services | 52,323 |
| 14,083,346 |
| POSCO. . . . . . . . . . . . . . . . . . . . . . . . | Metals & Mining | 15,429 |
| 3,849,562 |
| Samsung Electronics Co. Ltd... . . . . . . | Technology Hardware, Storage & Peripherals | 549,012 |
| 40,935,767 |
| aSamsung Life Insurance Co. Ltd.. . . . . | Insurance | 74,406 |
| 5,421,313 |
|
|
|
|
| 75,513,843 |
| Taiwan 15.8% |
|
|
|
|
| Catcher Technology Co. Ltd... . . . . . . . | Technology Hardware, Storage & Peripherals | 143,000 |
| 1,051,219 |
| CTBC Financial Holding Co. Ltd... . . . . | Banks | 350,500 |
| 245,945 |
| Hon Hai Precision Industry Co. Ltd... . . | Electronic Equipment, Instruments & |
|
|
|
|
| Components | 1,388,000 |
| 4,550,042 |
| Largan Precision Co. Ltd... . . . . . . . . . | Electronic Equipment, Instruments & |
|
|
|
|
| Components | 5,300 |
| 603,849 |
| MediaTek, Inc.. . . . . . . . . . . . . . . . . . . | Semiconductors & Semiconductor Equipment | 267,000 |
| 7,118,390 |
| Taiwan Semiconductor Manufacturing |
|
|
|
|
| Co. Ltd... . . . . . . . . . . . . . . . . . . . . . | Semiconductors & Semiconductor Equipment | 2,087,831 |
| 39,486,649 |
|
|
|
|
| 53,056,094 |
| Thailand 1.5% |
|
|
|
|
| Kasikornbank PCL. . . . . . . . . . . . . . . . | Banks | 705,000 |
| 2,654,663 |
| Kiatnakin Phatra Bank PCL.. . . . . . . . . | Banks | 859,600 |
| 1,481,899 |
| Thai Beverage PCL. . . . . . . . . . . . . . . | Beverages | 1,450,900 |
| 808,225 |
|
|
|
|
| 4,944,787 |
| United Kingdom 2.3% |
|
|
|
|
| Unilever plc. . . . . . . . . . . . . . . . . . . . . | Personal Products | 128,311 |
| 7,695,845 |
TD-16
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Developing Markets VIP Fund (continued)
a | a | Industry | Shares | a | Value |
| a |
|
|
|
|
| Common Stocks (continued) |
|
|
|
|
| United States 1.8% |
|
|
|
|
| Cognizant Technology Solutions Corp., |
|
|
|
|
| A.. . . . . . . . . . . . . . . . . . . . . . . . . . . | IT Services | 59,192 |
| $4,850,784 |
| aIMAX Corp.. . . . . . . . . . . . . . . . . . . . . | Entertainment | 66,750 |
| 1,202,835 |
|
|
|
|
| 6,053,619 |
| . . . . .Total Common Stocks (Cost $186,341,531).. . . . . . | . . . . . . . . . . . . . . . . | . . . . . . . . . . |
| 322,687,776 |
| Preferred Stocks 3.2% |
|
|
|
|
|
|
|
|
| |
| Brazil 3.2% |
|
|
|
|
| dBanco Bradesco SA, ADR, 3.42%.. . . . | Banks | 1,026,866 |
| 5,401,316 |
| dItau Unibanco Holding SA, ADR, 4.37%. | Banks | 897,443 |
| 5,465,428 |
|
|
|
|
| 10,866,744 |
| . . . . .Total Preferred Stocks (Cost $7,746,133).. . . . . . . . | . . . . . . . . . . . . . . . . | . . . . . . . . . . |
| 10,866,744 |
|
|
|
|
|
|
a |
| a | a | a | a |
| Escrows and Litigation Trusts 0.0% |
|
|
|
|
| eHemisphere Properties India Ltd., |
|
|
|
|
| Escrow Account.. . . . . . . . . . . . . . . . |
| 82,304 |
| — |
| . . . . .Total Escrows and Litigation Trusts (Cost $–). . . . | . . . . . . . . . . . . . . . . | . . . . . . . . . . |
| — |
| Total Long Term Investments (Cost $194,087,664) |
|
|
|
|
| . . . . . . . . . . . . . . . . | . . . . . . . . . . |
| 333,554,520 | |
| Short Term Investments 0.5% |
|
|
|
|
|
|
|
|
|
a a
Industry | Shares | a | Value |
a | a | a | a | a | a |
| Money Market Funds 0.4% |
|
|
|
|
| United States 0.4% |
|
|
|
|
| f,gInstitutional Fiduciary Trust - Money |
|
|
|
|
| Market Portfolio, 0%. . . . . . . . . . . . . |
| 1,250,033 |
| 1,250,033 |
| . . . . . . . . .Total Money Market Funds (Cost $1,250,033). . . . . . . . . . | . . . . . . | . . . . . . . . . . . |
| 1,250,033 |
| hInvestments from Cash Collateral Received for Loaned |
|
|
|
|
|
|
|
|
| |
| Securities 0.1% |
|
|
|
|
| Money Market Funds 0.1% |
|
|
|
|
| f,gInstitutional Fiduciary Trust - Money |
|
|
|
|
| Market Portfolio, 0%. . . . . . . . . . . . . |
| 518,425 |
| 518,425 |
Total Investments from Cash Collateral Received for Loaned Securities (Cost
$518,425).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .518,425
Total Short Term Investments (Cost $1,768,458). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,768,458 |
|
|
| a |
Total Investments (Cost $195,856,122) 99.8%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities 0.2%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$335,322,978 463,704
$335,786,682
See Abbreviations on page TD- 29.
aNon-income producing.
The accompanying notes are an integral part of these financial statements.
Annual Report
TD-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Developing Markets VIP Fund (continued)
bSecurity was purchased pursuant to Rule 144A or Regulation S under the Securities Act of 1933. 144A securities may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. Regulation S securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At December 31, 2020, the aggregate value of these securities was $3,154,713, representing 0.9% of net assets.
cA portion or all of the security is on loan at December 31, 2020. See Note 1(c).
dVariable rate security. The rate shown represents the yield at period end.
eFair valued using significant unobservable inputs. See Note 10 regarding fair value measurements.
fSee Note 3(e) regarding investments in affiliated management investment companies.
gThe rate shown is the annualized seven-day effective yield at period end.
hSee Note 1(c) regarding securities on loan.
TD-18
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Templeton |
| Developing |
| Markets VIP |
| Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $194,087,664 |
Cost - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,768,458 |
Value - Unaffiliated issuers (Includes securities loaned of $911,818).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $333,554,520 |
Value - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,768,458 |
Foreign currency, at value (cost $12,854).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 12,858 |
Receivables: |
|
Investment securities sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,644,857 |
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 40,972 |
Dividends.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 843,768 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 40 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 337,865,473 |
Liabilities: |
|
Payables: |
|
Investment securities purchased.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 368,942 |
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 87,408 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 293,084 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 51,784 |
Payable upon return of securities loaned (Note 1c).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 518,425 |
Deferred tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 551,342 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 207,806 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,078,791 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $335,786,682 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $195,381,923 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 140,404,759 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $335,786,682 |
| Templeton |
| Developing |
| Markets VIP |
| Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $89,164,574 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 7,599,685 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $11.73 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $241,104,498 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 20,719,809 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $11.64 |
Class 4: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $5,517,610 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 471,266 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $11.71 |
The accompanying notes are an integral part of these financial statements.
Annual Report
TD-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the year ended December 31, 2020
Templeton
Developing
Markets VIP
Fund
Investment income:
Dividends: (net of foreign taxes of $1,024,621)
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from securities loaned:
Unaffiliated entities (net of fees and rebates).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution fees: (Note 3c)
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses waived/paid by affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments: (net of foreign taxes of $182,654)
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation of other assets and liabilities denominated in foreign currencies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in deferred taxes on unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in unrealized appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,536,196 9,563
11,162
1,716
5,558,637
3,020,903
512,787
17,079
75,112
125,646
181,475
1,640
32,349
3,966,991
(11,011)
3,955,980
1,602,657
7,472,701
(54,850)
7,417,851
35,665,338
29,973
7,832
35,703,143
43,120,994
$44,723,651
TD-20
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Templeton Developing Markets VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,602,657 | $5,141,772 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,417,851 | 16,774,357 |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | 35,703,143 | 50,174,103 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | 44,723,651 | 72,090,232 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (5,313,566) | (1,134,638) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (13,445,802) | (2,113,534) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (329,902) | (46,961) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (19,089,270) | (3,295,133) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (15,688,037) | (8,627,549) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (8,150,495) | (10,720,631) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (515,345) | (845,695) |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (24,353,877) | (20,193,875) |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | 1,280,504 | 48,601,224 |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 334,506,178 | 285,904,954 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $335,786,682 | $334,506,178 |
The accompanying notes are an integral part of these financial statements.
Annual Report
TD-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Notes to Financial Statements
Templeton Developing Markets VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Templeton Developing Markets VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust's Board of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively.
Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade
in multiple markets or on multiple exchanges are valued
according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Investments in open-end mutual funds are valued at the closing NAV.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Events can occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund's portfolio securities as determined at the foreign market close and the latest indications of value at
4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund’s portfolio securities to the latest indications of fair value at 4 p.m. Eastern time. At December 31, 2020, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy. See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result in differences between the value of the Fund's portfolio securities on the last business day and the last calendar day
TD-22
Annual Report
Templeton Developing Markets VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
a. Financial Instrument Valuation (continued)
of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
c. Securities Lending
The Fund participates in an agency based securities lending program to earn additional income. The Fund receives collateral in the form of cash and/or U.S. Government
and Agency securities against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. Any cash collateral received is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund. Additionally, the Fund received $443,442 in U.S. Government and Agency securities as collateral. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/ or third-party vendor, is reported separately in the Statement of Operations. The Fund bears the market risk with respect to any cash collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.
d. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and, if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
Annual Report
TD-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Templeton Developing Markets VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
d. Income and Deferred Taxes (continued)
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
e. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the
relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
f. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
g. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust,
on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
TD-24
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Developing Markets VIP Fund (continued)
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
| Year Ended | Year Ended | ||
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 551,169 | $5,176,244 | 544,413 | $5,344,264 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 605,880 | 5,313,565 | 121,873 | 1,134,638 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2,564,863) | (26,177,846) | (1,570,097) | (15,106,451) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,407,814) | $(15,688,037) | (903,811) | $(8,627,549) |
Class 2 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,773,009 | $36,677,695 | 5,803,158 | $55,845,696 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 1,543,720 | 13,445,802 | 228,490 | 2,113,534 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (6,223,836) | (58,273,992) | (7,263,336) | (68,679,861) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | (907,107) | $(8,150,495) | (1,231,688) | $(10,720,631) |
Class 4 Shares: |
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Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 25,280 | $230,224 | 26,510 | $252,720 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 37,660 | 329,902 | 5,050 | 46,961 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (110,712) | (1,075,471) | (118,358) | (1,145,376) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | (47,772) | $(515,345) | (86,798) | $(845,695) |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or trustees of the following subsidiaries:
Subsidiary | Affiliation |
Templeton Asset Management Ltd. (Asset Management) | Investment manager |
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Franklin Templeton Services, LLC (FT Services) | Administrative manager |
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Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
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a. Management Fees
The Fund pays an investment management fee to Asset Management based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
1.050% | Up to and including $1 billion |
1.000% | Over $1 billion, up to and including $5 billion |
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0.950% | Over $5 billion, up to and including $10 billion |
0.900% | Over $10 billion, up to and including $15 billion |
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0.850% | Over $15 billion, up to and including $20 billion |
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0.800% | In excess of $20 billion |
Annual Report
TD-25
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Developing Markets VIP Fund (continued)
3. Transactions with Affiliates (continued)
b. Administrative Fees
Under an agreement with Asset Management, FT Services provides administrative services to the Fund. The fee is paid by Asset Management based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.25% and 0.35% per year of its average daily net assets of Class 2 and Class 4 respectively. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
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| Net Change in |
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| Unrealized | Value | Shares Held |
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| Realized Gain | Appreciation | at End | at End | Investment |
aa | of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Templeton Developing Markets VIP Fund |
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Non-Controlled Affiliates |
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Institutional Fiduciary Trust - Money |
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Market Portfolio, 0%.. . . . . . . . . | $3,522,232 | $44,073,306 | $(46,345,505) | $— | $— | $1,250,033 | 1,250,033 | $9,563 |
Non-Controlled Affiliates |
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Institutional Fiduciary Trust - Money |
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Market Portfolio, 0%.. . . . . . . . . | $— | $14,306,993 | $(13,788,568) | $— | $— | $518,425 | 518,425 | $1,716 |
Total Affiliated Securities. . . . . | $3,522,232 | $58,380,299 | $(60,134,073) | $— | $— | $1,768,458 |
| $11,279 |
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2020, there were no credits earned.
TD-26
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Developing Markets VIP Fund (continued)
5. Income Taxes
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows:
| 2020 | 2019 |
Distributions paid from: |
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Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $11,805,794 | $3,295,133 |
Long term capital gain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7,283,476 | — |
| $19,089,270 | $3,295,133 |
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed long term capital gains.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total distributable earnings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$203,964,075
$153,637,535 (22,278,632)
$131,358,903
$9,205,841 $532,628
$9,738,469
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of corporate actions.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $32,787,720 and $71,416,531, respectively.
At December 31, 2020, in connection with securities lending transactions, the Fund loaned equity investments and received $518,425 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.
7. Concentration of Risk
Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local, regional and global economic, political and social conditions, which may result in greater market volatility. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in securities in Europe. In addition, certain foreign securities may not be as liquid as U.S. securities.
The United States and other nations have imposed and could impose additional sanctions on certain issuers in Russia due to regional conflicts. These sanctions could result in the devaluation of Russia’s currency, a downgrade in Russian issuers’ credit ratings, or a decline in the value and liquidity of Russian stocks or other securities. Such sanctions could also adversely affect Russia’s economy. The Fund may be prohibited from investing in securities issued by companies subject to such sanctions.
In addition, if the Fund holds the securities of an issuer that is subject to such sanctions, an immediate freeze of that issuer’s
Annual Report
TD-27
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Developing Markets VIP Fund (continued)
7. Concentration of Risk (continued)
securities could result, impairing the ability of the Fund to buy, sell, receive or deliver those securities. There is also the risk that countermeasures could be taken by Russia’s government, which could involve the seizure of the Fund’s assets. These risks could affect the value of the Fund's portfolio. While the Fund holds securities of certain issuers impacted by the sanctions, existing investments do not presently violate the applicable terms and conditions of the sanctions. The sanctions currently do not affect the Fund's ability to sell these securities. At December 31, 2020, the Fund had 6.4% of its net assets invested in Russia.
8. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
9. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers, renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
10. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
TD-28
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Developing Markets VIP Fund (continued)
10. Fair Value Measurements (continued)
A summary of inputs used as of December 31, 2020, in valuing the Fund's assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total |
Templeton Developing Markets VIP Fund |
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Assets: |
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Investments in Securities: |
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Common Stocks: |
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Brazil .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $— | $8,125,550 | $— | $8,125,550 |
Cambodia . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 2,003,524 | — | 2,003,524 |
China .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,831,019 | 89,098,165 | — | 93,929,184 |
Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . | — | 1,236,955 | — | 1,236,955 |
Hungary .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 2,699,576 | — | 2,699,576 |
India .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 20,502,927 | — | 20,502,927 |
Indonesia .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 2,417,485 | — | 2,417,485 |
Kenya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 255,835 | — | — | 255,835 |
Mexico .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,092,183 | — | — | 5,092,183 |
Pakistan .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 835,952 | — | — | 835,952 |
Peru .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 988,533 | — | — | 988,533 |
Philippines .. . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 729,150 | — | 729,150 |
Russia .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 6,880,836 | 14,481,996 | — | 21,362,832 |
South Africa .. . . . . . . . . . . . . . . . . . . . . . . . . . | 1,658,759 | 13,585,143 | — | 15,243,902 |
South Korea .. . . . . . . . . . . . . . . . . . . . . . . . . . | — | 75,513,843 | — | 75,513,843 |
Taiwan .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 53,056,094 | — | 53,056,094 |
Thailand .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 4,944,787 | — | 4,944,787 |
United Kingdom .. . . . . . . . . . . . . . . . . . . . . . . | — | 7,695,845 | — | 7,695,845 |
United States .. . . . . . . . . . . . . . . . . . . . . . . . . | 6,053,619 | — | — | 6,053,619 |
Preferred Stocks .. . . . . . . . . . . . . . . . . . . . . . . . | 10,866,744 | — | — | 10,866,744 |
Escrows and Litigation Trusts.. . . . . . . . . . . . . . . | — | — | —a | — |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | 1,768,458 | — | — | 1,768,458 |
Total Investments in Securities.. . . . . . . . . . . | $39,231,938 | $296,091,040 | $— | $335,322,978 |
aIncludes securities determined to have no value at December 31, 2020.
11. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate LIBOR and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
12. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Abbreviations
Selected Portfolio
ADR | American Depositary Receipt |
GDR | Global Depositary Receipt |
Annual Report
TD-29
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Templeton Developing Markets VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Templeton Developing Markets VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
TD-30
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Templeton Developing Markets VIP Fund
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $7,283,476 as a long term capital gain dividend for the fiscal year ended December 31, 2020.
At December 31, 2020, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. The Fund elects to treat foreign taxes paid as allowed under Section 853 of the Internal Revenue Code. This election will allow shareholders of record as of the 2021 distribution date, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.
Annual Report
TD-31
Templeton Foreign VIP Fund
This annual report for Templeton Foreign VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares* represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | -0.92% |
5-Year | +3.57% |
10-Year | +2.68% |
*The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/21. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Annual Report
TF-1
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the MSCI All Country World Index (ACWI) ex USA Index. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to Performance Information preceding the Fund Summaries.
$18,000
$16,923
$16,000
$14,000
$13,026
$12,000 $10,000
$8,000 |
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1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 | |||||
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| Templeton Foreign VIP Fund |
| MSCI ACWI ex USA Index** |
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**Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
TF-2
Annual Report
Templeton Foreign VIP Fund
Fund Goal and Main Investments
The Fund seeks long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of issuers located outside the U.S., including those in emerging markets.
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in developing markets involve heightened risks related to the same factors. Currency rates may fluctuate significantly over short periods of time, and can reduce returns. Because the Fund may invest its assets in companies in a specific region, including Europe, it is subject to greater risks of adverse developments in that region and/or the surrounding regions than a fund that is more broadly diversified geographically. Current political uncertainty concerning the economic consequences of the departure of the U.K. from the European Union may increase market volatility. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio which may result in significant volatility and cause the Fund to participate in losses (as well as enable gains) on an amount that exceeds the Fund’s initial investment. The Fund may not achieve the anticipated benefits, and may realize losses when a counterparty fails to perform as promised. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. For comparison, the Fund’s benchmark, the MSCI All Country World Index (ACWI) ex USA Index, posted a +11.13% total return for the period under review.1
Geographic Composition 12/31/20
| % of Total |
| Net Assets |
Asia | 47.4% |
Europe | 39.5% |
Latin America & Caribbean | 1.7% |
North America | 1.3% |
Short-Term Investments & Other Net Assets | 10.1% |
Economic and Market Overview
Global developed and emerging market equities, as measured by the MSCI ACWI (USD), posted a +16.82% total return for the 12 months ended December 31, 2020.1 Stocks fell sharply in early 2020 as many investors sold equities amid fears of a global economic slowdown due to the novel coronavirus (COVID-19) pandemic. Global equities began to rebound in late March 2020 amid optimism about easing lockdown restrictions, vaccine and treatment development and economic stimulus measures. Despite declines in September and October due to geopolitical tensions and rising infection rates, markets rebounded in November and December, as positive sentiment about successful trials of COVID-19 vaccines, the beginning of vaccination programs in some countries and apparent resolution of political uncertainty supported markets.
In the U.S., pandemic-related restrictions caused stiff economic headwinds, including mass layoffs that drove the unemployment rate to 14.8% in April 2020.2 According to the National Bureau of Economic Research, the longest U.S. economic expansion in history ended in February, and the country slipped into a deep recession. Equities began to rebound in the spring amid the government’s fiscal and monetary stimulus, declining jobless claims, rising retail sales and optimism about treatments and potential vaccines for COVID-19. Following a record annualized decline in second-quarter gross domestic product (GDP), resilient consumer spending helped drive third-quarter GDP to expand at a record annualized rate, although growth slowed in the fourth quarter. Equities continued to rise during the summer but declined in the fall due to concerns about possible new restrictions amid rising COVID-19 infection rates and uncertainties about additional fiscal stimulus and the U.S. presidential election. Despite signs that the economic recovery was stalling as the unemployment
rate remained relatively high (6.7% at period-end) and
1.Source: Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
2.Source: U.S. Bureau of Labor Statistics.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
Annual Report
TF-3
TEMPLETON FOREIGN VIP FUND
consumer spending declined, stocks rallied in November and December, buoyed by the outcome of the U.S. presidential election, the start of COVID-19 vaccination programs and the passage of a new U.S. stimulus bill.2
In an effort to support the economy, the U.S. Federal Reserve (Fed) lowered the federal funds target rate to a range of 0.00%–0.25% in March 2020. The Fed also enacted quantitative easing measures aimed at ensuring credit flows to borrowers and supporting credit markets with open- ended bond purchasing. Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded its 2% target.
In the eurozone, the economy contracted again in the fourth quarter of 2020, following quarter-on-quarter expansion in the third quarter and contractions in the first and second quarters. After several months of gains due to easing restrictions and robust stimulus measures, European developed market equities, as measured by the MSCI Europe Index (USD), declined in September and October as rising infection rates heightened investor concerns that the nascent economic revival could stall. Nevertheless, successful vaccine development and a Brexit resolution supported European developed market equities, as measured by the MSCI Europe Index (USD), to post a +5.93% total return for the period.1
Asian developed and emerging market equities, as measured by the MSCI All Country Asia Index (USD), posted a +21.30% total return for the 12 months under review.1 Although pandemic-related lockdowns derailed economic growth in early 2020, sharp market declines were followed by rebounds as China’s economy, a key driver of the region’s economic activity, recovered from the contraction in the first quarter and expanded during the rest of 2020. Asian stocks rose as the region’s economies reopened, aided by robust stimulus measures and optimism that economic revitalization would be further spurred by COVID-19 vaccines.
Global emerging market stocks, as measured by the MSCI Emerging Markets Index (USD), posted a +18.69% total return for the period, despite steep pandemic-related declines in early 2020, benefiting from improving economic activity, stabilizing oil prices and U.S. dollar weakness.1 In spite of higher COVID-19 cases in some countries, emerging market stocks rallied near the end of 2020, bolstered by easing political uncertainty, commencement of COVID-19 vaccinations and rising commodity prices.
Top 10 Holdings 12/31/20
Company | % of Total |
Industry, Country | Net Assets |
a | a |
Samsung Electronics Co. Ltd. | 5.2% |
Technology Hardware, Storage & Peripherals, |
|
South Korea |
|
Taiwan Semiconductor Manufacturing Co. Ltd. | 3.8% |
Semiconductors & Semiconductor Equipment, |
|
Taiwan |
|
Takeda Pharmaceutical Co. Ltd. | 2.9% |
Pharmaceuticals, Japan |
|
NXP Semiconductors NV | 2.7% |
Semiconductors & Semiconductor Equipment, |
|
Netherlands |
|
Bayer AG | 2.5% |
Pharmaceuticals, Germany |
|
Hitachi Ltd. | 2.4% |
Electronic Equipment, Instruments & |
|
Components, Japan |
|
ArcelorMittal SA | 2.3% |
Metals & Mining, Luxembourg |
|
Sumitomo Metal Mining Co. Ltd. | 2.3% |
Metals & Mining, Japan |
|
AIA Group Ltd. | 2.3% |
Insurance, Hong Kong |
|
Housing Development Finance Corp. Ltd. | 2.2% |
Thrifts & Mortgage Finance, India |
|
Investment Strategy
Our investment philosophy is bottom up, value oriented and long term. When choosing investments for the Fund, we generally focus on the market price of a company’s securities relative to our evaluation of the company’s potential long-term earnings, asset value and cash flow. Our analysis includes an assessment of the potential impacts of material environmental, social and governance (ESG) factors on the long-term risk and return profile of a company. We also consider a company’s price/earnings ratio, price/cash flow ratio, profit margins and liquidation value.
The Fund may, from time to time, engage in currency-related derivatives to seek to hedge (protect) against currency risks. The Fund may also use a variety of equity-related derivatives for various purposes including enhancing Fund returns, increasing liquidity and gaining exposure to particular markets in more efficient or less expensive ways.
Manager’s Discussion
During the 12 months under review, significant detractors from the Fund’s performance relative to the MSCI ACWI ex USA Index included stock selection in the health care and financials sectors, as well as an overweighting in the energy sector.
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Within health care, German pharmaceuticals and agricultural chemicals firm Bayer was the biggest detractor. The market has remained skeptical about the finality of Bayer’s complex US$12 billion settlement to resolve litigation stemming from its acquisition of Monsanto (not a Fund holding), manufacturer of the controversial weed-killer Roundup. Adding to the negative sentiment, at the end of 2020’s third quarter, company management issued a profit warning for 2021.
In the financials sector, our positions in European banks Standard Chartered (U.K.), ING Groep (Netherlands), Bank of Ireland (not held at period-end) and BNP Paribas (France) (not held at period-end) hurt relative performance. Standard Chartered fell in early January 2020, as COVID-19 began to spread across parts of Asia and Europe. The uncertain operating environment brought on by the pandemic, combined with a low interest-rate environment, created a headwind for Standard Chartered operating profits in 2020. In addition, geopolitical tension between the U.S. and China, pertaining to the Hong Kong national security law passed at the end of June and supported by the business community, was a source of investor concern.
In the energy sector, our investment in U.K. integrated oil and gas company BP hampered relative results. BP began 2020 on a positive note by reporting positive fourth quarter results and increasing its dividend. However, the stock price slid during March 2020, due in part to cratering gasoline demand caused by reduced commuter and business travel as the COVID-19 pandemic significantly reduced travel, putting downward pressure on the price of oil. A pricing disagreement between Russia and Saudi Arabia exacerbated the issue. BP responded to the crisis by substantially reducing its capital expenditures, cutting jobs and decreasing its dividend distribution.
Other key relative detractors included our positions in Hong Kong-based industrial conglomerate CK Hutchison Holdings, Hong Kong-based property developer CK Asset Holdings and Hong Kong-based real estate management and development company Swire Pacific.
Conversely, key contributors to the Fund’s relative performance included stock selection and overweightings in the information technology (IT) and materials sectors.
Within IT, South Korean semiconductor, electronics and computer peripherals manufacturer Samsung Electronics, integrated circuits and wafer semiconductor devices maker Taiwan Semiconductor Manufacturing, German semiconductor and system solutions provider Infineon Technologies and Netherlands-based semiconductor
TEMPLETON FOREIGN VIP FUND
solutions provider NXP Semiconductors benefited relative performance. Samsung Electronics’ shares overcame the initial supply chain concerns amid the onset of the COVID-19 pandemic and rose amid an improving outlook for the memory chip market and expectations for the company to raise its dividends. New foundry orders from high-profile clients lifted market confidence in its chip-making business. Furthermore, many investors became optimistic about potential market share gains for the company across the semiconductor, smartphone, and 5G network equipment industries amid escalating U.S. restrictions against Chinese technology-related companies.
In the materials sector, Canada-based mining firms Wheaton Precious Metals, which has operations in Brazil, and Alamos Gold; Netherlands-based steelmaking and mining company ArcelorMittal; and Japan-based mining company Sumitomo Metal Mining aided relative results. Wheaton Precious Metals and Alamos Gold benefited from higher gold prices amid investor concerns about excess debt, economic turmoil and the potentially inflationary impact of extreme monetary accommodation.
Elsewhere, China-based internet search and online marketing solutions provider Baidu helped relative performance. Baidu’s shares recovered from the heightened market volatility in early 2020, as declining costs helped the company post better-than-expected first-quarter 2020 profits. Despite subpar advertising revenues during the summer months, second-quarter 2020 earnings results were positive, due in part to tight cost controls during those three months. As China’s advertising market rebounded in the fall, the company’s advertising revenues also recovered, turning core business revenues positive. Third-quarter 2020 earnings beat market expectations, and along with news of an acquisition, provided fuel for a share price rally that lasted for the remainder of the 2020.
From a geographic perspective, significant detractors from the Fund’s relative performance included stock selection in Asia ex Japan, particularly in Hong Kong and China; stock selection in the eurozone, especially in the Netherlands and Ireland; and stock selection in the U.K. and Japan. Conversely, key contributors to relative results included stock selection and an underweighting in Canada, as well as a lack of exposure to Latin America and the Caribbean.
It is important to recognize the effect of currency movements on the Fund’s performance. In general, if the value of the U.S. dollar goes up compared with a foreign currency, an investment traded in that foreign currency will go down in value because it will be worth fewer U.S. dollars. This can have a negative effect on Fund performance. Conversely,
Annual Report
TF-5
TEMPLETON FOREIGN VIP FUND
when the U.S. dollar weakens in relation to a foreign currency, an investment traded in that foreign currency will increase in value, which can contribute to Fund performance. For the 12 months ended December 31, 2020, the U.S. dollar declined in value relative to most currencies. As a result, the Fund’s performance was positively affected by the portfolio’s investment predominantly in securities with non- U.S. currency exposure. However, one cannot expect the same result in future periods.
Thank you for your participation in Templeton Foreign VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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TEMPLETON FOREIGN VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
|
|
| Actual |
| Hypothetical |
|
| ||
|
|
| (actual return after expenses) |
| (5% annual return before expenses) |
|
| ||
|
|
|
| Fund-Level |
|
| Fund-Level |
|
|
|
|
|
| Expenses |
|
| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201,2 |
| Value 12/31/20 | 7/1/20–12/31/201,2 | a | Ratio2 |
1 | $1,000 |
| $1,211.60 | $4.75 | $1,020.85 | $4.34 |
| 0.85% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.
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FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Templeton Foreign VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $14.23 | $13.01 | $15.80 | $13.89 | $13.46 |
Income from investment operationsa: | 0.32c | 0.44 | 0.29 | 0.30 | 0.33 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (0.54) | 1.19 | (2.64) | 2.03 | 0.62 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (0.22) | 1.63 | (2.35) | 2.33 | 0.95 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.44) | (0.27) | (0.44) | (0.42) | (0.29) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | (0.14) | — | — | (0.23) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.44) | (0.41) | (0.44) | (0.42) | (0.52) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $13.57 | $14.23 | $13.01 | $15.80 | $13.89 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.92)% | 12.84% | (15.27)% | 17.02% | 7.49% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 0.86% | 0.85% | 0.83% | 0.82% | 0.80% |
Expenses net of waiver and payments by affiliates. . . . . . . | 0.84% | 0.83% | 0.81% | 0.81%e | 0.78% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 2.68%c | 3.25% | 1.96% | 1.99% | 2.38% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $113,317 | $121,948 | $114,784 | $152,684 | $133,218 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 40.07% | 28.52% | 21.38% | 26.81% | 20.93% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.14 per share related to an adjustment for EU reclaims in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.54%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
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The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Templeton Foreign VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $13.93 | $12.74 | $15.47 | $13.61 | $13.20 |
Income from investment operationsa: | 0.28c | 0.40 | 0.25 | 0.26 | 0.28 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (0.53) | 1.16 | (2.58) | 1.98 | 0.62 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (0.25) | 1.56 | (2.33) | 2.24 | 0.90 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.40) | (0.23) | (0.40) | (0.38) | (0.26) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | (0.14) | — | — | (0.23) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.40) | (0.37) | (0.40) | (0.38) | (0.49) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $13.28 | $13.93 | $12.74 | $15.47 | $13.61 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.16)% | 12.53% | (15.44)% | 16.69% | 7.18% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.11% | 1.10% | 1.08% | 1.07% | 1.05% |
Expenses net of waiver and payments by affiliates. . . . . . . | 1.09% | 1.08% | 1.06% | 1.06%e | 1.03% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 2.42%c | 3.00% | 1.71% | 1.74% | 2.13% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $1,084,789 | $1,117,813 | $1,060,101 | $1,394,475 | $1,436,518 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 40.07% | 28.52% | 21.38% | 26.81% | 20.93% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.13 per share related to an adjustment for EU reclaims in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.28%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Annual Report
TF-9
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Templeton Foreign VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 4
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $14.20 | $12.96 | $15.71 | $13.71 | $13.29 |
Income from investment operationsa: | 0.28c | 0.39 | 0.24 | 0.23 | 0.26 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (0.55) | 1.20 | (2.63) | 2.03 | 0.63 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (0.27) | 1.59 | (2.39) | 2.26 | 0.89 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.39) | (0.21) | (0.36) | (0.26) | (0.24) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | (0.14) | — | — | (0.23) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.39) | (0.35) | (0.36) | (0.26) | (0.47) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $13.54 | $14.20 | $12.96 | $15.71 | $13.71 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.34)% | 12.49% | (15.54)% | 16.62% | 7.09% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates.. . . . . . | 1.21% | 1.20% | 1.18% | 1.17% | 1.15% |
Expenses net of waiver and payments by affiliates. . . . . . . | 1.19% | 1.18% | 1.16% | 1.16%e | 1.13% |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 2.33%c | 2.90% | 1.61% | 1.64% | 2.03% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $106,224 | $113,681 | $125,265 | $159,944 | $484,763 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 40.07% | 28.52% | 21.38% | 26.81% | 20.93% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.13 per share related to an adjustment for EU reclaims in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.19%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
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Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Templeton Foreign VIP Fund
I
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks 89.9% |
|
|
|
|
| Aerospace & Defense 2.2% |
|
|
|
|
| BAE Systems plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 2,629,361 |
| $17,535,896 |
| aDassault Aviation SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 10,152 |
| 11,055,208 |
|
|
|
|
| 28,591,104 |
| Airlines 1.1% |
|
|
|
|
| aInternational Consolidated Airlines Group SA.. . . . . . . . . . . . . . . . . | United Kingdom | 6,519,183 |
| 14,186,772 |
| Auto Components 3.0% |
|
|
|
|
| Cie Generale des Etablissements Michelin SCA. . . . . . . . . . . . . . . | France | 155,752 |
| 20,054,955 |
| Toyota Industries Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 247,600 |
| 19,672,098 |
|
|
|
|
| 39,727,053 |
| Automobiles 4.1% |
|
|
|
|
| Bayerische Motoren Werke AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 235,253 |
| 20,763,479 |
| Honda Motor Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 517,600 |
| 14,604,756 |
| Isuzu Motors Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 1,906,500 |
| 18,149,188 |
|
|
|
|
| 53,517,423 |
| Banks 8.4% |
|
|
|
|
| aING Groep NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 1,660,582 |
| 15,440,466 |
| Kasikornbank PCL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Thailand | 1,860,000 |
| 7,003,791 |
| KB Financial Group, Inc., ADR. . . . . . . . . . . . . . . . . . . . . . . . . . . . | South Korea | 596,606 |
| 23,625,598 |
| Shinhan Financial Group Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . | South Korea | 619,076 |
| 18,342,111 |
| aStandard Chartered plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 4,207,691 |
| 26,720,550 |
| Sumitomo Mitsui Financial Group, Inc.. . . . . . . . . . . . . . . . . . . . . . | Japan | 606,500 |
| 18,800,380 |
|
|
|
|
| 109,932,896 |
| Beverages 1.5% |
|
|
|
|
| Kirin Holdings Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 836,100 |
| 19,742,826 |
| Biotechnology 0.3% |
|
|
|
|
| aGalapagos NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Belgium | 44,734 |
| 4,427,700 |
| Chemicals 1.7% |
|
|
|
|
| bCovestro AG, 144A, Reg S.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 216,793 |
| 13,357,910 |
| Tosoh Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 574,100 |
| 8,969,835 |
|
|
|
|
| 22,327,745 |
| Construction & Engineering 1.3% |
|
|
|
|
| Sinopec Engineering Group Co. Ltd., H.. . . . . . . . . . . . . . . . . . . . . | China | 11,734,000 |
| 5,066,299 |
| Taisei Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 352,700 |
| 12,167,634 |
|
|
|
|
| 17,233,933 |
| Electronic Equipment, Instruments & Components 3.1% |
|
|
|
|
| Hitachi Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 796,900 |
| 31,453,096 |
| aLandis+Gyr Group AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 120,834 |
| 9,492,746 |
|
|
|
|
| 40,945,842 |
| Energy Equipment & Services 1.4% |
|
|
|
|
| SBM Offshore NV.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 960,511 |
| 18,146,596 |
| Food & Staples Retailing 2.4% |
|
|
|
|
| Matsumotokiyoshi Holdings Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . | Japan | 387,600 |
| 16,532,156 |
| Sundrug Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 366,100 |
| 14,631,888 |
|
|
|
|
| 31,164,044 |
| Health Care Providers & Services 2.2% |
|
|
|
|
| Fresenius Medical Care AG & Co. KGaA.. . . . . . . . . . . . . . . . . . . . | Germany | 265,350 |
| 22,127,749 |
The accompanying notes are an integral part of these financial statements.
Annual Report
TF-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Templeton Foreign VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Health Care Providers & Services (continued) |
|
|
|
|
| Sinopharm Group Co. Ltd., H. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 2,794,800 |
| $6,779,697 |
|
|
|
|
| 28,907,446 |
| Household Durables 1.9% |
|
|
|
|
| Sony Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 248,300 |
| 25,020,716 |
| Industrial Conglomerates 2.6% |
|
|
|
|
| CK Hutchison Holdings Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 3,873,500 |
| 27,044,137 |
| Siemens AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 46,925 |
| 6,759,658 |
|
|
|
|
| 33,803,795 |
| Insurance 2.3% |
|
|
|
|
| AIA Group Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 2,416,800 |
| 29,451,420 |
| Interactive Media & Services 2.0% |
|
|
|
|
| aBaidu, Inc., ADR.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 122,130 |
| 26,409,391 |
| Internet & Direct Marketing Retail 1.2% |
|
|
|
|
| aAlibaba Group Holding Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 516,700 |
| 15,027,977 |
| IT Services 0.6% |
|
|
|
|
| Amadeus IT Group SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Spain | 104,548 |
| 7,717,763 |
| Machinery 1.4% |
|
|
|
|
| Komatsu Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 655,000 |
| 18,076,879 |
| Media 1.6% |
|
|
|
|
| aInforma plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 1,217,196 |
| 9,102,085 |
| Nippon Television Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 338,900 |
| 3,694,637 |
| TBS Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 441,700 |
| 7,768,482 |
|
|
|
|
| 20,565,204 |
| Metals & Mining 7.1% |
|
|
|
|
| Alamos Gold, Inc., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 1,135,752 |
| 9,937,830 |
| aArcelorMittal SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Luxembourg | 1,334,255 |
| 30,515,598 |
| Sumitomo Metal Mining Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 670,600 |
| 29,828,960 |
| Wheaton Precious Metals Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Brazil | 544,400 |
| 22,750,023 |
|
|
|
|
| 93,032,411 |
| Multi-Utilities 1.7% |
|
|
|
|
| E.ON SE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 1,972,849 |
| 21,846,728 |
| Oil, Gas & Consumable Fuels 4.7% |
|
|
|
|
| BP plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 6,025,868 |
| 20,795,241 |
| Equinor ASA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Norway | 1,303,205 |
| 21,994,164 |
| Galp Energia SGPS SA, B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Portugal | 1,139,637 |
| 12,076,541 |
| Husky Energy, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Canada | 1,163,600 |
| 5,762,660 |
|
|
|
|
| 60,628,606 |
| Pharmaceuticals 8.4% |
|
|
|
|
| Bayer AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 552,576 |
| 32,554,246 |
| Novartis AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 71,856 |
| 6,765,814 |
| Roche Holding AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 54,982 |
| 19,150,152 |
| Sanofi. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 130,382 |
| 12,637,533 |
| Takeda Pharmaceutical Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 1,053,394 |
| 38,121,669 |
|
|
|
|
| 109,229,414 |
| Real Estate Management & Development 3.4% |
|
|
|
|
| CK Asset Holdings Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 3,560,500 |
| 18,218,720 |
| Mitsui Fudosan Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 811,000 |
| 16,981,991 |
TF-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Foreign VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Real Estate Management & Development (continued) |
|
|
|
|
| Swire Pacific Ltd., A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 1,628,500 |
| $8,970,442 |
|
|
|
|
| 44,171,153 |
| Semiconductors & Semiconductor Equipment 8.2% |
|
|
|
|
| Infineon Technologies AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 590,665 |
| 22,557,604 |
| NXP Semiconductors NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 221,300 |
| 35,188,913 |
| Taiwan Semiconductor Manufacturing Co. Ltd.. . . . . . . . . . . . . . . . | Taiwan | 2,587,000 |
| 48,927,313 |
|
|
|
|
| 106,673,830 |
| Technology Hardware, Storage & Peripherals 5.2% |
|
|
|
|
| Samsung Electronics Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . | South Korea | 909,188 |
| 67,791,429 |
| Thrifts & Mortgage Finance 2.2% |
|
|
|
|
| Housing Development Finance Corp. Ltd... . . . . . . . . . . . . . . . . . . | India | 822,605 |
| 28,825,898 |
| Tobacco 1.8% |
|
|
|
|
| Imperial Brands plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 1,122,761 |
| 23,551,167 |
| Wireless Telecommunication Services 0.9% |
|
|
|
|
| Vodafone Group plc, ADR.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 700,303 |
| 11,540,994 |
| .. . . . . . . . .Total Common Stocks (Cost $959,821,356) | . . . . . . . . . . . . . . . . . . | . . . . . . . . . . |
| 1,172,216,155 |
|
|
|
|
|
|
Short Term Investments 9.2%
a | a | Country | Shares | a |
| a |
|
|
|
Value
Money Market Funds 9.2%
c,dInstitutional Fiduciary Trust - Money Market Portfolio, 0%. . . . . . . . | United States | 120,292,539 | 120,292,539 |
Total Money Market Funds (Cost $120,292,539).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Short Term Investments (Cost $120,292,539). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Investments (Cost $1,080,113,895) 99.1%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities 0.9%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
120,292,539
120,292,539
$1,292,508,694 11,821,511
$1,304,330,205
See Abbreviations on page TF-26.
aNon-income producing.
bSecurity was purchased pursuant to Rule 144A or Regulation S under the Securities Act of 1933. 144A securities may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. Regulation S securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At December 31, 2020, the value of this security was $13,357,910, representing 1.0% of net assets.
cSee Note 3(e) regarding investments in affiliated management investment companies.
dThe rate shown is the annualized seven-day effective yield at period end.
The accompanying notes are an integral part of these financial statements.
Annual Report
TF-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Templeton |
| Foreign VIP |
| Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $959,821,356 |
Cost - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 120,292,539 |
Value - Unaffiliated issuers .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,172,216,155 |
Value - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 120,292,539 |
Receivables: |
|
Investment securities sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 60,245 |
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 116,182 |
Dividends.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,984,448 |
European Union tax reclaims (Note 1d).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 13,602,471 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 155 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,310,272,195 |
Liabilities: |
|
Payables: |
|
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,851,915 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 874,668 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 260,329 |
Deferred tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,509,784 |
Accrued contingent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 90,131 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 355,163 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,941,990 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,304,330,205 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,202,123,551 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 102,206,654 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,304,330,205 |
| Templeton |
| Foreign VIP |
| Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $113,316,913 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 8,350,806 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $13.57 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,084,789,093 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 81,677,642 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $13.28 |
Class 4: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $106,224,199 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 7,842,727 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $13.54 |
TF-14
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the year ended December 31, 2020
| Templeton |
| Foreign VIP |
| Fund |
Investment income: |
|
Dividends: (net of foreign taxes of $1,717,098) |
|
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $27,135,753 |
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 185,345 |
Income from securities loaned: |
|
Unaffiliated entities (net of fees and rebates).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 126,544 |
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 15,612 |
Other income (Note 1d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 13,270,885 |
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 40,734,139 |
Expenses: |
|
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,395,009 |
Distribution fees: (Note 3c) |
|
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,397,954 |
Class 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 340,716 |
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 112,001 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 283,634 |
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 124,651 |
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 6,787 |
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 97,024 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Total expenses | 12,757,776 |
Expenses waived/paid by affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (271,371) |
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 12,486,405 |
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 28,247,734 |
Realized and unrealized gains (losses): |
|
Net realized gain (loss) from: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (90,535,276) |
Foreign currency transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,214,424) |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (91,749,700) |
Net change in unrealized appreciation (depreciation) on: |
|
Investments: |
|
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 51,886,450 |
Translation of other assets and liabilities denominated in foreign currencies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 711,362 |
Change in deferred taxes on unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,487,265) |
Net change in unrealized appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 51,110,547 |
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (40,639,153) |
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $(12,391,419) |
The accompanying notes are an integral part of these financial statements.
Annual Report
TF-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Templeton Foreign VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $28,247,734 | $39,750,754 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (91,749,700) | (42,940,121) |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | 51,110,547 | 161,044,541 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | (12,391,419) | 157,855,174 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (3,651,171) | (3,542,825) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (32,735,824) | (29,727,357) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (3,189,135) | (2,819,837) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (39,576,130) | (36,090,019) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (3,329,454) | (3,622,678) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,474,525 | (41,982,881) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (3,288,883) | (22,867,835) |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,856,188 | (68,473,394) |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | (49,111,361) | 53,291,761 |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,353,441,566 | 1,300,149,805 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $1,304,330,205 | $1,353,441,566 |
TF-16
Annual Report
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
Templeton Foreign VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Templeton Foreign VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust's Board of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade
in multiple markets or on multiple exchanges are valued
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Investments in open-end mutual funds are valued at the closing NAV.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Events can occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund . As a result, differences may arise between the value of the Fund's portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund's portfolio securities to the latest indications of fair value at 4 p.m Eastern time. At December 31, 2020, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy. See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result in differences between the value of the Fund's portfolio securities on the last business day and the last calendar day
Annual Report
TF-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Templeton Foreign VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
a. Financial Instrument Valuation (continued)
of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Securities Lending
The Fund participates in an agency based securities lending program to earn additional income. The Fund receives collateral in the form of cash and/or U.S. Government
and Agency securities against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. Any cash collateral received is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities agent and/or third party vendor, is reported separately in the Statement of Operations. The Fund bears the market risk with respect to any cash collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower. At December 31, 2020, the Fund has no securities on loan.
d. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
TF-18
Annual Report
Templeton Foreign VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
d. Income and Deferred Taxes (continued)
As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected
as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities.
When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, when EU reclaims are received by the Fund and the Fund previously passed foreign tax credit on to its shareholders, the Fund will enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund’s shareholders
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
e. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions
to shareholders are recorded on the ex-dividend date.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
f. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
g. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
Annual Report
TF-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Foreign VIP Fund (continued)
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
| Year Ended | Year Ended | ||
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 806,359 | $9,224,666 | 315,303 | $4,277,207 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 325,707 | 3,651,171 | 273,789 | 3,542,825 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,349,400) | (16,205,291) | (844,252) | (11,442,710) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | (217,334) | $(3,329,454) | (255,160) | $(3,622,678) |
Class 2 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 11,015,042 | $124,442,450 | 7,564,257 | $99,786,234 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 2,981,404 | 32,735,824 | 2,342,581 | 29,727,357 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (12,535,323) | (147,703,749) | (12,910,655) | (171,496,472) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,461,123 | $9,474,525 | (3,003,817) | $(41,982,881) |
Class 4 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,219,556 | $13,736,529 | 784,963 | $10,500,046 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 284,490 | 3,189,135 | 218,085 | 2,819,837 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,669,364) | (20,214,547) | (2,661,084) | (36,187,718) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | (165,318) | $(3,288,883) | (1,658,036) | $(22,867,835) |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Templeton Investment Counsel, LLC (TIC) | Investment manager |
|
|
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
|
|
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
|
|
TF-20
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Foreign VIP Fund (continued)
3. Transactions with Affiliates (continued)
a. Management Fees
The Fund pays an investment management fee to TIC based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
0.900% | Up to and including $200 million |
0.810% | Over $200 million, up to and including $700 million |
|
|
0.775% | Over $700 million, up to and including $1.2 billion |
0.750% | Over $1.2 billion, up to and including $1.3 billion |
|
|
0.675% | Over $1.3 billion, up to and including $10 billion |
0.655% | Over $10 billion, up to and including $15 billion |
|
|
0.635% | Over $15 billion, up to and including $20 billion |
0.615% | In excess of $20 billion |
For the year ended December 31, 2020, the gross effective investment management fee rate was 0.811% of the Fund’s average daily net assets.
b. Administrative Fees
Under an agreement with TIC, FT Services provides administrative services to the Fund. The fee is paid by TIC based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.25% and 0.35% per year of its average daily net assets of Class 2 and Class 4, respectively. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
Annual Report
TF-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Foreign VIP Fund (continued)
3. Transactions with Affiliates (continued)
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
|
|
|
|
| Net Change in |
| Number of |
|
| Value at |
|
|
| Unrealized | Value | Shares Held |
|
| Beginning |
|
| Realized Gain | Appreciation | at End | at End | Investment |
aa | of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Templeton Foreign VIP Fund |
|
|
|
|
|
|
|
|
Non-Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividends |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
|
Market Portfolio, 0%.. . . . . . . . . | $70,825,763 | $283,203,116 | $(233,736,340) | $— | $— | $120,292,539 | 120,292,539 | $185,345 |
Non-Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income from |
|
|
|
|
|
|
|
| securities |
|
|
|
|
|
|
|
| loaned |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
|
Market Portfolio, 0%.. . . . . . . . . | $— | $260,204,128 | $(260,204,128) | $— | $— | $—a | — | $15,612 |
Total Affiliated Securities. . . . . | $70,825,763 | $543,407,244 | $(493,940,468) | $— | $— | $120,292,539 |
| $200,957 |
aAs of December 31, 2020, no longer held by the fund.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2020, there were no credits earned.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains.
At December 31, 2020, the capital loss carryforwards were as follows:
Capital loss carryforwards not subject to expiration: |
|
Short term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $13,644,309 |
Long term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 121,820,664 |
Total capital loss carryforwards.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $135,464,973 |
TF-22
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Foreign VIP Fund (continued)
5. Income Taxes (continued)
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows:
| 2020 | 2019 |
Distributions paid from: |
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $39,576,130 | $24,584,858 |
Long term capital gain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 11,505,161 |
| $39,576,130 | $36,090,019 |
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,089,077,125
$316,464,790 (113,033,221)
$203,431,569
$22,035,070
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of wash sales, EU reclaims, corporate actions, passive foreign investment company shares and foreign capital gain taxes.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $413,400,119 and $477,319,270, respectively.
7. Concentration of Risk
Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local, regional and global economic, political and social conditions, which may result in greater market volatility. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in securities in Europe. In addition, certain foreign securities may not be as liquid as U.S. securities.
8. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
Annual Report
TF-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Foreign VIP Fund (continued)
9. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
10. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
TF-24
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Foreign VIP Fund (continued)
10. Fair Value Measurements (continued)
A summary of inputs used as of December 31, 2020, in valuing the Fund's investments in financial instruments carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total |
Templeton Foreign VIP Fund |
|
|
|
|
Assets: |
|
|
|
|
Investments in Securities: |
|
|
|
|
Common Stocks: |
|
|
|
|
Aerospace & Defense .. . . . . . . . . . . . . . . . . . . | $— | $28,591,104 | $— | $28,591,104 |
Airlines .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 14,186,772 | — | 14,186,772 |
Auto Components .. . . . . . . . . . . . . . . . . . . . . . | — | 39,727,053 | — | 39,727,053 |
Automobiles .. . . . . . . . . . . . . . . . . . . . . . . . . . | — | 53,517,423 | — | 53,517,423 |
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 23,625,598 | 86,307,298 | — | 109,932,896 |
Beverages .. . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 19,742,826 | — | 19,742,826 |
Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . | — | 4,427,700 | — | 4,427,700 |
Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 22,327,745 | — | 22,327,745 |
Construction & Engineering . . . . . . . . . . . . . . . | — | 17,233,933 | — | 17,233,933 |
Electronic Equipment, Instruments & |
|
|
|
|
Components .. . . . . . . . . . . . . . . . . . . . . . . . | — | 40,945,842 | — | 40,945,842 |
Energy Equipment & Services . . . . . . . . . . . . . | — | 18,146,596 | — | 18,146,596 |
Food & Staples Retailing . . . . . . . . . . . . . . . . . | — | 31,164,044 | — | 31,164,044 |
Health Care Providers & Services .. . . . . . . . . . | — | 28,907,446 | — | 28,907,446 |
Household Durables .. . . . . . . . . . . . . . . . . . . . | — | 25,020,716 | — | 25,020,716 |
Industrial Conglomerates . . . . . . . . . . . . . . . . . | — | 33,803,795 | — | 33,803,795 |
Insurance .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 29,451,420 | — | 29,451,420 |
Interactive Media & Services .. . . . . . . . . . . . . . | 26,409,391 | — | — | 26,409,391 |
Internet & Direct Marketing Retail .. . . . . . . . . . | — | 15,027,977 | — | 15,027,977 |
IT Services .. . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 7,717,763 | — | 7,717,763 |
Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 18,076,879 | — | 18,076,879 |
Media .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 20,565,204 | — | 20,565,204 |
Metals & Mining .. . . . . . . . . . . . . . . . . . . . . . . | 32,687,853 | 60,344,558 | — | 93,032,411 |
Multi-Utilities .. . . . . . . . . . . . . . . . . . . . . . . . . . | — | 21,846,728 | — | 21,846,728 |
Oil, Gas & Consumable Fuels .. . . . . . . . . . . . . | 5,762,660 | 54,865,946 | — | 60,628,606 |
Pharmaceuticals .. . . . . . . . . . . . . . . . . . . . . . . | — | 109,229,414 | — | 109,229,414 |
Real Estate Management & Development .. . . . | — | 44,171,153 | — | 44,171,153 |
Semiconductors & Semiconductor Equipment .. | 35,188,913 | 71,484,917 | — | 106,673,830 |
Technology Hardware, Storage & Peripherals .. | — | 67,791,429 | — | 67,791,429 |
Thrifts & Mortgage Finance .. . . . . . . . . . . . . . . | — | 28,825,898 | — | 28,825,898 |
Tobacco .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 23,551,167 | — | 23,551,167 |
Wireless Telecommunication Services .. . . . . . . | 11,540,994 | — | — | 11,540,994 |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | 120,292,539 | — | — | 120,292,539 |
Total Investments in Securities.. . . . . . . . . . . | $255,507,948 | $1,037,000,746 | $— | $1,292,508,694 |
11. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
Annual Report
TF-25
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Foreign VIP Fund (continued)
12. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Abbreviations
Selected Portfolio
ADR | American Depositary Receipt |
TF-26
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Templeton Foreign VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Templeton Foreign VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian and transfer agent. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
Annual Report
TF-27
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Templeton Foreign VIP Fund
At December 31, 2020, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. The Fund elects to treat foreign taxes paid as allowed under Section 853 of the Internal Revenue Code. This election will allow shareholders of record as of the 2021 distribution date, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.
TF-28
Annual Report
Templeton Global Bond VIP Fund
This annual report for Templeton Global Bond VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares* represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | -5.07%** |
5-Year | +0.91% |
10-Year | +1.81% |
*The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/21. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
**Total return information is based on net asset values calculated for shareholder transactions. Certain adjustments were made to the net assets of the Fund at 12/31/19 for financial reporting purposes. Accordingly, adjusted total returns have been disclosed in the Financial Highlights and differ from those reported here.
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Annual Report
TGB-1
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance* is compared to the performance of the J.P. Morgan (JPM) Global Government Bond Index (GGBI) and the FTSE World Government Bond Index (WGBI). One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Important Notes to
Performance Information preceding the Fund Summaries.
$13,000 |
|
|
|
| $12,746 |
|
|
|
|
| |
$12,500 |
|
|
|
| $12,576 |
$12,000 |
|
|
|
| $11,963 |
$11,500 |
|
|
|
|
|
$11,000 |
|
|
|
|
|
$10,500 |
|
|
|
|
|
$10,000 |
|
|
|
|
|
$9,500 |
|
|
|
|
|
1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
| Templeton Global Bond VIP | JPM GGBI*** |
| FTSE WGBI*** |
|
| Fund |
|
|
|
|
***Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
TGB-2
Annual Report
Templeton Global Bond VIP Fund
Fund Goal and Main Investments
The Fund seeks high current income, consistent with preservation of capital. Capital appreciation is a secondary consideration. Under normal market conditions, the Fund invests at least 80% of its net assets in bonds, which include debt securities of any maturity, such as bonds, notes, bills and debentures.
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Foreign securities involve special risks, including currency fluctuations and economic and political uncertainties. Currency rates may fluctuate significantly over short periods of time, and can reduce returns. Sovereign debt securities are subject to various risks in addition to those relating to debt securities and foreign securities generally, including, but not limited to, the risk that a governmental entity may be unwilling or unable to pay interest and repay principal on its sovereign debt, or otherwise meet its obligations when due. Adverse conditions in a certain region or country can adversely affect securities of issuers in other countries whose economies appear to be unrelated. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities market. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. For comparison, the J.P. Morgan Global Government Bond Index posted a +9.68% total return and the FTSE World Government Bond Index posted a +10.11% total return for the same period.1
Geographic Composition 12/31/20
| % of Total |
| Net Assets |
North America | 20.8% |
Asia | 19.9% |
Latin America & Caribbean | 19.1% |
Europe | 5.5% |
Middle East & Africa | 1.6% |
Supranational | 0.5% |
Short-Term Investments & Other Net Assets | 32.6% |
Economic and Market Overview
The 12-month period ended December 31, 2020, started optimistically, as a phase one trade deal between the U.S. and China appeared to bolster market sentiment, driving risk asset valuations higher in several markets across the globe. However, conditions changed radically and rapidly by late February, as the novel coronavirus (COVID-19) pandemic upended economies and financial markets around the world. Lockdown orders from governments trying to “flatten the curve” (i.e., stem the rate of infection) ultimately brought entire countries, regions and continents to an economic standstill in March and April. The speed and pervasiveness of the economic shocks were unprecedented. There is
no historical comparison for the magnitude of aggregate demand that was destroyed, nor the magnitude of job losses in such a compressed timescale.
Risk aversion rapidly escalated to crisis levels and deepened throughout March, driving correlations to 1.0 across multiple asset classes as investors shed risk and moved into perceived safe havens. Credit markets experienced substantial price volatility, with the lower-rated credit tiers bearing the brunt of the selloffs. The U.S. Federal Reserve (Fed) responded quickly to the deepening crisis with two emergency rate cuts in March, the second of which dropped the federal funds target rate 100 basis points (bps) to the zero bound that was used during the 2008 global financial crisis (GFC). The Fed also cut reserve requirements and encouraged financial institutions to borrow directly from the discount window.
Growing liquidity strains throughout financial markets in March prompted the Fed to restart liquidity programs that had been created during the GFC, such as the Commercial Paper Funding Facility and the Primary Dealer Credit Facility. On March 23, the Fed took its financial market
1.Source: Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
Annual Report
TGB-3
TEMPLETON GLOBAL BOND VIP FUND
interventions beyond the scope of the GFC programs by creating corporate lending programs, and announcing its intentions to support lending to small- and medium-sized businesses through the newly created Main Street Business Lending Program. The Fed also pledged to buy unlimited government bonds, abandoning the previous quantitative easing (QE) targets it had announced a week earlier on March 15. The heightened demand for U.S. dollars (USD) around the world also led the Fed to expand its liquidity swaps program with foreign central banks beyond the five banks in its standing facility.
On the U.S. fiscal side, Congress passed the CARES Act (Coronavirus Aid, Relief, and Economic Security) on March 27, a USD$2.2 trillion fiscal relief program designed to provide loans to businesses, income support and unemployment benefits to individuals, and funding for hospitals and public health services. It was the largest economic relief bill in U.S. history.
In Europe, the European Central Bank (ECB) unveiled the €750 billion Pandemic Emergency Purchase Programme (PEPP) in an unscheduled mid-week announcement on March 18. ECB President Christine Lagarde commented that, “there are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate.” PEPP appeared geared to support the more vulnerable states, as the program has unprecedented flexibility to buy a wide range of eligible securities, including Greek and Italian sovereign debt, as well as corporate commercial paper. The European Commission passed its €750 billion recovery fund in July, which was largely viewed by markets as a major step towards greater fiscal solidarity across the euro area.
In the second quarter of 2020, global financial markets rebounded from the extreme lows in March, as extraordinary measures from central banks and governments appeared to improve market confidence. Additionally, regional economies began to incrementally reopen and the improving economic data appeared to bolster optimism that the worst of the economic shocks had passed. Risk assets rallied and credit spreads tightened in many sectors during the second quarter, returning to levels last seen in early March and late February. Those trends largely extended through July and August as strengthening economic activity and profound policy interventions continued to fuel rallies across global financial markets through much of the summer. However, many risk assets appeared detached from underlying economic fundamentals due to extraordinary monetary policies.
Risk assets eventually pulled back from their summer high points in September 2020, as rising cases of COVID-19 appeared to concern investors, particularly as areas of Europe and Asia returned to various mobility restrictions. Developed market sovereign bond yields fluctuated during the summer months, rising on reflation expectations but dropping in September as broad risk aversion returned to global financial markets. Additionally, economic recoveries in many regions showed signs of levelling off in August and September, demonstrating that the improvements in the late spring and summer months were rebounds from the extreme low points in March and April, not trends that could be extrapolated through upcoming quarters.
Yoshihide Suga was confirmed as the new prime minister of Japan on September 16, following Shinzo Abe's resignation on August 28. Abe had been prime minister since December 2012. We expected political continuity in the near term, as Suga is an Abe loyalist who was often credited with pushing through many of Abe’s critical domestic reforms.
In October 2020, “risk-on” sentiment initially returned to global financial markets, with risk assets rallying during the first couple weeks of the month before broad risk aversion sharply returned, leading to significant price adjustments in various credit sectors during the second half of the month. Investors appeared concerned over resurgent waves of COVID-19 cases around the world. Market sentiments ultimately improved in November on apparent optimism over promising vaccine trials and prospects for a potential global economic recovery in 2021. Risk assets finished the final months of the year on broad-based rallies as initial vaccine distributions commenced.
However, market optimism in the fourth quarter ran in stark contrast to the worsening pandemic, as COVID-19 infections surged to record levels in areas of Europe, the U.S. and Latin America in the waning months of the year, with a highly contagious variant of the virus surfacing in dozens of countries. The harsh realities of a worldwide health crisis and deepening economic hardship continued to have profound consequences for lives and livelihoods around the world.
In late December 2020, the U.S. government passed a USD$900 billion support package that extended unemployment benefits until mid-March 2021 and provides one-time relief payments of USD$600 to most citizens. Additional fiscal stimulus appeared likely with the upcoming change in the U.S. government. The Fed continued to maintain low rates as well as its emergency support program from March through the end of the year, continuously reaffirming its commitment to use its “full range of tools to support the U.S. economy” at each policy meeting.
TGB-4
Annual Report
TEMPLETON GLOBAL BOND VIP FUND
The ECB also kept monetary policy unchanged through the end of the year, with the main refinancing operations rate remaining at 0.0%, and the main deposit facility rate remaining at -0.5%. The ECB increased the size of the PEPP program to €1.85 trillion in December, after previously raising it to €1.35 trillion in June. The U.K. and the European Union also settled on final terms for post-Brexit trade agreements in the last week of the year.
The Bank of Japan (BOJ) also made no changes to its rates policy in 2020. Overnight interest rates remained at 0.1% and the yield target on the 10-year Japanese government bond remained at 0.0%. In the second quarter, the BOJ removed QE caps and quadrupled the size of its corporate debt purchases. It also increasingly focused on ensuring businesses had ample access to capital through various loan programs, increasing its lending program to USD$1 trillion. However, despite the BOJ's efforts to drive inflation higher during the Abenomics era, deflationary pressures returned, with core inflation dropping to -0.4% year-over- year in August and falling further to -0.9% in November. The BOJ announced in December that it had launched
a comprehensive review of its monetary framework, scheduled to arrive in March 2021. We continued to expect the Japanese yen to appreciate against the USD during the period, on stable rate differentials and Japan’s strong external balance.
Nearly every country in the world declared some form of fiscal response to the economic crisis in 2020, with most countries pursuing programs that went beyond the measures they deployed during the GFC. Debt-to-GDP (gross domestic product) ratios have risen significantly in just about every country. On the monetary front, many central banks aggressively cut policy rates, with several indicating they intend to respond to ongoing economic adversity with additional accommodation as needed. During the 12-month period, Brazil cut rates by 250 bps to 2.00%, Colombia cut rates by 250 bps to 1.75%, Mexico cut rates by 300 bps to 4.25%, Indonesia cut rates by 125 bps to 3.75%, and India cut rates by 115 bps to 4.00%.
In global bond markets, the yield on the 10-year U.S. Treasury (UST) note finished the period 100 bps lower, at 0.92%, ranging from a pre-pandemic high of 1.92% on January 1 to an all-time low of 0.51% on August 4. The yield on the 10-year German Bund finished the year 38 bps lower at -0.57%, ranging from a pre-pandemic high of -0.19%
on January 13 to an all-time low of -0.86% on March 9, during peak financial market shocks. Sovereign bond yields also declined in several countries on ongoing monetary
accommodation during the year, notably including much of Latin America and Asia, particularly Brazil, Mexico, Indonesia and India.
In currency markets, the USD initially strengthened in March on tremendous demand for U.S. dollars during the financial market shocks, but then entered a broad-based weakening pattern in mid-May that largely persisted through the end of December. Many developed market and emerging market currencies alike strengthened against the USD over the final seven months of the year. In credit markets, spreads widened substantially during peak financial market volatility in February and March, but progressively tightened from April through December, with several sovereign and corporate sectors finishing the year at pre-pandemic levels.
Investment Strategy
We invest selectively in bonds around the world based upon our assessment of changing market, political and economic conditions. While seeking opportunities, we monitor various factors including changes in interest rates, currency exchange rates and credit risks. We seek to manage the Fund’s exposure to various currencies and regularly enter into various currency-related derivative instruments, such as currency and cross-currency forwards, currency and currency index futures contracts and currency options.
Manager’s Discussion
The strategy was structured around four key pillars during much of the reporting period: (1) maintaining high liquidity through elevated cash balances and risk-adjusted position weights; (2) holding long exposures to perceived safe-haven assets such as the Japanese yen, Swiss franc, Norwegian krone and Swedish krona; (3) targeting appropriate risk- adjusted returns in a select subset of emerging markets; and (4) underweighting overvalued developed fixed income markets, notably longer-term USTs. The strategy continued to emphasize select duration exposures in countries that have attractive risk-adjusted yields, resilient economic fundamentals and prudent fiscal and monetary policies. Several emerging markets continued to offer significantly higher yields than those available in the developed markets. The strategy entered the reporting period in a de-risked state as the investment team saw elevated global financial market risks that it believed were significantly underappreciated
by markets. While the team was not explicitly anticipating the COVID-19 crisis, it was concerned that overvalued risk assets were vulnerable to a geopolitical, economic or financial market shock. The team adjusted the risk-sizing of various positions and hedged (using currency forwards)
Annual Report
TGB-5
TEMPLETON GLOBAL BOND VIP FUND
a substantial amount of local-currency emerging market beta risk through proxy hedges (net-negative Australian dollar) and direct hedges (Indian rupee, South Korean won, Mexican peso and Brazilian real). The strategy held a net-negative position in the euro as the team expected fundamental weakening in the currency due to structural and political risks in the eurozone, along with headwinds to growth and reflation efforts across Europe.
The strategy remained significantly underweighted in developed market duration, preferring to hold short- to intermediate-term USTs, while holding no exposure to the long end of the curve. The strategy exited its negative duration exposure to USTs in the first quarter. The strategy held no duration exposure in the eurozone, and instead focused on higher-yielding local-currency bonds in specific emerging markets, such as Brazil, Mexico, Colombia, Indonesia, India and Ghana. The team also continued to broadly avoid credit sectors, which it believed were overvalued leading up to the crisis and increasingly vulnerable to insolvencies as the economic crisis progressed. During the period, the team used forward currency exchange contracts to actively manage currencies, and used interest-rate swaps to tactically manage duration exposures.
During the period, the Fund’s negative absolute performance was primarily due to currency positions. Interest-rate strategies contributed to absolute results, while sovereign credit exposures had a largely neutral effect. Among currencies, positions in Latin America (the Brazilian real and Argentine peso) detracted from absolute performance. The Fund’s net-negative positions in the euro and the Australian dollar also detracted from absolute results, as did tactical positioning (negative) in the Mexican peso. However, the Fund’s net-positive positions in the Japanese yen and the Swiss franc contributed to absolute performance, as did positions in northern European currencies (the Swedish krona and Norwegian krone). The Fund maintained a defensive approach regarding interest rates in developed markets, while holding duration exposures in select emerging markets. Select duration exposures in Latin America (Argentina and Mexico), Asia ex-Japan (India
and Indonesia) and Africa (Ghana) contributed to absolute results, while negative duration exposure to USTs during the first quarter detracted.
On a relative basis, the Fund underperformed its benchmark due to currency positions, followed by interest-rate strategies. Sovereign credit exposures had a largely neutral effect on relative results. Among currencies, overweighted positions in Latin America (the Brazilian real and Argentine peso) detracted from relative performance. The Fund’s
underweighted positions in the euro, the Australian dollar and the Mexican peso also detracted from relative results. However, overweighted positions in northern European currencies (the Swedish krona and Norwegian krone) contributed to relative performance, as did the Fund’s overweighted positions in the Japanese yen and the Swiss franc. The Fund maintained a defensive approach regarding interest rates in developed markets, while holding duration exposures in select emerging markets. Underweighted duration exposure in the U.S. detracted from relative results, as did select underweighted duration exposures in Europe. However, select overweighted duration exposures in Latin America (Argentina and Mexico), Asia ex-Japan (India
and Indonesia) and Africa (Ghana) contributed to relative performance.
Thank you for your participation in Templeton Global Bond VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
TGB-6
Annual Report
TEMPLETON GLOBAL BOND VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
|
|
| Actual |
| Hypothetical |
|
| ||
|
|
| (actual return after expenses) |
| (5% annual return before expenses) |
|
| ||
|
|
|
| Fund-Level |
|
| Fund-Level |
|
|
|
|
|
| Expenses |
|
| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201, 2 |
| Value 12/31/20 | 7/1/20–12/31/201, 2 | a | Ratio2 |
1 | $1,000 |
| $1,000.70 | $2.35 | $1,022.79 | $2.37 |
| 0.47% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.
Annual Report
TGB-7
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Templeton Global Bond VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $16.63 | $17.54 | $17.17 | $16.85 | $16.34 |
Income from investment operationsa: | 0.52 | 0.89 | 0.88 | 0.83 | 0.62 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (1.31) | (0.54) | (0.51) | (0.46) | (0.10) |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (0.79) | 0.35 | 0.37 | 0.37 | 0.52 |
Less distributions from: |
|
|
|
|
|
Net investment income and net foreign currency gains.. . | (1.35) | (1.26) | — | — | — |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | — | — | (0.05) | (0.01) |
Tax return of capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | (—)c | — | — | — | — |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.35) | (1.26) | — | (0.05) | (0.01) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $14.49 | $16.63 | $17.54 | $17.17 | $16.85 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (4.73)% | 1.89% | 2.15% | 2.15% | 3.21% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates and |
|
|
|
|
|
expense reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.51% | 0.53% | 0.56% | 0.53% | 0.53% |
Expenses net of waiver and payments by affiliates. . . . . . . | 0.46% | 0.44% | 0.47% | 0.46% | 0.48% |
Expenses net of waiver and payments by affiliates and |
|
|
|
| 0.48%e |
expense reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.45% | 0.42% | 0.45% | 0.46%e | |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.43% | 5.22% | 5.09% | 4.81% | 3.88% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $224,704 | $322,794 | $285,046 | $286,502 | $241,792 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 52.84% | 22.58% | 18.22% | 37.97% | 59.00% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned, adjustments to interest income for the inflation-indexed bonds, and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding. cAmount rounds to less than $0.01 per share.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
TGB-8
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Templeton Global Bond VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $15.91 | $16.83 | $16.51 | $16.25 | $15.80 |
Income from investment operationsa: | 0.46 | 0.82 | 0.81 | 0.76 | 0.56 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (1.24) | (0.53) | (0.49) | (0.45) | (0.10) |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (0.78) | 0.29 | 0.32 | 0.31 | 0.46 |
Less distributions from: |
|
|
|
|
|
Net investment income and net foreign currency gains.. . | (1.31) | (1.21) | — | — | — |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | — | — | (0.05) | (0.01) |
Tax return of capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | (—)c | — | — | — | — |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.31) | (1.21) | — | (0.05) | (0.01) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $13.82 | $15.91 | $16.83 | $16.51 | $16.25 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (4.92)% | 1.63% | 1.94% | 1.93% | 2.94% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates and |
|
|
|
|
|
expense reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.75% | 0.78% | 0.81% | 0.78% | 0.78% |
Expenses net of waiver and payments by affiliates. . . . . . . | 0.71% | 0.69% | 0.72% | 0.71% | 0.73% |
Expenses net of waiver and payments by affiliates and |
|
|
|
| 0.73%e |
expense reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.70% | 0.67% | 0.70% | 0.71%e | |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.16% | 4.97% | 4.84% | 4.56% | 3.63% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $2,022,487 | $2,389,610 | $2,544,900 | $2,730,081 | $2,812,535 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 52.84% | 22.58% | 18.22% | 37.97% | 59.00% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned, adjustments to interest income for the inflation-indexed bonds, and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding. cAmount rounds to less than $0.01 per share.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Annual Report
TGB-9
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Templeton Global Bond VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 4
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $16.27 | $17.19 | $16.88 | $16.62 | $16.18 |
Income from investment operationsa: | 0.46 | 0.82 | 0.81 | 0.76 | 0.56 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | (1.27) | (0.55) | (0.50) | (0.45) | (0.11) |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | (0.81) | 0.27 | 0.31 | 0.31 | 0.45 |
Less distributions from: |
|
|
|
|
|
Net investment income and net foreign currency gains.. . | (1.29) | (1.19) | — | — | — |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | — | — | (0.05) | (0.01) |
Tax return of capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | (—)c | — | — | — | — |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1.29) | (1.19) | — | (0.05) | (0.01) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $14.17 | $16.27 | $17.19 | $16.88 | $16.62 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (5.00)% | 1.48% | 1.84% | 1.76% | 2.87% |
Ratios to average net assets |
|
|
|
|
|
Expenses before waiver and payments by affiliates and |
|
|
|
|
|
expense reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.85% | 0.88% | 0.91% | 0.88% | 0.88% |
Expenses net of waiver and payments by affiliates. . . . . . . | 0.81% | 0.79% | 0.82% | 0.81% | 0.83% |
Expenses net of waiver and payments by affiliates and |
|
|
|
| 0.83%e |
expense reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.80% | 0.77% | 0.80% | 0.81%e | |
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.06% | 4.87% | 4.74% | 4.46% | 3.53% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $76,771 | $90,272 | $94,312 | $98,934 | $96,798 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 52.84% | 22.58% | 18.22% | 37.97% | 59.00% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned, adjustments to interest income for the inflation-indexed bonds, and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding. cAmount rounds to less than $0.01 per share.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of expense reduction rounds to less than 0.01%.
TGB-10
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Templeton Global Bond VIP Fund
|
|
| Principal |
|
|
a | a | Industry | Amount* | a | Value |
a | a | a | a | a | a |
| Foreign Government and Agency Securities 46.6% |
|
|
|
|
| Argentina 1.8% |
|
|
|
|
a,bArgentina BONCER, |
|
|
|
Index Linked, 1.1%, 4/17/21.. . . . . . . | 365,252,183 | ARS | $2,547,335 |
Index Linked, 1%, 8/05/21.. . . . . . . . | 197,247,071 | ARS | 1,387,789 |
Index Linked, 1.2%, 3/18/22.. . . . . . . | 1,943,817,439 | ARS | 13,606,998 |
Index Linked, 1.3%, 9/20/22.. . . . . . . | 16,771,612 | ARS | 112,093 |
Index Linked, 1.4%, 3/25/23.. . . . . . . | 1,112,491,535 | ARS | 7,267,681 |
Index Linked, 1.5%, 3/25/24.. . . . . . . | 1,112,491,539 | ARS | 6,650,114 |
b,cArgentina Bonos del Tesoro Nacional en |
|
|
|
Pesos Badlar, FRN, 31.641%, (ARS |
|
|
|
BADLAR + 2%), 4/03/22. . . . . . . . . . | 24,036,000 | ARS | 155,231 |
bArgentina Government Bond, |
|
|
|
18.2%, 10/03/21. . . . . . . . . . . . . . . . | 820,823,000 | ARS | 4,735,423 |
16%, 10/17/23.. . . . . . . . . . . . . . . . . | 844,288,000 | ARS | 2,692,248 |
15.5%, 10/17/26. . . . . . . . . . . . . . . . | 1,668,306,000 | ARS | 3,879,808 |
|
|
|
|
|
|
| 43,034,720 |
Brazil 1.0% |
|
|
|
Brazil Notas do Tesouro Nacional, 10%, |
|
|
|
1/01/21. . . . . . . . . . . . . . . . . . . . . . . | 117,516,000 | BRL | 22,641,507 |
Colombia 1.8% |
|
|
|
Colombia Government Bond, |
|
|
|
Senior Bond, 7.75%, 4/14/21.. . . . . . | 2,386,000,000 | COP | 707,155 |
Senior Bond, 4.375%, 3/21/23.. . . . . | 362,000,000 | COP | 108,121 |
Senior Bond, 9.85%, 6/28/27.. . . . . . | 576,000,000 | COP | 219,726 |
Colombia Titulos de Tesoreria, |
|
|
|
B, 7%, 5/04/22.. . . . . . . . . . . . . . . . . | 17,524,600,000 | COP | 5,441,181 |
B, 10%, 7/24/24.. . . . . . . . . . . . . . . . | 40,977,000,000 | COP | 14,546,773 |
B, 7.5%, 8/26/26. . . . . . . . . . . . . . . . | 35,134,200,000 | COP | 11,863,115 |
B, 6%, 4/28/28.. . . . . . . . . . . . . . . . . | 29,113,600,000 | COP | 9,113,408 |
|
|
|
|
|
|
| 41,999,479 |
Ghana 1.6% |
|
|
|
Ghana Government Bond, |
|
|
|
24.75%, 3/01/21. . . . . . . . . . . . . . . . | 690,000 | GHS | 119,774 |
16.5%, 3/22/21. . . . . . . . . . . . . . . . . | 1,730,000 | GHS | 296,862 |
16.25%, 5/17/21. . . . . . . . . . . . . . . . | 7,250,000 | GHS | 1,241,152 |
24.5%, 6/21/21. . . . . . . . . . . . . . . . . | 80,000 | GHS | 14,146 |
24.75%, 7/19/21. . . . . . . . . . . . . . . . | 1,190,000 | GHS | 210,935 |
18.75%, 1/24/22. . . . . . . . . . . . . . . . | 26,990,000 | GHS | 4,636,323 |
17.6%, 11/28/22. . . . . . . . . . . . . . . . | 520,000 | GHS | 87,578 |
19%, 9/18/23.. . . . . . . . . . . . . . . . . . | 150,000 | GHS | 25,355 |
19.75%, 3/25/24. . . . . . . . . . . . . . . . | 26,840,000 | GHS | 4,602,058 |
19%, 11/02/26.. . . . . . . . . . . . . . . . . | 80,510,000 | GHS | 13,048,859 |
19.75%, 3/15/32. . . . . . . . . . . . . . . . | 80,510,000 | GHS | 12,797,848 |
|
|
|
|
|
|
| 37,080,890 |
India 4.0% |
|
|
|
India Government Bond, |
|
|
|
8.79%, 11/08/21. . . . . . . . . . . . . . . . | 653,000,000 | INR | 9,330,989 |
8.2%, 2/15/22. . . . . . . . . . . . . . . . . . | 500,000,000 | INR | 7,191,604 |
8.35%, 5/14/22. . . . . . . . . . . . . . . . . | 212,700,000 | INR | 3,089,362 |
8.15%, 6/11/22. . . . . . . . . . . . . . . . . | 1,621,000,000 | INR | 23,561,404 |
6.84%, 12/19/22. . . . . . . . . . . . . . . . | 98,000,000 | INR | 1,417,610 |
7.16%, 5/20/23. . . . . . . . . . . . . . . . . | 133,700,000 | INR | 1,953,728 |
8.83%, 11/25/23. . . . . . . . . . . . . . . . | 1,468,100,000 | INR | 22,518,431 |
The accompanying notes are an integral part of these financial statements.
Annual Report
TGB-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Global Bond VIP Fund (continued)
|
|
| Principal |
|
|
a | a | Industry | Amount* | a | Value |
a | a | a | a | a | a |
| Foreign Government and Agency Securities (continued) |
|
|
|
|
| India (continued) |
|
|
|
|
| India Government Bond, (continued) |
|
|
|
|
| Senior Note, 5.22%, 6/15/25. . . . . . . |
| 313,000,000 | INR | $4,321,896 |
| 7.59%, 1/11/26. . . . . . . . . . . . . . . . . |
| 1,032,000,000 | INR | 15,607,187 |
| 7.27%, 4/08/26. . . . . . . . . . . . . . . . . |
| 214,000,000 | INR | 3,204,971 |
|
|
|
|
|
|
|
|
|
|
| 92,197,182 |
| Indonesia 4.9% |
|
|
|
|
| Indonesia Government Bond, |
|
|
|
|
| FR34, 12.8%, 6/15/21. . . . . . . . . . . . |
| 324,406,000,000 | IDR | 24,141,265 |
| FR61, 7%, 5/15/22.. . . . . . . . . . . . . . |
| 244,849,000,000 | IDR | 18,160,651 |
| FR35, Senior Bond, 12.9%, 6/15/22.. |
| 71,229,000,000 | IDR | 5,735,693 |
| FR43, 10.25%, 7/15/22. . . . . . . . . . . |
| 147,832,000,000 | IDR | 11,532,491 |
| FR63, 5.625%, 5/15/23. . . . . . . . . . . |
| 274,915,000,000 | IDR | 20,229,336 |
| FR46, 9.5%, 7/15/23. . . . . . . . . . . . . |
| 226,780,000,000 | IDR | 18,077,709 |
| FR39, 11.75%, 8/15/23. . . . . . . . . . . |
| 5,491,000,000 | IDR | 458,380 |
| FR70, 8.375%, 3/15/24. . . . . . . . . . . |
| 53,132,000,000 | IDR | 4,166,265 |
| FR44, 10%, 9/15/24.. . . . . . . . . . . . . |
| 4,454,000,000 | IDR | 368,372 |
| FR81, 6.5%, 6/15/25. . . . . . . . . . . . . |
| 101,941,000,000 | IDR | 7,655,733 |
| FR40, 11%, 9/15/25.. . . . . . . . . . . . . |
| 46,856,000,000 | IDR | 4,113,127 |
|
|
|
|
|
|
|
|
|
|
| 114,639,022 |
| Mexico 14.5% |
|
|
|
|
| Mexican Bonos Desarr Fixed Rate, |
|
|
|
|
| M, 6.5%, 6/10/21.. . . . . . . . . . . . . . . |
| 1,413,720,000 | MXN | 71,703,274 |
| M, Senior Note, 7.25%, 12/09/21.. . . |
| 1,840,710,000 | MXN | 95,033,288 |
| M, 6.5%, 6/09/22.. . . . . . . . . . . . . . . |
| 2,147,994,000 | MXN | 111,253,386 |
| M, Senior Note, 6.75%, 3/09/23.. . . . |
| 229,144,000 | MXN | 12,099,089 |
| M, Senior Bond, 8%, 12/07/23.. . . . . |
| 836,490,000 | MXN | 46,202,989 |
|
|
|
|
|
|
|
|
|
|
| 336,292,026 |
| Norway 5.5% |
|
|
|
|
| dNorway Government Bond, |
|
|
|
|
| 144A, Reg S, 3.75%, 5/25/21.. . . . . . |
| 335,990,000 | NOK | 39,746,904 |
| 144A, Reg S, 2%, 5/24/23.. . . . . . . . |
| 315,007,000 | NOK | 38,192,670 |
| 144A, Reg S, 3%, 3/14/24.. . . . . . . . |
| 265,052,000 | NOK | 33,430,124 |
| 144A, Reg S, 1.75%, 3/13/25.. . . . . . |
| 89,312,000 | NOK | 10,927,022 |
| 144A, Reg S, 1.5%, 2/19/26.. . . . . . . |
| 52,969,000 | NOK | 6,441,429 |
|
|
|
|
|
|
|
|
|
|
| 128,738,149 |
| South Korea 11.0% |
|
|
|
|
| Korea Treasury Bond, |
|
|
|
|
| 3%, 3/10/23.. . . . . . . . . . . . . . . . . . . |
| 3,919,000,000 | KRW | 3,759,972 |
| 2.25%, 9/10/23. . . . . . . . . . . . . . . . . |
| 88,312,000,000 | KRW | 83,860,948 |
| 1.875%, 3/10/24. . . . . . . . . . . . . . . . |
| 33,811,000,000 | KRW | 31,854,621 |
| 1.375%, 9/10/24. . . . . . . . . . . . . . . . |
| 75,881,910,000 | KRW | 70,265,722 |
| 3%, 9/10/24.. . . . . . . . . . . . . . . . . . . |
| 18,500,000,000 | KRW | 18,121,176 |
| 1.375%, 12/10/29. . . . . . . . . . . . . . . |
| 53,382,000,000 | KRW | 47,708,850 |
|
|
|
|
|
|
|
|
|
|
| 255,571,289 |
| Supranational 0.5% |
|
|
|
|
| eInter-American Development Bank, |
|
|
|
|
| Senior Bond, 7.5%, 12/05/24.. . . . . . |
| 200,000,000 | MXN | 10,946,188 |
| .. . . . . . . . .Total Foreign Government and Agency Securities (Cost $1,267,123,431) | . . | 1,083,140,452 | ||
|
|
|
|
|
|
TGB-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Global Bond VIP Fund (continued)
|
|
|
| Principal |
|
|
|
|
|
a | a | Industry | Amount* |
| a |
| Value | ||
a | a | a | a |
| a |
| a | ||
| U.S. Government and Agency Securities 20.8% |
|
|
|
|
|
|
| |
| United States 20.8% |
|
|
|
|
|
|
| |
| U.S. Treasury Notes, |
|
|
|
|
|
|
| |
| 1.125%, 9/30/21. . . . . . . . . . . . . . . . |
|
| 3,497,000 |
|
|
| $3,523,502 | |
| 1.5%, 9/30/21. . . . . . . . . . . . . . . . . . |
|
| 15,768,000 |
|
|
| 15,931,779 | |
| 2.125%, 12/31/21. . . . . . . . . . . . . . . |
|
| 3,953,000 |
|
|
| 4,032,148 | |
| 1.5%, 10/31/24. . . . . . . . . . . . . . . . . |
|
| 64,160,000 |
|
|
| 67,247,700 | |
| 1.5%, 11/30/24. . . . . . . . . . . . . . . . . |
|
| 50,420,000 |
|
|
| 52,874,036 | |
| 1.75%, 12/31/24. . . . . . . . . . . . . . . . |
|
| 22,672,000 |
|
|
| 24,018,150 | |
| 2%, 2/15/25.. . . . . . . . . . . . . . . . . . . |
|
| 49,140,000 |
|
|
| 52,620,110 | |
| 2.125%, 5/15/25. . . . . . . . . . . . . . . . |
|
| 58,760,000 |
|
|
| 63,428,665 | |
| 2.875%, 5/31/25. . . . . . . . . . . . . . . . |
|
| 76,680,000 |
|
|
| 85,318,481 | |
| 2.625%, 12/31/25. . . . . . . . . . . . . . . |
|
| 44,803,000 |
|
|
| 49,824,086 | |
| 1.625%, 2/15/26. . . . . . . . . . . . . . . . |
|
| 24,220,000 |
|
|
| 25,762,133 | |
| 2.125%, 5/31/26. . . . . . . . . . . . . . . . |
|
| 11,063,000 |
|
|
| 12,076,820 | |
| 1.625%, 10/31/26. . . . . . . . . . . . . . . |
|
| 24,220,000 |
|
|
| 25,828,360 | |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| 482,485,970 | |
| .. . . . .Total U.S. Government and Agency Securities (Cost $463,568,866) | . . . . . . . . | . . | . |
| 482,485,970 | |||
| Total Long Term Investments (Cost $1,730,692,297) |
|
|
|
| ||||
| . . . . . . . . . . . . . | . . . . . . . . | . . 1,565,626,422. | ||||||
|
|
| Number of | Notional |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
| Contracts | Amount# |
|
|
|
|
|
|
|
| a a | aa |
|
|
|
|
|
| Options Purchased 0.7% |
|
|
|
|
|
|
| |
| Calls - Over-the-Counter |
|
|
|
|
|
|
| |
| Currency Options |
|
|
|
|
|
|
| |
| Foreign Exchange AUD/JPY, |
|
|
|
|
|
|
| |
| Counterparty CITI, January Strike |
|
|
|
|
|
|
| |
| Price 78.75 JPY, Expires 1/22/21.. . . | 1 | 29,730,000 | AUD | 365,624 | ||||
| Foreign Exchange AUD/JPY, |
|
|
|
|
|
|
| |
| Counterparty CITI, January Strike |
|
|
|
|
|
|
| |
| Price 79.00 JPY, Expires 1/22/21.. . . | 1 | 26,674,000 | AUD | 283,333 | ||||
| Foreign Exchange AUD/JPY, |
|
|
|
|
|
|
| |
| Counterparty CITI, April Strike Price |
|
|
|
|
|
|
| |
| 81.00 JPY, Expires 4/29/21. . . . . . . . | 1 | 19,266,000 | AUD | 205,458 | ||||
| Foreign Exchange AUD/JPY, |
|
|
|
|
|
|
| |
| Counterparty CITI, June Strike Price |
|
|
|
|
|
|
| |
| 81.00 JPY, Expires 6/21/21. . . . . . . . | 1 | 29,640,000 | AUD | 415,785 | ||||
| Foreign Exchange AUD/JPY, |
|
|
|
|
|
|
| |
| Counterparty CITI, June Strike Price |
|
|
|
|
|
|
| |
| 84.15 JPY, Expires 6/18/21. . . . . . . . | 1 | 30,645,000 | AUD | 153,690 | ||||
| Foreign Exchange AUD/JPY, |
|
|
|
|
|
|
| |
| Counterparty CITI, December Strike |
|
|
|
|
|
|
| |
| Price 86.50 JPY, Expires 12/20/21.. . | 1 | 22,983,000 | AUD | 161,357 | ||||
| Foreign Exchange USD/AUD, |
|
|
|
|
|
|
| |
| Counterparty HSBK, January Strike |
|
|
|
|
|
|
| |
| Price 1.45 AUD, Expires 1/22/21. . . . | 1 | 16,911,280 |
|
|
| 832 | ||
| Foreign Exchange USD/AUD, |
|
|
|
|
|
|
| |
| Counterparty HSBK, March Strike |
|
|
|
|
|
|
| |
| Price 1.46 AUD, Expires 3/22/21. . . . | 1 | 14,358,483 |
|
|
| 13,259 | ||
| Foreign Exchange USD/AUD, |
|
|
|
|
|
|
| |
| Counterparty MSCO, February Strike |
|
|
|
|
|
|
| |
| Price 1.47 AUD, Expires 2/02/21. . . . | 1 | 22,794,030 |
|
|
| 1,527 | ||
| Foreign Exchange USD/AUD, |
|
|
|
|
|
|
| |
| Counterparty MSCO, January Strike |
|
|
|
|
|
|
| |
| Price 1.48 AUD, Expires 1/21/21. . . . | 1 | 19,862,726 |
|
|
| 393 | ||
|
|
|
|
|
|
| |||
|
| The accompanying notes are an integral part of these financial statements. | Annual Report |
| TGB-13 | ||||
|
|
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Global Bond VIP Fund (continued)
|
| Number of | Notional |
|
|
a | a | Contracts | Amount# | a | Value |
a | a | a a | aa | a | a |
| Options Purchased (continued) |
|
|
|
|
| Calls - Over-the-Counter (continued) |
|
|
|
|
| Currency Options (continued) |
|
|
|
|
| Foreign Exchange USD/AUD, |
|
|
|
|
| Counterparty MSCO, April Strike Price |
|
|
|
|
| 1.48 AUD, Expires 4/16/21.. . . . . . . . | 1 | 15,551,876 |
| $19,368 |
| Foreign Exchange USD/AUD, |
|
|
|
|
| Counterparty HSBK, February Strike |
|
|
|
|
| Price 1.53 AUD, Expires 2/08/21. . . . | 1 | 20,676,864 |
| 891 |
| Foreign Exchange USD/AUD, |
|
|
|
|
| Counterparty HSBK, February Strike |
|
|
|
|
| Price 1.54 AUD, Expires 2/10/21. . . . | 1 | 24,565,503 |
| 966 |
| Foreign Exchange USD/JPY, |
|
|
|
|
| Counterparty CITI, February Strike |
|
|
|
|
| Price 104.78 JPY, Expires 2/01/21.. . | 1 | 4,536,000 |
| 9,512 |
| Foreign Exchange USD/JPY, |
|
|
|
|
| Counterparty CITI, February Strike |
|
|
|
|
| Price 110.80 JPY, Expires 2/24/21. . . | 1 | 49,303,000 |
| 4,196 |
| Foreign Exchange USD/JPY, |
|
|
|
|
| Counterparty CITI, February Strike |
|
|
|
|
| Price 115.00 JPY, Expires 2/24/21. . . | 1 | 98,607,000 |
| 1,225 |
| Foreign Exchange USD/JPY, |
|
|
|
|
| Counterparty CITI, August Strike Price |
|
|
|
|
| 115.95 JPY, Expires 8/11/21.. . . . . . . | 1 | 27,911,000 |
| 15,713 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty GSCO, March Strike |
|
|
|
|
| Price 20.65 MXN, Expires 3/25/21.. . | 1 | 48,868,000 |
| 901,267 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
| 21.16 MXN, Expires 6/21/21. . . . . . . | 1 | 28,804,000 |
| 711,995 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty GSCO, June Strike Price |
|
|
|
|
| 22.83 MXN, Expires 6/09/21. . . . . . . | 1 | 7,291,000 |
| 73,507 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, March Strike Price |
|
|
|
|
| 23.23 MXN, Expires 3/24/21. . . . . . . | 1 | 18,842,000 |
| 56,328 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, April Strike Price |
|
|
|
|
| 23.30 MXN, Expires 4/29/21. . . . . . . | 1 | 17,520,000 |
| 98,825 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, April Strike Price |
|
|
|
|
| 23.75 MXN, Expires 4/09/21. . . . . . . | 1 | 11,742,000 |
| 37,863 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
| 24.81 MXN, Expires 6/30/21. . . . . . . | 1 | 35,754,000 |
| 195,983 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, April Strike Price |
|
|
|
|
| 25.48 MXN, Expires 4/09/21. . . . . . . | 1 | 11,205,000 |
| 15,660 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
| 26.09 MXN, Expires 6/18/21. . . . . . . | 1 | 23,833,000 |
| 72,908 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, October Strike |
|
|
|
|
| Price 26.30 MXN, Expires 10/19/23.. | 1 | 16,875,000 |
| 777,058 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, October Strike |
|
|
|
|
| Price 26.30 MXN, Expires 10/19/23.. | 1 | 9,033,000 |
| 415,951 |
TGB-14
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Global Bond VIP Fund (continued)
|
| Number of | Notional |
|
|
a | a | Contracts | Amount# | a | Value |
a | a | a a | aa | a | a |
| Options Purchased (continued) |
|
|
|
|
| Calls - Over-the-Counter (continued) |
|
|
|
|
| Currency Options (continued) |
|
|
|
|
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, October Strike |
|
|
|
|
| Price 26.30 MXN, Expires 10/19/23.. | 1 | 9,033,000 |
| $415,951 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty MSCO, March Strike |
|
|
|
|
| Price 28.75 MXN, Expires 3/30/21.. . | 1 | 24,669,000 |
| 6,177 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty MSCO, August Strike |
|
|
|
|
| Price 29.19 MXN, Expires 8/29/24.. . | 1 | 21,864,000 |
| 1,019,302 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty MSCO, August Strike |
|
|
|
|
| Price 29.71 MXN, Expires 8/09/24.. . | 1 | 21,864,000 |
| 941,769 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, December Strike |
|
|
|
|
| Price 29.73 MXN, Expires 12/07/21.. | 1 | 31,535,000 |
| 148,161 |
|
|
|
|
| 7,541,834 |
| Puts - Over-the-Counter |
|
|
|
|
| Currency Options |
|
|
|
|
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
| 58.95 JPY, Expires 6/21/21. . . . . . . . | 1 | 39,520,000 | AUD | 16,294 |
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, March Strike Price |
|
|
|
|
| 68.50 JPY, Expires 3/24/21. . . . . . . . | 1 | 17,783,000 | AUD | 8,477 |
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
| 69.20 JPY, Expires 6/24/21. . . . . . . . | 1 | 31,616,000 | AUD | 82,765 |
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
| 69.20 JPY, Expires 6/24/21. . . . . . . . | 1 | 15,808,000 | AUD | 41,382 |
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, April Strike Price |
|
|
|
|
| 71.00 JPY, Expires 4/29/21. . . . . . . . | 1 | 51,376,000 | AUD | 107,886 |
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
| 71.44 JPY, Expires 6/21/21. . . . . . . . | 1 | 39,520,000 | AUD | 154,646 |
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, December Strike |
|
|
|
|
| Price 75.00 JPY, Expires 12/20/21.. . | 1 | 45,967,000 | AUD | 754,911 |
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
| 76.20 JPY, Expires 6/18/21. . . . . . . . | 1 | 61,289,000 | AUD | 626,428 |
| Foreign Exchange USD/AUD, |
|
|
|
|
| Counterparty HSBK, February Strike |
|
|
|
|
| Price 1.28 AUD, Expires 2/08/21. . . . | 1 | 12,330,240 |
| 103,455 |
| Foreign Exchange USD/AUD, |
|
|
|
|
| Counterparty MSCO, May Strike Price |
|
|
|
|
| 1.30 AUD, Expires 5/12/21.. . . . . . . . | 1 | 16,341,872 |
| 447,024 |
| Foreign Exchange USD/AUD, |
|
|
|
|
| Counterparty MSCO, April Strike Price |
|
|
|
|
| 1.33 AUD, Expires 4/16/21.. . . . . . . . | 1 | 8,931,989 |
| 327,876 |
The accompanying notes are an integral part of these financial statements. Annual Report
TGB-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Global Bond VIP Fund (continued)
|
| Number of | Notional |
|
|
a | a | Contracts | Amount# | a | Value |
a | a | a a | aa | a | a |
| Options Purchased (continued) |
|
|
|
|
| Puts - Over-the-Counter (continued) |
|
|
|
|
| Currency Options (continued) |
|
|
|
|
| Foreign Exchange USD/AUD, |
|
|
|
|
| Counterparty HSBK, January Strike |
|
|
|
|
| Price 1.40 AUD, Expires 1/22/21. . . . | 1 | 5,677,954 |
| $436,715 |
| Foreign Exchange USD/JPY, |
|
|
|
|
| Counterparty CITI, February Strike |
|
|
|
|
| Price 102.10 JPY, Expires 2/24/21.. . | 1 | 49,303,000 |
| 290,219 |
| Foreign Exchange USD/JPY, |
|
|
|
|
| Counterparty CITI, August Strike Price |
|
|
|
|
| 102.65 JPY, Expires 8/11/21. . . . . . . | 1 | 41,892,000 |
| 832,070 |
| Foreign Exchange USD/JPY, |
|
|
|
|
| Counterparty CITI, February Strike |
|
|
|
|
| Price 103.50 JPY, Expires 2/01/21.. . | 1 | 29,582,000 |
| 261,319 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty GSCO, March Strike |
|
|
|
|
| Price 18.72 MXN, Expires 3/25/21.. . | 1 | 41,049,000 |
| 164,595 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
| 18.83 MXN, Expires 6/21/21. . . . . . . | 1 | 34,913,000 |
| 334,344 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty MSCO, August Strike |
|
|
|
|
| Price 19.43 MXN, Expires 8/30/21.. . | 1 | 16,398,000 |
| 342,469 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, October Strike |
|
|
|
|
| Price 19.85 MXN, Expires 10/19/23.. | 1 | 4,517,000 |
| 158,537 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, October Strike |
|
|
|
|
| Price 19.85 MXN, Expires 10/19/23.. | 1 | 4,517,000 |
| 158,537 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, October Strike |
|
|
|
|
| Price 19.85 MXN, Expires 10/19/23.. | 1 | 8,437,000 |
| 296,121 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty MSCO, August Strike |
|
|
|
|
| Price 19.88 MXN, Expires 8/11/21. . . | 1 | 16,398,000 |
| 486,534 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, March Strike Price |
|
|
|
|
| 20.66 MXN, Expires 3/24/21. . . . . . . | 1 | 10,516,000 |
| 489,471 |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty GSCO, June Strike Price |
|
|
|
|
| 22.83 MXN, Expires 6/09/21. . . . . . . | 1 | 7,291,000 |
| 994,813 |
|
|
|
|
| 7,916,888 |
| Total Options Purchased (Cost $28,886,326).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 15,458,722 | |||
| Short Term Investments 31.8% |
| Principal |
|
|
|
|
|
|
| |
a | a |
| Amount* | a | Value |
a | a | a | a | a | a |
| Foreign Government and Agency Securities 11.9% |
|
|
|
|
| Argentina 0.1% |
|
|
|
|
b,fArgentina Letras de la Nacion Argentina |
|
|
|
| |
| con Ajuste por CER, |
|
|
|
|
a | Index Linked, 2/26/21. . . . . . . . . . . . |
| 62,729,833 | ARS | 432,988 |
| 5/21/21. . . . . . . . . . . . . . . . . . . . . . . |
| 202,632,899 | ARS | 1,467,363 |
a | Index Linked, 9/13/21. . . . . . . . . . . . |
| 111,839,579 | ARS | 801,134 |
TGB-16
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Global Bond VIP Fund (continued)
Short Term Investments (continued)
|
|
|
| Principal |
|
| |
a | a |
| Amount* | a | Value | ||
a | a | a | a | a | a | ||
| Foreign Government and Agency Securities (continued) |
|
|
|
|
| |
| Argentina (continued) |
|
|
|
|
| |
| b,fArgentina Letras Del Tesoro En Pesos A |
|
|
|
|
| |
| Descuento, 3/31/21.. . . . . . . . . . . . . |
| 48,678,666 |
| ARS | $308,906 | |
|
|
|
|
|
|
| 3,010,391 |
| Brazil 3.0% |
|
|
|
|
| |
| fBrazil Letras do Tesouro Nacional, |
|
|
|
|
| |
| 4/01/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 25,610,000 |
| BRL | 4,906,924 |
| 7/01/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 34,210,000 |
| BRL | 6,519,582 |
| 10/01/21. . . . . . . . . . . . . . . . . . . . . . |
|
| 302,400,000 | BRL | 57,139,108 | |
|
|
|
|
|
|
| 68,565,614 |
| Japan 8.7% |
|
|
|
|
| |
| fJapan Treasury Bills, |
|
|
|
|
| |
| 1/12/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 1,884,800,000 |
| JPY | 18,254,250 |
| 1/12/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 5,422,600,000 |
| JPY | 52,517,771 |
| 1/18/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 1,610,000,000 |
| JPY | 15,593,105 |
| 2/10/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 1,180,000,000 |
| JPY | 11,429,316 |
| 3/10/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 8,017,300,000 |
| JPY | 77,660,294 |
| 3/22/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 896,100,000 |
| JPY | 8,680,400 |
| 3/25/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 698,500,000 |
| JPY | 6,766,318 |
| 4/12/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 290,800,000 |
| JPY | 2,817,115 |
| 6/16/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 906,750,000 |
| JPY | 8,786,287 |
|
|
|
|
|
|
| 202,504,856 |
| Mexico 0.1% |
|
|
|
|
| |
| fMexico Cetes, BI, 3/25/21.. . . . . . . . . . |
| 24,448,000 |
| MXN | 1,218,197 | |
| Total Foreign Government and Agency Securities (Cost $273,009,376) | . . . . . . . . . . | . | . . | 275,299,058 | ||
| U.S. Government and Agency Securities 10.4% |
|
|
|
|
| |
|
|
|
|
|
| ||
| United States 10.4% |
|
|
|
|
| |
| fU.S. Treasury Bills, |
|
|
|
|
| |
| 1/07/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 64,460,000 |
|
| 64,459,892 |
| 3/09/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 113,820,000 |
|
| 113,804,825 |
| 3/18/21. . . . . . . . . . . . . . . . . . . . . . . |
|
| 64,460,000 |
|
| 64,452,157 |
|
|
|
|
|
|
| 242,716,874 |
| .. . . . . . . . . . . . .Total U.S. Government and Agency Securities (Cost $242,711,668) | . | . . | 242,716,874 | |||
|
|
| Industry | Shares |
|
|
|
|
|
|
|
| |||
| Money Market Funds 9.5% |
|
|
|
|
| |
| United States 9.5% |
|
|
|
|
| |
| g,hInstitutional Fiduciary Trust - Money |
|
|
|
|
| |
| Market Portfolio, 0%. . . . . . . . . . . . . |
| 221,215,254 |
|
| 221,215,254 | |
| .. . . . . . . . . .Total Money Market Funds (Cost $221,215,254) | . . . . . . . . . . . . . . . . . . . . | . | . . | 221,215,254 | ||
| Total Short Term Investments (Cost $736,936,298) |
|
|
|
|
| |
| . . . . . . . . . . . . . . . . . . . . | . | . . | 739,231,186 | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| a |
Total Investments (Cost $2,496,514,921) 99.9%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Written (0.8)%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities 0.9%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,320,316,330 (18,551,294)
22,196,494
$2,323,961,530
a
The accompanying notes are an integral part of these financial statements.
Annual Report
TGB-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Global Bond VIP Fund (continued)
|
|
|
|
| a |
|
| Number of | Notional | a | Value |
a | a | Contracts | Amount# | ||
| iOptions Written (0.8)% |
|
|
|
|
| Calls - Over-the-Counter |
|
|
|
|
| Currency Options |
|
|
|
|
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, January Strike |
|
|
|
|
| Price 76.00 JPY, Expires 1/22/21.. . . | 1 | 26,674,000 | AUD | $(946,714) |
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, January Strike |
|
|
|
|
| Price 76.25 JPY, Expires 1/22/21.. . . | 1 | 29,730,000 | AUD | (986,586) |
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, April Strike Price |
|
|
|
|
| 76.80 JPY, Expires 4/29/21. . . . . . . . | 1 | 38,532,000 | AUD | (1,356,653) |
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, January Strike |
|
|
|
|
| Price 76.95 JPY, Expires 1/22/21.. . . | 1 | 31,616,000 | AUD | (848,964) |
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
| 78.00 JPY, Expires 6/21/21. . . . . . . . | 1 | 29,640,000 | AUD | (889,160) |
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
| 80.50 JPY, Expires 6/18/21. . . . . . . . | 1 | 30,645,000 | AUD | (489,930) |
| Foreign Exchange AUD/JPY, |
|
|
|
|
| Counterparty CITI, December Strike |
|
|
|
|
| Price 81.20 JPY, Expires 12/20/21.. . | 1 | 22,983,000 | AUD | (500,565) |
| Foreign Exchange USD/AUD, |
|
|
|
|
| Counterparty HSBK, January Strike |
|
|
|
|
| Price 1.40 AUD, Expires 1/22/21. . . . | 1 | 5,677,954 |
| (1,445) |
| Foreign Exchange USD/AUD, |
|
|
|
|
| Counterparty MSCO, February Strike |
|
|
|
|
| Price 1.44 AUD, Expires 2/02/21. . . . | 1 | 8,362,475 |
| (1,291) |
| Foreign Exchange USD/AUD, |
|
|
|
|
| Counterparty HSBK, January Strike |
|
|
|
|
| Price 1.52 AUD, Expires 1/22/21. . . . | 1 | 7,817,846 |
| (66) |
| Foreign Exchange USD/AUD, |
|
|
|
|
| Counterparty HSBK, January Strike |
|
|
|
|
| Price 1.52 AUD, Expires 1/27/21. . . . | 1 | 6,879,660 |
| (81) |
| Foreign Exchange USD/AUD, |
|
|
|
|
| Counterparty HSBK, March Strike |
|
|
|
|
| Price 1.54 AUD, Expires 3/22/21. . . . | 1 | 5,515,403 |
| (1,544) |
| Foreign Exchange USD/AUD, |
|
|
|
|
| Counterparty MSCO, January Strike |
|
|
|
|
| Price 1.57 AUD, Expires 1/21/21. . . . | 1 | 9,344,403 |
| (21) |
| Foreign Exchange USD/JPY, |
|
|
|
|
| Counterparty CITI, February Strike |
|
|
|
|
| Price 107.00 JPY, Expires 2/24/21.. . | 1 | 98,607,000 |
| (82,495) |
| Foreign Exchange USD/JPY, |
|
|
|
|
| Counterparty CITI, February Strike |
|
|
|
|
| Price 107.65 JPY, Expires 2/01/21.. . | 1 | 19,721,000 |
| (3,295) |
| Foreign Exchange USD/JPY, |
|
|
|
|
| Counterparty CITI, August Strike Price |
|
|
|
|
| 109.90 JPY, Expires 8/11/21. . . . . . . | 1 | 41,892,000 |
| (116,149) |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty GSCO, March Strike |
|
|
|
|
| Price 21.48 MXN, Expires 3/25/21.. . | 1 | 48,868,000 |
| (486,346) |
| Foreign Exchange USD/MXN, |
|
|
|
|
| Counterparty CITI, April Strike Price |
|
|
|
|
| 22.38 MXN, Expires 4/29/21. . . . . . . | 1 | 8,760,000 |
| (78,974) |
TGB-18
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Global Bond VIP Fund (continued)
|
|
|
|
|
| a |
|
|
| Number of | Notional |
|
|
a | a |
| Contracts | Amount# | a | Value |
a | a |
| a | a | a | a |
| iOptions Written (continued) |
|
|
|
| |
| Calls - Over-the-Counter (continued) |
|
|
|
| |
| Currency Options (continued) |
|
|
|
| |
| Foreign Exchange USD/MXN, |
|
|
|
| |
| Counterparty CITI, June Strike Price |
|
|
|
| |
| 22.56 | MXN, Expires 6/21/21. . . . . . . | 1 | 19,202,000 |
| $(239,215) |
| Foreign Exchange USD/MXN, |
|
|
|
| |
| Counterparty CITI, April Strike Price |
|
|
|
| |
| 24.57 | MXN, Expires 4/29/21. . . . . . . | 1 | 4,380,000 |
| (13,805) |
| Foreign Exchange USD/MXN, |
|
|
|
| |
| Counterparty CITI, March Strike Price |
|
|
|
| |
| 25.87 | MXN, Expires 3/24/21. . . . . . . | 1 | 17,883,000 |
| (12,438) |
| Foreign Exchange USD/MXN, |
|
|
|
| |
| Counterparty CITI, March Strike Price |
|
|
|
| |
| 26.08 | MXN, Expires 3/24/21. . . . . . . | 1 | 7,537,000 |
| (4,732) |
| Foreign Exchange USD/MXN, |
|
|
|
| |
| Counterparty MSCO, August Strike |
|
|
|
| |
| Price 26.61 MXN, Expires 8/30/21.. . | 1 | 16,398,000 |
| (83,130) | |
| Foreign Exchange USD/MXN, |
|
|
|
| |
| Counterparty CITI, April Strike Price |
|
|
|
| |
| 27.24 MXN, Expires 4/09/21. . . . . . . | 1 | 22,442,000 |
| (15,249) | |
| Foreign Exchange USD/MXN, |
|
|
|
| |
| Counterparty MSCO, August Strike |
|
|
|
| |
| Price 27.38 MXN, Expires 8/11/21. . . | 1 | 16,398,000 |
| (61,265) | |
| Foreign Exchange USD/MXN, |
|
|
|
| |
| Counterparty CITI, December Strike |
|
|
|
| |
| Price 27.93 MXN, Expires 12/07/21.. | 1 | 10,512,000 |
| (69,687) | |
| Foreign Exchange USD/MXN, |
|
|
|
| |
| Counterparty CITI, June Strike Price |
|
|
|
| |
| 28.24 MXN, Expires 6/18/21. . . . . . . | 1 | 23,833,000 |
| (37,968) | |
| Foreign Exchange USD/MXN, |
|
|
|
| |
| Counterparty CITI, June Strike Price |
|
|
|
| |
| 28.40 MXN, Expires 6/30/21. . . . . . . | 1 | 23,836,000 |
| (43,662) | |
| Foreign Exchange USD/MXN, |
|
|
|
| |
| Counterparty GSCO, June Strike Price |
|
|
|
| |
| 30.36 MXN, Expires 6/09/21. . . . . . . | 1 | 7,291,000 |
| (5,935) | |
| Foreign Exchange USD/MXN, |
|
|
|
| |
| Counterparty CITI, October Strike |
|
|
|
| |
| Price 34.95 MXN, Expires 10/19/23.. | 1 | 4,517,000 |
| (75,111) | |
| Foreign Exchange USD/MXN, |
|
|
|
| |
| Counterparty CITI, October Strike |
|
|
|
| |
| Price 34.95 MXN, Expires 10/19/23.. | 1 | 4,517,000 |
| (75,111) | |
|
|
|
|
|
| (7,527,587) |
| Puts - Over-the-Counter |
|
|
|
| |
| Currency Options |
|
|
|
| |
| Foreign Exchange AUD/JPY, |
|
|
|
| |
| Counterparty CITI, June Strike Price |
|
|
|
| |
| 64.86 JPY, Expires 6/21/21. . . . . . . . | 1 | 59,280,000 | AUD | (67,583) | |
| Foreign Exchange AUD/JPY, |
|
|
|
| |
| Counterparty CITI, April Strike Price |
|
|
|
| |
| 66.00 JPY, Expires 4/29/21. . . . . . . . | 1 | 25,688,000 | AUD | (18,474) | |
| Foreign Exchange AUD/JPY, |
|
|
|
| |
| Counterparty CITI, December Strike |
|
|
|
| |
| Price 68.40 JPY, Expires 12/20/21.. . | 1 | 22,983,000 | AUD | (154,519) |
The accompanying notes are an integral part of these financial statements.
Annual Report
TGB-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Global Bond VIP Fund (continued)
|
|
|
|
|
| a |
|
| Number of | Notional |
|
| Value |
a | a | Contracts | Amount# | a |
| |
a | a | a | a | a |
| a |
| iOptions Written (continued) |
|
|
|
|
|
| Puts - Over-the-Counter (continued) |
|
|
|
|
|
| Currency Options (continued) |
|
|
|
|
|
| Foreign Exchange AUD/JPY, |
|
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
|
| 71.60 JPY, Expires 6/18/21. . . . . . . . | 1 | 61,289,000 | AUD | $(241,110) | |
| Foreign Exchange USD/AUD, |
|
|
|
|
|
| Counterparty HSBK, May Strike Price |
|
|
|
|
|
| 1.29 AUD, Expires 5/05/21.. . . . . . . . | 1 | 15,290,750 |
| (320,038) | |
| Foreign Exchange USD/AUD, |
|
|
|
|
|
| Counterparty MSCO, May Strike Price |
|
|
|
|
|
| 1.35 AUD, Expires 5/12/21.. . . . . . . . | 1 | 31,506,748 |
| (1,700,783) | |
| Foreign Exchange USD/AUD, |
|
|
|
|
|
| Counterparty MSCO, April Strike Price |
|
|
|
|
|
| 1.38 AUD, Expires 4/16/21.. . . . . . . . | 1 | 5,718,544 |
| (409,058) | |
| Foreign Exchange USD/AUD, |
|
|
|
|
|
| Counterparty MSCO, February Strike |
|
|
|
|
|
| Price 1.39 AUD, Expires 2/02/21. . . . | 1 | 8,669,520 |
| (621,646) | |
| Foreign Exchange USD/JPY, |
|
|
|
|
|
| Counterparty CITI, August Strike Price |
|
|
|
|
|
| 98.00 JPY, Expires 8/11/21. . . . . . . . | 1 | 13,980,000 |
| (104,270) | |
| Foreign Exchange USD/JPY, |
|
|
|
|
|
| Counterparty CITI, February Strike |
|
|
|
|
|
| Price 98.80 JPY, Expires 2/01/21.. . . | 1 | 17,256,000 |
| (7,983) | |
| Foreign Exchange USD/JPY, |
|
|
|
|
|
| Counterparty CITI, February Strike |
|
|
|
|
|
| Price 104.78 JPY, Expires 2/01/21.. . | 1 | 4,536,000 |
| (78,288) | |
| Foreign Exchange USD/MXN, |
|
|
|
|
|
| Counterparty GSCO, March Strike |
|
|
|
|
|
| Price 19.40 MXN, Expires 3/25/21.. . | 1 | 41,049,000 |
| (498,372) | |
| Foreign Exchange USD/MXN, |
|
|
|
|
|
| Counterparty GSCO, June Strike Price |
|
|
|
|
|
| 19.61 MXN, Expires 6/09/21. . . . . . . | 1 | 7,291,000 |
| (154,458) | |
| Foreign Exchange USD/MXN, |
|
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
|
| 19.79 MXN, Expires 6/21/21. . . . . . . | 1 | 34,913,000 |
| (898,769) | |
| Foreign Exchange USD/MXN, |
|
|
|
|
|
| Counterparty CITI, June Strike Price |
|
|
|
|
|
| 20.24 MXN, Expires 6/30/21. . . . . . . | 1 | 11,918,000 |
| (445,705) | |
| Foreign Exchange USD/MXN, |
|
|
|
|
|
| Counterparty MSCO, August Strike |
|
|
|
|
|
| Price 20.94 MXN, Expires 8/30/21.. . | 1 | 16,398,000 |
| (982,956) | |
| Foreign Exchange USD/MXN, |
|
|
|
|
|
| Counterparty MSCO, August Strike |
|
|
|
|
|
| Price 21.43 MXN, Expires 8/11/21. . . | 1 | 16,398,000 |
| (1,268,490) | |
| Foreign Exchange USD/MXN, |
|
|
|
|
|
| Counterparty CITI, October Strike |
|
|
|
|
|
| Price 22.32 MXN, Expires 10/19/23.. | 1 | 16,875,000 |
| (1,473,601) | |
| Foreign Exchange USD/MXN, |
|
|
|
|
|
| Counterparty CITI, October Strike |
|
|
|
|
|
| Price 22.32 MXN, Expires 10/19/23.. | 1 | 9,033,000 |
| (788,802) | |
| Foreign Exchange USD/MXN, |
|
|
|
|
|
| Counterparty CITI, October Strike |
|
|
|
|
|
| Price 22.32 MXN, Expires 10/19/23.. | 1 | 9,033,000 |
|
| (788,802) |
|
|
|
|
|
| (11,023,707) |
| Total Options Written (Premiums received $16,875,384).. . . . . . . . . . . . . . . . . . . . . . . . . . | $(18,551,294) |
TGB-20
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Global Bond VIP Fund (continued)
#Notional amount is the number of units specified in the contract, and can include currency units, bushels, shares, pounds, barrels or other units. Currency units are stated in
U.S. dollars unless otherwise indicated.
*The principal amount is stated in U.S. dollars unless otherwise indicated. a Redemption price at maturity is adjusted for inflation. See Note 1(f).
b Securities denominated in Argentine Peso have been designated as Level 3 investments. See Note 12 regarding fair value measurements. c The coupon rate shown represents the rate at period end.
dSecurity was purchased pursuant to Rule 144A or Regulation S under the Securities Act of 1933. 144A securities may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. Regulation S securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At December 31, 2020, the aggregate value of these securities was $128,738,149, representing 5.5% of net assets.
eA supranational organization is an entity formed by two or more central governments through international treaties.
fThe security was issued on a discount basis with no stated coupon rate.
gSee Note 3(e) regarding investments in affiliated management investment companies.
hThe rate shown is the annualized seven-day effective yield at period end.
iSee Note 1(c) regarding written options.
At December 31, 2020, the Fund had the following forward exchange contracts outstanding. See Note 1(c).
Forward Exchange Contracts
| Counter- |
|
| Contract |
| Settlement | Unrealized | Unrealized |
Currency | partya | Type | Quantity | Amount* |
| Date | Appreciation | Depreciation |
a | a | a | a | a |
| a | a | a |
OTC Forward Exchange Contracts |
|
|
|
|
|
|
| |
Brazilian Real.. . . . . . | CITI | Buy | 177,213,700 | 35,182,390 |
| 1/04/21 | $— | $(1,063,465) |
Brazilian Real.. . . . . . | CITI | Sell | 177,213,700 | 30,586,782 |
| 1/04/21 | — | (3,532,143) |
Euro.. . . . . . . . . . . . . | CITI | Buy | 33,700,000 | 41,012,900 |
| 1/04/21 | 158,389 | — |
Euro.. . . . . . . . . . . . . | CITI | Sell | 33,700,000 | 37,987,988 |
| 1/04/21 | — | (3,183,301) |
Brazilian Real.. . . . . . | HSBK | Buy | 93,155,800 | 18,308,923 |
| 1/05/21 | — | (373,651) |
Brazilian Real.. . . . . . | HSBK | Sell | 93,155,800 | 16,086,306 |
| 1/05/21 | — | (1,848,965) |
South Korean Won.. . | HSBK | Buy | 42,561,000,000 | 38,607,583 |
| 1/08/21 | 513,083 | — |
South Korean Won.. . | HSBK | Sell | 42,561,000,000 | 36,389,364 |
| 1/08/21 | — | (2,731,303) |
Euro.. . . . . . . . . . . . . | UBSW | Sell | 8,109,795 | 8,689,078 | CHF | 1/11/21 | — | (92,508) |
Swiss Franc.. . . . . . . | UBSW | Sell | 8,689,078 | 8,061,603 | EUR | 1/11/21 | 33,623 | — |
Australian Dollar.. . . . | JPHQ | Sell | 5,931,539 | 452,327,326 | JPY | 1/13/21 | — | (192,452) |
Euro.. . . . . . . . . . . . . | UBSW | Sell | 5,039,506 | 5,430,597 | CHF | 1/13/21 | — | (22,245) |
Japanese Yen.. . . . . . | JPHQ | Sell | 465,945,132 | 5,931,539 | AUD | 1/13/21 | 60,553 | — |
Mexican Peso.. . . . . . | CITI | Buy | 404,375,000 | 20,233,622 |
| 1/13/21 | 83,488 | — |
Mexican Peso.. . . . . . | CITI | Sell | 404,375,000 | 18,709,804 |
| 1/13/21 | — | (1,607,305) |
South Korean Won.. . | DBAB | Buy | 13,919,000,000 | 12,865,924 |
| 1/13/21 | — | (71,969) |
South Korean Won.. . | DBAB | Sell | 13,919,000,000 | 11,609,809 |
| 1/13/21 | — | (1,184,146) |
Swiss Franc.. . . . . . . | UBSW | Sell | 5,430,597 | 5,038,664 | EUR | 1/13/21 | 21,217 | — |
Euro.. . . . . . . . . . . . . | GSCO | Sell | 7,941,195 | 8,527,493 | CHF | 1/14/21 | — | (68,861) |
Swiss Franc.. . . . . . . | GSCO | Sell | 8,527,493 | 7,908,422 | EUR | 1/14/21 | 28,813 | — |
Mexican Peso.. . . . . . | CITI | Buy | 595,223,000 | 29,776,932 |
| 1/15/21 | 121,789 | — |
Mexican Peso.. . . . . . | CITI | Sell | 595,223,000 | 27,490,440 |
| 1/15/21 | — | (2,408,281) |
Chinese Yuan.. . . . . . | CITI | Buy | 125,329,450 | 19,174,578 |
| 1/19/21 | 80,264 | — |
Chinese Yuan.. . . . . . | HSBK | Buy | 135,702,480 | 20,756,914 |
| 1/19/21 | 91,576 | — |
Euro.. . . . . . . . . . . . . | DBAB | Sell | 10,035,282 | 104,016,200 | SEK | 1/19/21 | 382,047 | — |
Euro.. . . . . . . . . . . . . | JPHQ | Sell | 18,291,233 | 198,445,700 | NOK | 1/19/21 | 792,010 | — |
South Korean Won.. . | HSBK | Buy | 13,984,825,441 | 12,685,800 |
| 1/19/21 | 168,744 | — |
South Korean Won.. . | HSBK | Sell | 13,984,825,441 | 11,602,776 |
| 1/19/21 | — | (1,251,768) |
Mexican Peso.. . . . . . | CITI | Buy | 299,321,000 | 14,915,221 |
| 1/21/21 | 116,340 | (7,207) |
Mexican Peso.. . . . . . | CITI | Sell | 299,321,000 | 14,091,331 |
| 1/21/21 | — | (933,023) |
Mexican Peso.. . . . . . | CITI | Buy | 223,105,000 | 11,223,144 |
| 1/22/21 | — | (25,788) |
Mexican Peso.. . . . . . | CITI | Sell | 223,105,000 | 10,493,775 |
| 1/22/21 | — | (703,581) |
Mexican Peso.. . . . . . | JPHQ | Buy | 57,736,000 | 2,903,977 |
| 1/22/21 | — | (6,281) |
Mexican Peso.. . . . . . | JPHQ | Sell | 57,736,000 | 2,607,533 |
| 1/22/21 | — | (290,163) |
The accompanying notes are an integral part of these financial statements.
Annual Report
TGB-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Global Bond VIP Fund (continued)
Forward Exchange Contracts (continued)
| Counter- |
|
| Contract |
| Settlement | Unrealized | Unrealized |
Currency | partya | Type | Quantity | Amount* |
| Date | Appreciation | Depreciation |
a | a | a | a | a |
| a | a | a |
OTC Forward Exchange Contracts (continued) |
|
|
|
|
|
| ||
Euro.. . . . . . . . . . . . . | HSBK | Sell | 25,253,939 | 3,112,320,681 | JPY | 1/25/21 | $— | $(718,362) |
Australian Dollar.. . . . | HSBK | Buy | 4,821,000 | 3,590,329 |
| 1/27/21 | 127,888 | — |
Australian Dollar.. . . . | HSBK | Sell | 4,821,000 | 3,416,995 |
| 1/27/21 | — | (301,222) |
Mexican Peso.. . . . . . | CITI | Buy | 12,590,000 | 632,266 |
| 1/27/21 | — | (771) |
Mexican Peso.. . . . . . | CITI | Sell | 250,042,000 | 11,849,939 |
| 1/27/21 | — | (691,779) |
South Korean Won.. . | HSBK | Buy | 63,804,055,536 | 57,875,309 |
| 1/29/21 | 772,613 | — |
South Korean Won.. . | HSBK | Sell | 63,804,055,536 | 56,267,080 |
| 1/29/21 | — | (2,380,842) |
Brazilian Real.. . . . . . | CITI | Sell | 72,644,928 | 13,456,752 |
| 2/02/21 | — | (527,303) |
Brazilian Real.. . . . . . | HSBK | Sell | 160,509,575 | 30,775,804 |
| 2/02/21 | 366,122 | (488,203) |
Brazilian Real.. . . . . . | JPHQ | Sell | 60,285,900 | 11,151,046 |
| 2/02/21 | — | (453,912) |
South Korean Won.. . | DBAB | Buy | 13,920,000,000 | 12,857,717 |
| 2/04/21 | — | (62,541) |
South Korean Won.. . | DBAB | Sell | 13,920,000,000 | 11,622,276 |
| 2/04/21 | — | (1,172,900) |
Indian Rupee. . . . . . . | CITI | Buy | 149,657,200 | 2,018,440 |
| 2/08/21 | 23,605 | — |
Indian Rupee. . . . . . . | JPHQ | Buy | 205,330,400 | 2,769,242 |
| 2/08/21 | 32,453 | — |
Euro.. . . . . . . . . . . . . | UBSW | Sell | 8,111,577 | 8,689,162 | CHF | 2/09/21 | — | (92,728) |
Indian Rupee. . . . . . . | HSBK | Buy | 241,380,400 | 3,254,487 |
| 2/09/21 | 38,767 | — |
Swiss Franc.. . . . . . . | UBSW | Sell | 8,689,162 | 8,062,654 | EUR | 2/09/21 | 32,907 | — |
Australian Dollar.. . . . | HSBK | Buy | 15,808,000 | 11,773,909 |
| 2/10/21 | 420,255 | — |
Australian Dollar.. . . . | HSBK | Sell | 15,808,000 | 11,369,509 |
| 2/10/21 | — | (824,656) |
Euro.. . . . . . . . . . . . . | UBSW | Sell | 20,210,865 | 21,723,143 | CHF | 2/10/21 | — | (148,151) |
South Korean Won.. . | HSBK | Buy | 75,818,000,000 | 69,121,508 |
| 2/10/21 | 569,639 | — |
South Korean Won.. . | HSBK | Sell | 75,818,000,000 | 67,138,354 |
| 2/10/21 | — | (2,552,794) |
Swiss Franc.. . . . . . . | UBSW | Sell | 21,723,143 | 20,162,411 | EUR | 2/10/21 | 88,904 | — |
Australian Dollar.. . . . | HSBK | Buy | 6,937,000 | 5,166,726 |
| 2/12/21 | 184,482 | — |
Australian Dollar.. . . . | HSBK | Sell | 6,937,000 | 5,037,649 |
| 2/12/21 | — | (313,559) |
Euro.. . . . . . . . . . . . . | GSCO | Sell | 10,558,941 | 11,370,079 | CHF | 2/12/21 | — | (53,414) |
Swiss Franc.. . . . . . . | GSCO | Sell | 11,370,079 | 10,540,245 | EUR | 2/12/21 | 30,553 | — |
Euro.. . . . . . . . . . . . . | DBAB | Sell | 25,071,532 | 255,476,400 | SEK | 2/16/21 | 410,871 | — |
Mexican Peso.. . . . . . | CITI | Sell | 546,651,200 | 24,633,360 |
| 2/16/21 | — | (2,723,482) |
Chinese Yuan.. . . . . . | JPHQ | Buy | 94,285,000 | 14,394,920 |
| 2/18/21 | 61,822 | — |
Australian Dollar.. . . . | JPHQ | Sell | 45,472,501 | 3,464,199,714 | JPY | 2/22/21 | — | (1,511,165) |
Euro.. . . . . . . . . . . . . | BOFA | Sell | 7,066,000 | 8,402,520 |
| 2/22/21 | — | (239,622) |
Japanese Yen.. . . . . . | JPHQ | Sell | 3,571,720,807 | 45,472,501 | AUD | 2/22/21 | 469,275 | — |
Euro.. . . . . . . . . . . . . | JPHQ | Sell | 13,349,845 | 15,834,652 |
| 2/23/21 | — | (493,343) |
Euro.. . . . . . . . . . . . . | HSBK | Sell | 25,252,747 | 3,170,191,934 | JPY | 2/24/21 | — | (166,848) |
Australian Dollar.. . . . | CITI | Sell | 31,292,467 | 2,371,562,224 | JPY | 2/25/21 | — | (1,159,558) |
Australian Dollar.. . . . | JPHQ | Sell | 119,768,499 | 9,077,741,433 | JPY | 2/25/21 | — | (4,429,880) |
Euro.. . . . . . . . . . . . . | HSBK | Sell | 50,507,550 | 6,262,645,380 | JPY | 2/25/21 | — | (1,090,204) |
Japanese Yen.. . . . . . | CITI | Sell | 2,457,603,992 | 31,292,467 | AUD | 2/25/21 | 325,781 | — |
Japanese Yen.. . . . . . | JPHQ | Sell | 9,406,837,061 | 119,768,499 | AUD | 2/25/21 | 1,240,822 | — |
Australian Dollar.. . . . | CITI | Sell | 3,372,533 | 255,563,103 | JPY | 2/26/21 | — | (125,263) |
Euro.. . . . . . . . . . . . . | CITI | Sell | 20,106,846 | 2,529,075,228 | JPY | 2/26/21 | — | (85,983) |
Japanese Yen.. . . . . . | CITI | Buy | 2,796,566,000 | 26,458,830 |
| 2/26/21 | 641,184 | — |
Japanese Yen.. . . . . . | CITI | Sell | 264,866,234 | 3,372,533 | AUD | 2/26/21 | 35,112 | — |
Japanese Yen.. . . . . . | JPHQ | Buy | 4,594,279,100 | 43,404,543 |
| 2/26/21 | 1,116,140 | — |
Brazilian Real.. . . . . . | CITI | Sell | 177,213,700 | 35,127,297 |
| 3/02/21 | 1,079,585 | — |
Mexican Peso.. . . . . . | CITI | Sell | 861,862,000 | 38,568,616 |
| 3/02/21 | — | (4,496,832) |
Indian Rupee. . . . . . . | CITI | Buy | 200,059,600 | 2,691,252 |
| 3/08/21 | 30,649 | — |
Indian Rupee. . . . . . . | JPHQ | Buy | 205,911,800 | 2,769,240 |
| 3/08/21 | 32,284 | — |
Mexican Peso.. . . . . . | CITI | Sell | 440,156,000 | 20,126,477 |
| 3/08/21 | — | (1,852,408) |
Indian Rupee. . . . . . . | HSBK | Buy | 242,055,750 | 3,254,487 |
| 3/09/21 | 38,411 | — |
Indian Rupee. . . . . . . | JPHQ | Buy | 266,347,200 | 3,582,584 |
| 3/09/21 | 40,773 | — |
South Korean Won.. . | GSCO | Buy | 44,346,000,000 | 40,847,968 |
| 3/09/21 | — | (87,298) |
South Korean Won.. . | GSCO | Sell | 44,346,000,000 | 37,383,351 |
| 3/09/21 | — | (3,377,319) |
Australian Dollar.. . . . | CITI | Sell | 23,089,500 | 1,766,224,375 | JPY | 3/10/21 | — | (696,259) |
Euro.. . . . . . . . . . . . . | UBSW | Sell | 10,068,687 | 10,861,193 | CHF | 3/10/21 | — | (27,321) |
Japanese Yen.. . . . . . | CITI | Sell | 834,402,500 | 10,625,000 | AUD | 3/10/21 | 110,604 | — |
TGB-22
Annual Report The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Global Bond VIP Fund (continued)
Forward Exchange Contracts (continued)
| Counter- |
|
| Contract |
| Settlement | Unrealized | Unrealized |
Currency | partya | Type | Quantity | Amount* |
| Date | Appreciation | Depreciation |
a | a | a | a | a |
| a | a | a |
OTC Forward Exchange Contracts (continued) |
|
|
|
|
|
| ||
Swiss Franc.. . . . . . . | UBSW | Sell | 10,861,193 | 10,050,379 | EUR | 3/10/21 | $4,922 | $— |
Australian Dollar.. . . . | HSBK | Sell | 14,685,041 | 1,131,174,023 | JPY | 3/11/21 | — | (366,707) |
Euro.. . . . . . . . . . . . . | GSCO | Sell | 13,210,994 | 14,212,520 | CHF | 3/11/21 | — | (79,093) |
Mexican Peso.. . . . . . | CITI | Sell | 539,656,000 | 23,963,623 |
| 3/11/21 | — | (2,974,215) |
Swiss Franc.. . . . . . . | GSCO | Sell | 14,212,520 | 13,177,921 | EUR | 3/11/21 | 38,628 | — |
Chinese Yuan.. . . . . . | JPHQ | Buy | 188,842,190 | 28,786,382 |
| 3/15/21 | 120,334 | — |
Euro.. . . . . . . . . . . . . | DBAB | Sell | 33,580,296 | 346,720,571 | SEK | 3/15/21 | 1,089,930 | — |
Euro.. . . . . . . . . . . . . | GSCO | Sell | 10,558,082 | 11,369,999 | CHF | 3/15/21 | — | (49,827) |
Swiss Franc.. . . . . . . | GSCO | Sell | 11,369,999 | 10,494,350 | EUR | 3/15/21 | — | (28,157) |
Australian Dollar.. . . . | HSBK | Sell | 81,620,000 | 6,273,721,300 | JPY | 3/16/21 | — | (2,165,868) |
Chinese Yuan.. . . . . . | HSBK | Buy | 68,097,210 | 10,378,457 |
| 3/16/21 | 44,675 | — |
Euro.. . . . . . . . . . . . . | JPHQ | Sell | 18,684,804 | 198,445,700 | NOK | 3/16/21 | 278,786 | — |
Mexican Peso.. . . . . . | CITI | Sell | 545,017,000 | 25,079,239 |
| 3/16/21 | — | (2,110,193) |
Australian Dollar.. . . . | HSBK | Sell | 9,830,000 | 754,855,530 | JPY | 3/17/21 | — | (267,850) |
Mexican Peso.. . . . . . | MSCO | Sell | 616,953,800 | 29,350,721 |
| 3/17/21 | — | (1,423,820) |
South Korean Won.. . | CITI | Buy | 4,215,000,000 | 3,841,212 |
| 3/22/21 | 32,601 | — |
South Korean Won.. . | CITI | Sell | 4,215,000,000 | 3,570,521 |
| 3/22/21 | — | (303,292) |
Mexican Peso.. . . . . . | MSCO | Sell | 103,277,000 | 4,655,682 |
| 3/24/21 | — | (491,676) |
Euro.. . . . . . . . . . . . . | HSBK | Sell | 25,254,215 | 3,106,369,487 | JPY | 3/25/21 | — | (796,535) |
Euro.. . . . . . . . . . . . . | CITI | Sell | 22,619,073 | 2,852,513,891 | JPY | 3/29/21 | — | (33,258) |
Euro.. . . . . . . . . . . . . | CITI | Sell | 33,700,000 | 41,090,747 |
| 3/29/21 | — | (158,961) |
Euro.. . . . . . . . . . . . . | CITI | Sell | 22,619,073 | 2,787,144,769 | JPY | 3/31/21 | — | (667,530) |
Euro.. . . . . . . . . . . . . | JPHQ | Sell | 20,737,524 | 230,077,650 | NOK | 3/31/21 | 1,444,635 | — |
Mexican Peso.. . . . . . | GSCO | Sell | 452,466,000 | 20,057,895 |
| 4/05/21 | — | (2,461,254) |
Australian Dollar.. . . . | HSBK | Sell | 14,684,959 | 1,111,761,533 | JPY | 4/13/21 | — | (552,412) |
Australian Dollar.. . . . | JPHQ | Sell | 28,382,293 | 2,152,140,576 | JPY | 4/13/21 | — | (1,034,821) |
Euro.. . . . . . . . . . . . . | GSCO | Sell | 7,929,022 | 8,527,545 | CHF | 4/13/21 | — | (48,144) |
Euro.. . . . . . . . . . . . . | UBSW | Sell | 5,043,109 | 5,430,597 | CHF | 4/13/21 | — | (22,909) |
Mexican Peso.. . . . . . | CITI | Sell | 211,419,600 | 9,442,126 |
| 4/13/21 | — | (1,070,288) |
Swiss Franc.. . . . . . . | GSCO | Sell | 8,527,545 | 7,869,025 | EUR | 4/13/21 | — | (25,319) |
Swiss Franc.. . . . . . . | UBSW | Sell | 5,430,597 | 5,022,192 | EUR | 4/13/21 | — | (2,703) |
Euro.. . . . . . . . . . . . . | DBAB | Sell | 13,397,109 | 138,688,215 | SEK | 4/15/21 | 472,712 | — |
Euro.. . . . . . . . . . . . . | DBAB | Sell | 10,025,271 | 104,016,200 | SEK | 4/16/21 | 382,005 | — |
South Korean Won.. . | HSBK | Buy | 7,007,000,000 | 6,387,187 |
| 4/20/21 | 51,727 | — |
South Korean Won.. . | HSBK | Sell | 7,007,000,000 | 6,116,979 |
| 4/20/21 | — | (321,935) |
Australian Dollar.. . . . | MSCO | Buy | 2,096,000 | 1,573,425 |
| 4/21/21 | 44,118 | — |
Australian Dollar.. . . . | MSCO | Sell | 2,096,000 | 1,489,732 |
| 4/21/21 | — | (127,811) |
Euro.. . . . . . . . . . . . . | CITI | Sell | 20,106,927 | 2,467,743,293 | JPY | 4/30/21 | — | (695,979) |
Japanese Yen.. . . . . . | CITI | Buy | 4,212,680,000 | 40,850,745 |
| 4/30/21 | 5,207 | — |
Mexican Peso.. . . . . . | CITI | Sell | 660,655,100 | 29,513,293 |
| 4/30/21 | — | (3,270,712) |
Australian Dollar.. . . . | CITI | Sell | 2,393,000 | 178,673,345 | JPY | 5/06/21 | — | (113,934) |
Mexican Peso.. . . . . . | CITI | Sell | 23,651,000 | 1,136,767 |
| 5/13/21 | — | (35,079) |
Japanese Yen.. . . . . . | CITI | Buy | 727,486,679 | 6,927,290 |
| 5/17/21 | 129,647 | — |
Euro.. . . . . . . . . . . . . | GSCO | Sell | 1,230,811 | 1,466,757 |
| 5/20/21 | — | (41,521) |
Euro.. . . . . . . . . . . . . | JPHQ | Sell | 13,349,846 | 15,865,958 |
| 5/24/21 | — | (494,839) |
Euro.. . . . . . . . . . . . . | MSCO | Sell | 30,744,500 | 36,649,289 |
| 5/27/21 | — | (1,031,858) |
Indian Rupee. . . . . . . | CITI | Buy | 151,776,500 | 2,018,439 |
| 6/08/21 | 22,621 | — |
Euro.. . . . . . . . . . . . . | UBSW | Sell | 8,063,735 | 8,689,078 | CHF | 6/09/21 | — | (25,950) |
Indian Rupee. . . . . . . | CITI | Buy | 89,376,700 | 1,187,888 |
| 6/09/21 | 13,873 | — |
Swiss Franc.. . . . . . . | UBSW | Sell | 8,689,078 | 8,031,536 | EUR | 6/09/21 | — | (13,525) |
Euro.. . . . . . . . . . . . . | DBAB | Sell | 26,961,737 | 277,376,415 | SEK | 6/11/21 | 715,728 | — |
Euro.. . . . . . . . . . . . . | DBAB | Sell | 5,298,434 | 54,462,600 | SEK | 6/15/21 | 134,650 | — |
Euro.. . . . . . . . . . . . . | DBAB | Sell | 6,199,274 | 66,595,700 | NOK | 6/15/21 | 161,704 | — |
Japanese Yen.. . . . . . | CITI | Buy | 3,558,290,259 | 34,310,001 |
| 6/15/21 | 219,747 | — |
Japanese Yen.. . . . . . | JPHQ | Buy | 14,722,547,314 | 141,897,232 |
| 6/15/21 | 970,779 | — |
Chinese Yuan.. . . . . . | HSBK | Buy | 68,493,670 | 10,378,458 |
| 6/16/21 | 45,237 | — |
Euro.. . . . . . . . . . . . . | DBAB | Sell | 9,571,391 | 101,812,800 | NOK | 6/16/21 | 131,868 | — |
The accompanying notes are an integral part of these financial statements.
Annual Report
TGB-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Global Bond VIP Fund (continued)
Forward Exchange Contracts (continued)
| Counter- |
|
| Contract |
| Settlement | Unrealized | Unrealized |
Currency | partya | Type | Quantity | Amount* |
| Date | Appreciation | Depreciation |
a | a | a | a | a |
| a | a | a |
OTC Forward Exchange Contracts (continued) |
|
|
|
|
|
| ||
Euro.. . . . . . . . . . . . . | DBAB | Sell | 13,578,730 | 138,736,600 | SEK | 6/16/21 | $242,685 | $— |
Euro.. . . . . . . . . . . . . | DBAB | Sell | 8,945,963 | 95,003,000 | NOK | 6/18/21 | 104,365 | — |
Euro.. . . . . . . . . . . . . | JPHQ | Sell | 2,465,027 | 25,140,000 | SEK | 6/18/21 | 38,416 | — |
Japanese Yen.. . . . . . | BNDP | Buy | 2,244,657,680 | 21,784,862 |
| 6/22/21 | — | (695) |
Euro.. . . . . . . . . . . . . | CITI | Sell | 22,619,081 | 2,788,932,752 | JPY | 6/30/21 | — | (673,981) |
Australian Dollar.. . . . | JPHQ | Sell | 5,931,544 | 451,307,483 | JPY | 7/13/21 | — | (198,506) |
Euro.. . . . . . . . . . . . . | DBAB | Sell | 5,298,435 | 54,526,200 | SEK | 9/15/21 | 134,636 | — |
Euro.. . . . . . . . . . . . . | DBAB | Sell | 6,199,272 | 66,742,600 | NOK | 9/15/21 | 160,218 | — |
Euro.. . . . . . . . . . . . . | JPHQ | Sell | 19,009,633 | 202,667,400 | NOK | 9/20/21 | 255,851 | — |
Japanese Yen.. . . . . . | JPHQ | Buy | 1,180,260,000 | 11,507,883 |
| 9/21/21 | — | (39,917) |
Japanese Yen.. . . . . . | MSCO | Buy | 9,526,876,470 | 92,355,861 |
| 9/21/21 | 211,797 | — |
Total Forward Exchange Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $18,677,539 | $(79,165,402) | ||||||
Net unrealized appreciation (depreciation). . . . . | . . . . . . . . . . . . . . | . . . . . . . . . . . | . . . . . . | . . . . . . . . |
| $(60,487,863) |
*In U.S. dollars unless otherwise indicated.
aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.
See Note 10 regarding other derivative information.
See Abbreviations on page TGB-41.
TGB-24
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Templeton |
| Global Bond |
| VIP Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,275,299,667 |
Cost - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 221,215,254 |
Value - Unaffiliated issuers .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,099,101,076 |
Value - Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 221,215,254 |
Cash.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,407,633 |
Restricted currency, at value (cost $3,193) (Note 1d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,151 |
Foreign currency, at value (cost $3,787,220). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,781,188 |
Receivables: |
|
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,004,347 |
Interest.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 14,628,365 |
Deposits with brokers for: |
|
OTC derivative contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 66,930,973 |
Unrealized appreciation on OTC forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 18,677,539 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 337 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,426,749,863 |
Liabilities: |
|
Payables: |
|
Investment securities purchased.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 463,749 |
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,016,699 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 880,640 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 448,759 |
Options written, at value (premiums received $16,875,384). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 18,551,294 |
Unrealized depreciation on OTC forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 79,165,402 |
Deferred tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,286,229 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 975,561 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 102,788,333 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,323,961,530 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,743,348,578 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (419,387,048) |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,323,961,530 |
The accompanying notes are an integral part of these financial statements.
Annual Report
TGB-25
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (continued)
December 31, 2020
| Templeton |
| Global Bond |
| VIP Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $224,703,591 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 15,502,215 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $14.49 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,022,486,543 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 146,390,649 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $13.82 |
Class 4: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $76,771,396 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 5,419,116 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $14.17 |
TGB-26
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the year ended December 31, 2020
Templeton
Global Bond
VIP Fund
Investment income:
Dividends:
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest: (net of foreign taxes of $2,639,472)
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution fees: (Note 3c)
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expense reductions (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses waived/paid by affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments: (net of foreign taxes of $451,244)
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Written options.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swap contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation of other assets and liabilities denominated in foreign currencies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Written options.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward exchange contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swap contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in deferred taxes on unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in unrealized appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,688,580
93,505,721
95,194,301
11,349,848
5,317,115
282,633
470,321
347,279
146,095
14,825
113,159
18,041,275
(356,564)
(1,044,163)
16,640,548
78,553,753
(88,414,051)
(21,331,965)
(7,181,805)
(21,322,484)
(117,098,171)
(255,348,476)
45,401,707
558,772
(7,062,273)
(24,408,172)
28,588,210
(205,474)
42,872,770
(212,475,706)
$(133,921,953)
The accompanying notes are an integral part of these financial statements.
Annual Report
TGB-27
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Templeton Global Bond VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $78,553,753 | $143,948,395 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (255,348,476) | 40,922,392 |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | 42,872,770 | (136,420,695) |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | (133,921,953) | 48,450,092 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (22,006,093) | (22,427,340) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (177,353,662) | (175,601,316) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (6,338,562) | (6,224,019) |
Distributions to shareholders from tax return of capital: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,661) | — |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (13,386) | — |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (478) | — |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (205,713,842) | (204,252,675) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (61,786,697) | 55,417,128 |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (74,631,398) | (21,954,185) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2,661,086) | 758,324 |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (139,079,181) | 34,221,267 |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | (478,714,976) | (121,581,316) |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,802,676,506 | 2,924,257,822 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $2,323,961,530 | $2,802,676,506 |
TGB-28
Annual Report
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
Templeton Global Bond VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Templeton Global Bond VIP Fund (Fund) is included in
this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust's Board of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Debt securities generally trade in the over-the-counter (OTC) market rather than on a securities exchange. The Fund's pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in
a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.
Investments in open-end mutual funds are valued at the closing NAV.
Certain derivative financial instruments are centrally cleared or trade in the OTC market. The Fund's pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund's net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated
Annual Report
TGB-29
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Templeton Global Bond VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
b. Foreign Currency Translation (continued)
in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Derivative Financial Instruments
The Fund invested in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including
the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.
Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements
with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination.
Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure
of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets
and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.
Collateral requirements differ by type of derivative. Collateral terms are contract specific for OTC derivatives. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values
may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund, if any, is held in segregated accounts with the Fund's custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund's investment objectives. To the extent that the amounts
due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.
TGB-30
Annual Report
Templeton Global Bond VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
c. Derivative Financial Instruments (continued)
The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.
The Fund entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is
an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional amount. These agreements may be privately negotiated in the over-the- counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps). For centrally cleared interest rate swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized.
The Fund purchased or wrote OTC option contracts primarily to manage and/or gain exposure to foreign exchange rate risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset
or notional amount of a swap (swaption), at a specified price. When an option is purchased or written, an amount equal to the premium paid or received is recorded as an asset or liability, respectively. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium received or paid and the cost to close the position is recorded as a realized gain or loss.
See Note 10 regarding other derivative information.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
d. Restricted Currency
At December 31, 2020, the Fund held currencies in certain markets in which the ability to repatriate such currency is limited. As a result of such limitations on repatriation, the Fund may incur substantial delays in gaining access to these assets and may be exposed to potential adverse movements in currency value.
e. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
f. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income is recorded on the ex-dividend date. Distributions to shareholders are
Annual Report
TGB-31
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Templeton Global Bond VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
f. Security Transactions, Investment Income, Expenses and Distributions (continued)
recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
Inflation-indexed bonds are adjusted for inflation through periodic increases or decreases in the security's interest accruals, face amount, or principal redemption value, by amounts corresponding to the rate of inflation as measured by an index. Any increase or decrease in the face amount or principal redemption value will be included as interest income in the Statement of Operations.
g. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
h. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
| Year Ended | Year Ended | ||
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,250,493 | $64,180,339 | 5,087,795 | $89,164,653 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 1,520,923 | 22,007,754 | 1,330,210 | 22,427,340 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (9,677,321) | (147,974,790) | (3,257,868) | (56,174,865) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | (3,905,905) | $(61,786,697) | 3,160,137 | $55,417,128 |
Class 2 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 10,329,028 | $147,468,530 | 7,233,859 | $119,112,193 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 12,843,378 | 177,367,048 | 10,873,146 | 175,601,316 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (26,982,602) | (399,466,976) | (19,122,225) | (316,667,694) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | (3,810,196) | $(74,631,398) | (1,015,220) | $(21,954,185) |
TGB-32
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Global Bond VIP Fund (continued)
2. Shares of Beneficial Interest (continued)
|
| Year Ended | Year Ended | ||
|
| December 31, 2020 | December 31, 2019 | ||
|
| Shares | Amount | Shares | Amount |
| Class 4 Shares: |
|
|
|
|
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 867,773 | $12,730,613 | 692,994 | $11,712,750 | |
| Shares issued in reinvestment of distributions.. . . . . . . . . . | 447,356 | 6,339,040 | 376,529 | 6,224,019 |
| Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (1,443,142) | (21,730,739) | (1,010,027) | (17,178,445) |
| Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | (128,013) | $(2,661,086) | 59,496 | $758,324 |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Advisers, Inc. (Advisers) | Investment manager |
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
|
|
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
|
|
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
a. Management Fees
The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
0.625% | Up to and including $100 million |
0.500% | Over $100 million, up to and including $250 million |
|
|
0.450% | Over $250 million, up to and including $7.5 billion |
0.440% | Over $7.5 billion, up to and including $10 billion |
|
|
0.430% | Over $10 billion, up to and including $12.5 billion |
|
|
0.420% | Over $12.5 billion, up to and including $15 billion |
0.400% | In excess of $15 billion |
|
|
For the year ended December 31, 2020, the gross effective investment management fee rate was 0.460% of the Fund’s average daily net assets.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.25% and 0.35% per year of its average daily net assets of Class 2 and Class 4, respectively. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
Annual Report
TGB-33
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Global Bond VIP Fund (continued)
3. Transactions with Affiliates (continued)
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
|
|
|
|
| Net Change in |
| Number of |
|
| Value at |
|
|
| Unrealized | Value | Shares Held |
|
| Beginning |
|
| Realized Gain | Appreciation | at End | at End | Investment |
aa | of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Templeton Global Bond VIP Fund |
|
|
|
|
|
|
|
|
Non-Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividends |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
|
Market Portfolio, 0%.. . . . . . . . . | $691,092,548 | $1,042,673,135 | $(1,512,550,429) | $— | $— | $221,215,254 | 221,215,254 | $1,688,580 |
Total Affiliated Securities. . . . . | $691,092,548 | $1,042,673,135 | $(1,512,550,429) | $— | $— | $221,215,254 |
| $1,688,580 |
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains.
At December 31, 2020, the capital loss carryforwards were as follows:
Capital loss carryforwards not subject to expiration: |
|
|
|
Short term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $9,962,453 | ||
Long term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . |
| 186,743,959 |
Total capital loss carryforwards.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . |
| $196,706,412 |
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows: |
| ||
| 2020 |
| 2019 |
Distributions paid from: |
|
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $205,698,317 |
| $204,252,675 |
Return of capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 15,525 |
| — |
| $205,713,842 |
| $204,252,675 |
TGB-34
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Global Bond VIP Fund (continued)
5. Income Taxes (continued)
At December 31, 2020, the cost of investments and net unrealized appreciation (depreciation), for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,463,160,595
$164,932,086 (386,815,507)
$(221,883,421)
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, options sold, swaps, inflation related adjustments on foreign securities and tax straddles.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $883,018,892 and $947,470,844, respectively.
7. Credit Risk
At December 31, 2020, the Fund had 7.6% of its portfolio invested in high yield or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.
8. Concentration of Risk
Investments in issuers domiciled or with significant operations in developing or emerging market countries may be subject to higher risks than investments in developed countries. These risks include fluctuating currency values, underdeveloped legal or business systems, and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Currencies of developing or emerging market countries may be subject to significantly greater risks than currencies of developed countries, including the potential inability to repatriate those currencies into U.S. dollars.
At December 31, 2020, the Fund had 2.0% of its net assets denominated in Argentine Pesos. Argentina has restricted currency repatriation since September 2019, and had restructured certain issues of its debt. Political and economic conditions in Argentina could continue to affect the value of the Fund's holdings.
9. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
Annual Report
TGB-35
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Global Bond VIP Fund (continued)
10. Other Derivative Information
At December 31, 2020, the Fund's investments in derivative contracts are reflected in the Statement of Assets and Liabilities as follows:
| Asset Derivatives |
|
| Liability Derivatives |
| ||
Derivative Contracts | Statement of |
|
| Statement of |
| ||
Not Accounted for as | Assets and Liabilities |
|
| Assets and Liabilities |
| ||
Hedging Instruments | Location | Fair Value | Location | Fair Value | |||
Templeton Global Bond VIP Fund |
|
|
|
|
| ||
Foreign exchange contracts. . . |
|
|
|
|
|
|
|
| Investments in securities, at value | $15,458,722a | Options written, at value | $18,551,294 | |||
| Unrealized appreciation on OTC | 18,677,539 |
| Unrealized depreciation on OTC | 79,165,402 | ||
| forward exchange contracts |
|
| forward exchange contracts |
| ||
Total.. . . . . . . . . . . . . . . . . . . . |
|
| $34,136,261 |
|
|
| $97,716,696 |
aPurchased option contracts are included in investments in securities, at value in the Statements of Assets and Liabilities.
For the year ended December 31, 2020, the effect of derivative contracts in the Statement of Operations was as follows:
|
|
|
|
| Net Change in |
|
|
|
|
| Unrealized |
Derivative Contracts |
| Net Realized |
| Appreciation | |
Not Accounted for as | Statement of | Gain (Loss) for | Statement of | (Depreciation) | |
Hedging Instruments | Operations Location | the Year | Operations Location | for the Year | |
| Net realized gain (loss) from: |
|
| Net change in unrealized |
|
|
|
|
| appreciation (depreciation) on: |
|
Templeton Global Bond VIP Fund |
|
|
|
| |
Interest rate contracts.. . . . . . . |
|
|
|
|
|
| Swap contracts | $(117,098,171) |
| Swap contracts | $28,588,210 |
Foreign exchange contracts. . . |
|
|
|
|
|
| Investments | 27,890,115a | Investments | 5,176,467a | |
| Written options | (21,331,965) |
| Written options | (7,062,273) |
| Forward exchange contracts | (21,322,484) |
| Forward exchange contracts | (24,408,172) |
Total.. . . . . . . . . . . . . . . . . . . . |
| $(131,862,505) |
|
| $2,294,232 |
aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Statement of Operations.
For the year ended December 31, 2020, the average month end notional amount of swap contracts and options represented $60,563,231 and $2,863,855,977, respectively. The average month end contract value of forward exchange contracts was $2,916,651,060.
See Note 1(c) regarding derivative financial instruments.
TGB-36
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Global Bond VIP Fund (continued)
10. Other Derivative Information (continued)
At December 31, 2020, OTC derivative assets and liabilities are as follows:
|
| Gross Amounts of |
|
| Assets and Liabilities Presented |
| |
| in the Statement of Assets and Liabilities |
| |
| Assetsa | Liabilitiesa | |
Derivatives |
|
| |
Templeton Global Bond VIP Fund |
|
| |
Forward exchange contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $18,677,539 | $79,165,402 | |
Options purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 15,458,722 | — | |
Options written. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| — | 18,551,294 |
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| $34,136,261 | $97,716,696 |
aAbsent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.
At December 31, 2020, OTC derivative assets, which may be offset against OTC derivative liabilities and collateral received from the counterparty, are as follows:
|
|
| Amounts Not Offset in the |
|
|
| |
|
|
| Statement of Assets and Liabilities |
| |||
|
| Gross |
|
|
|
|
|
|
| Amounts of | Financial | Financial |
|
|
|
|
| Assets Presented in | Instruments | Instruments | Cash | Net Amount | |
|
| the Statement of | Available for | Collateral | Collateral | (Not less | |
|
| Assets and Liabilities | Offset | Receiveda,b | Received | than zero) | |
Templeton Global Bond VIP Fund |
|
|
|
|
|
| |
Counterparty |
|
|
|
|
|
| |
BNDP. . . . . . . . . . . . . . . . . . . . | $— | $— | $— | $— | $— | ||
BOFA. . . . . . . . . . . . . . . . . . . . | — | — | — | — | — | ||
CITI.. . . . . . . . . . . . . . . . . . . . . | 12,406,469 | (12,406,469) | — | — | — | ||
DBAB. . . . . . . . . . . . . . . . . . . . | 4,523,419 | (2,491,556) | (1,624,786) | — | 407,077 | ||
GSCO.. . . . . . . . . . . . . . . . . . . | 2,232,176 | (2,232,176) | — | — | — | ||
HSBK. . . . . . . . . . . . . . . . . . . . | 3,989,338 | (3,989,338) | — | — | — | ||
JPHQ. . . . . . . . . . . . . . . . . . . . | 6,954,933 | (6,954,933) | — | — | — | ||
MSCO.. . . . . . . . . . . . . . . . . . . | 3,848,353 | (3,848,353) | — | — | — | ||
UBSW.. . . . . . . . . . . . . . . . . . . |
| 181,573 | (181,573) | — | — | — | |
Total.. . . . . . . . . . . . . . . . . . . |
| $34,136,261 | $(32,104,398) | $(1,624,786) | $— | $407,077 |
Annual Report
TGB-37
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Global Bond VIP Fund (continued)
10. Other Derivative Information (continued)
At December 31, 2020, OTC derivative liabilities, which may be offset against OTC derivative assets and collateral pledged to the counterparty, are as follows:
|
|
| Amounts Not Offset in the |
| ||
|
|
| Statement of Assets and Liabilities |
| ||
|
| Gross |
|
|
|
|
|
| Amounts of |
|
|
|
|
|
| Liabilities | Financial | Financial |
|
|
|
| Presented in | Instruments | Instruments | Cash | Net Amount |
|
| the Statement of | Available for | Collateral | Collateral | (Not less |
|
| Assets and Liabilities | Offset | Pledged | Pledgedb | than zero) |
Templeton Global Bond VIP Fund |
|
|
|
|
| |
Counterparty |
|
|
|
|
| |
BNDP. . . . . . . . . . . . . . . . . . . . | $695 | $— | $— | $— | $695 | |
BOFA. . . . . . . . . . . . . . . . . . . . | 239,622 | — | — | (239,622) | — | |
CITI.. . . . . . . . . . . . . . . . . . . . . | 49,885,523 | (12,406,469) | — | (37,479,054) | — | |
DBAB. . . . . . . . . . . . . . . . . . . . | 2,491,556 | (2,491,556) | — | — | — | |
GSCO.. . . . . . . . . . . . . . . . . . . | 7,465,318 | (2,232,176) | — | (5,230,000) | 3,142 | |
HSBK. . . . . . . . . . . . . . . . . . . . | 19,836,859 | (3,989,338) | — | (15,847,521) | — | |
JPHQ. . . . . . . . . . . . . . . . . . . . | 9,145,278 | (6,954,933) | — | (2,190,345) | — | |
MSCO.. . . . . . . . . . . . . . . . . . . | 8,203,805 | (3,848,353) | — | (4,355,452) | — | |
UBSW.. . . . . . . . . . . . . . . . . . . |
| 448,040 | (181,573) | — | (266,467) | — |
Total.. . . . . . . . . . . . . . . . . . . |
| $97,716,696 | $(32,104,398) | $— | $(65,608,461) | $3,837 |
aAt December 31, 2020, the Fund received U.S. Treasury Bills, Bonds and Notes as collateral for derivatives.
bIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit the collateral amounts to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.
See Abbreviations on page TGB-41.
11. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers, renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
TGB-38
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Global Bond VIP Fund (continued)
12. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
A summary of inputs used as of December 31, 2020, in valuing the Fund's assets and liabilities carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total |
Templeton Global Bond VIP Fund |
|
|
|
|
Assets: |
|
|
|
|
Investments in Securities: |
|
|
|
|
Foreign Government and Agency Securities: |
|
|
|
|
Argentina .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | $— | $— | $43,034,720 | $43,034,720 |
Brazil .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 22,641,507 | — | 22,641,507 |
Colombia .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 41,999,479 | — | 41,999,479 |
Ghana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 37,080,890 | — | 37,080,890 |
India .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 92,197,182 | — | 92,197,182 |
Indonesia .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 114,639,022 | — | 114,639,022 |
Mexico .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 336,292,026 | — | 336,292,026 |
Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 128,738,149 | — | 128,738,149 |
South Korea .. . . . . . . . . . . . . . . . . . . . . . . . . . | — | 255,571,289 | — | 255,571,289 |
Supranational .. . . . . . . . . . . . . . . . . . . . . . . . . | — | 10,946,188 | — | 10,946,188 |
U.S. Government and Agency Securities.. . . . . . . | — | 482,485,970 | — | 482,485,970 |
Options purchased.. . . . . . . . . . . . . . . . . . . . . . . | — | 15,458,722 | — | 15,458,722 |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | 463,932,128 | 272,288,667 | 3,010,391 | 739,231,186 |
Total Investments in Securities.. . . . . . . . . . . | $463,932,128 | $1,810,339,091 | $46,045,111 | $2,320,316,330 |
Other Financial Instruments: |
|
|
|
|
Forward exchange contracts . . . . . . . . . . . . . . . . | $— | $18,677,539 | $— | $18,677,539 |
Restricted Currency (ARS).. . . . . . . . . . . . . . . . . | — | — | 3,151 | 3,151 |
.. . . . . . . . .Total Other Financial Instruments | $— | $18,677,539 | $3,151 | $18,680,690 |
Receivables: |
|
|
|
|
Interest (ARS). . . . . . . . . . . . . . . . . . . . . . . . . . . | $— | $— | $947,439 | $947,439 |
Liabilities: |
|
|
|
|
Other Financial Instruments: |
|
|
|
|
Options written.. . . . . . . . . . . . . . . . . . . . . . . . . . | $— | $18,551,294 | $— | $18,551,294 |
Forward exchange contracts.. . . . . . . . . . . . . . . . | — | 79,165,402 | — | 79,165,402 |
.. . . . . . . . .Total Other Financial Instruments | $— | $97,716,696 | $— | $97,716,696 |
Payables: |
|
|
|
|
Investment Securities Purchased (ARS). . . . . . . . | $— | $— | $463,749 | $463,749 |
. . . . . . . . . . . . . . . . . . . . . . .Deferred Tax (ARS) | $— | $— | $2,124 | $2,124 |
Annual Report
TGB-39
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Global Bond VIP Fund (continued)
12. Fair Value Measurements (continued)
A reconciliation in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 assets and/or liabilities at the beginning and/or end of the year. At December 31, 2020, the reconciliation is as follows:
|
|
|
|
|
|
|
|
|
| Net Change in |
|
|
|
|
|
|
|
|
|
| Unrealized |
|
|
|
|
|
|
|
|
|
| Appreciation |
|
|
|
|
|
|
| Net | Net |
| (Depreciation) |
| Balance at |
|
| Transfer | Transfer | Cost Basis | Realized | Unrealized | Balance | on Assets |
| Beginning of |
|
| Into | Out of | Adjust- | Gain | Appreciation | at End | Held at |
| Year | Purchases | Sales | Level 3 | Level 3 | mentsa | (Loss)(Depreciation) | of Year | Year End | |
Templeton Global Bond VIP Fund |
|
|
|
|
|
|
|
|
| |
Assets: |
|
|
|
|
|
|
|
|
|
|
Investments in Securities: |
|
|
|
|
|
|
|
|
|
|
Foreign Government and |
|
|
|
|
|
|
|
|
|
|
Agency Securities: |
|
|
|
|
|
|
|
|
|
|
Argentina.. . . . . . . . . | $35,675,197 | $28,179,321 | $(10,217,792) | $— | $— | $7,089,775 | $(18,641,512) | $949,731 | $43,034,720 | $(6,646,977) |
Short Term Investments. . | 3,394,233 | 3,129,601 | (2,160,508) | — | — | 388,475 | (817,458) | (923,952) | 3,010,391 | 84,863 |
Total Investments in Securities. | $39,069,430 | $31,308,922 | $(12,378,300) | $— | $— | 7,478,250 | (19,458,970) | 25,779 | $46,045,111 | $(6,562,114) |
Other Financial Instruments: | $8,460,563 | $18,433,690 | $(25,517,801) | $— | $— | $— | $(1,603,199) | $229,898 | $3,151 | $(42) |
Restricted Currency (ARS). | ||||||||||
Receivables: | $1,601,869 | $10,006,358 | $(9,462,346) | $— | $— | $— | $(1,350,526) | $152,084 | $947,439 | $33,577 |
Interest (ARS).. . . . . . | ||||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
Payables: |
|
|
|
|
|
|
|
|
|
|
Deferred Tax (ARS). . . . . | $4,066 | $— | $— | $— | $— | $— | $— | $(1,942) | $2,124 | $(1,942) |
Investment Securities | $— | $463,749 | $— | $— | $— | $— | $— | $— | $463,749 | $— |
Purchased (ARS).. . . . |
aMay include accretion, amortization, partnership adjustments, and/or other cost basis adjustments.
Significant unobservable valuation inputs for material Level 3 assets and/or liabilities and impact to fair value as a result of changes in unobservable valuation inputs as of December 31, 2020, are as follows:
|
|
|
|
|
| Impact to |
|
|
|
|
|
| Fair Value |
| Fair Value at |
|
|
|
| if Input |
Description | End of Year | Valuation Technique | Unobservable Inputs | Amount |
| Increasesa |
Templeton Global Bond VIP Fund |
|
|
|
|
| |
Assets: |
|
|
|
|
|
|
Investments in Securities: |
|
|
|
|
|
|
Foreign Government and |
|
|
|
|
|
|
Agency Securities: |
|
|
|
|
|
|
Argentina. . . . . . . . . . | $43,034,720 | Market comparables | Implied foreign | 143.8 | ARS/USD | Decreaseb |
|
|
| exchange rate |
|
|
|
Short Term Investments: |
|
|
|
|
|
|
Argentina. . . . . . . . . . | 3,010,391 | Market comparables | Implied foreign | 143.8 | ARS/USD | Decreasec |
|
|
| exchange rate |
|
|
|
All Other.. . . . . . . . . . . . | 950,590d |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
All Other.. . . . . . . . . . . . | 465,873d |
|
|
|
|
|
|
|
|
|
|
|
|
Total.. . . . . . . . . . . . . . . | $46,529,828 |
|
|
|
|
|
TGB-40
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Global Bond VIP Fund (continued)
12. Fair Value Measurements (continued)
aRepresents the directional change in the fair value of the Level 3 financial instruments that would result from a significant and reasonable increase in the corresponding input. A significant and reasonable decrease in the input would have the opposite effect. Significant impacts, if any, to fair value and/or net assets have been indicated.
bRepresents a significant impact to fair value and net assets.
cRepresents a significant impact to fair value but not net assets.
dIncludes fair value of immaterial assets and/or liabilities developed using various valuation techniques and unobservable inputs. May also include values derived using private transaction prices or non-public third party pricing information which is unobservable.
13. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020- 04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
14. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Abbreviations
Counterparty |
| Currency |
| |
BNDP | BNP Paribas SA |
| ARS | Argentine Peso |
BOFA | Bank of America Corp. |
| AUD | Australian Dollar |
CITI | Citibank NA |
| BRL | Brazilian Real |
DBAB | Deutsche Bank AG |
| CHF | Swiss Franc |
GSCO | Goldman Sachs Group, Inc. |
| COP | Colombian Peso |
HSBK | HSBC Bank plc |
| GHS | Ghanaian Cedi |
JPHQ | JPMorgan Chase Bank NA |
| IDR | Indonesian Rupiah |
MSCO | Morgan Stanley |
| INR | Indian Rupee |
UBSW | UBS AG |
| JPY | Japanese Yen |
|
|
| KRW | South Korean Won |
Selected Portfolio |
| MXN | Mexican Peso | |
BADLAR | Argentina Deposit Rates Badlar Private Banks |
| NOK | Norwegian Krone |
ARS |
| SEK | Swedish Krona | |
FRN | Floating Rate Note |
| ||
| USD | United States Dollar | ||
|
|
|
Annual Report
TGB-41
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Templeton Global Bond VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Templeton Global Bond VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
TGB-42
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Templeton Global Bond VIP Fund
At December 31, 2020, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. The Fund elects to treat foreign taxes paid as allowed under Section 853 of the Internal Revenue Code. This election will allow shareholders of record as of the 2021 distribution date, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.
Annual Report
TGB-43
Templeton Growth VIP Fund
This annual report for Templeton Growth VIP Fund covers the fiscal year ended December 31, 2020.
Class 1 Performance Summary as of December 31, 2020
Average annual total return of Class 1 shares represents the average annual change in value, assuming reinvestment of dividends and capital gains. Average returns smooth out variations in returns, which can be significant; they are not the same as year-by-year results.
| Average Annual |
Share Class | Total Return |
1 |
|
1-Year | +5.99% |
5-Year | +6.40% |
10-Year | +6.33% |
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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Total Return Index Comparison for a Hypothetical $10,000 Investment (1/1/11–12/31/20)
The graph below shows the change in value of a hypothetical $10,000 investment in the Fund over the indicated period and includes reinvestment of any income or distributions. The Fund’s performance is compared to the performance of the MSCI All Country World Index (ACWI). One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
Please see Important Notes to Performance Information preceding the Fund Summaries.
$30,000
$25,000 |
|
|
|
| $25,271 |
$20,000 |
|
|
|
| $18,478 |
|
|
|
|
| |
$15,000 |
|
|
|
|
|
$10,000 |
|
|
|
|
|
$5,000 |
|
|
|
|
|
1/11 | 12/12 | 12/14 | 12/16 | 12/18 | 12/20 |
| Templeton Growth VIP Fund | MSCI ACWI* |
|
|
*Source: Morningstar. Please see Index Descriptions following the Fund Summaries.
Annual Report
TG-1
Templeton Growth VIP Fund
Fund Goal and Main Investments
The Fund seeks long-term capital growth. Under normal market conditions, the Fund invests primarily in equity securities (primarily common stocks) of companies located anywhere in the world, including developing markets.
Fund Risks
All investments involve risks, including possible loss of principal. Unexpected events and their aftermaths, such as the spread of deadly diseases; natural, environmental or man-made disasters; financial, political or social disruptions; terrorism and war; and other tragedies or catastrophes, can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in developing markets involve heightened risks related to the same factors. Because the Fund may invest its assets in companies in a specific region, including Europe, it is subject to greater risks of adverse developments in that region and/ or the surrounding regions than a fund that is more broadly diversified geographically. Political, social or economic disruptions in the region, even in countries in which the Fund is not invested, may adversely affect the value of securities held by the Fund. Current political uncertainty concerning the economic consequences of the departure of the U.K. from the European Union may increase market volatility. Derivatives involve costs and can create economic leverage which may result in significant volatility and cause the Fund to participate in losses (and enable gains) on
an amount that exceeds the Fund’s initial investment. In addition, securities issued by small- and mid-capitalization companies have historically experienced more price volatility than larger-company stocks, especially over the short
term and may involve additional risks. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
Geographic Composition 12/31/20
| % of Total |
| Net Assets |
North America | 35.3% |
Asia | 28.4% |
Europe | 26.1% |
Latin America & Caribbean | 1.8% |
Short-Term Investments & Other Net Assets | 8.4% |
Performance Overview
You can find the Fund’s one-year total return in the Performance Summary. For comparison, the Fund’s benchmark, the MSCI All Country World Index (ACWI), posted a +16.82% total return for the period under review.1
Economic and Market Overview
Global developed and emerging market equities, as measured by the MSCI ACWI (USD), posted a +16.82% total return for the 12 months ended December 31, 2020.1 Stocks fell sharply in early 2020 as many investors sold equities amid fears of a global economic slowdown due to the novel coronavirus (COVID-19) pandemic. Global equities began to rebound in late March 2020 amid optimism about easing lockdown restrictions, vaccine and treatment development and economic stimulus measures. Despite declines in September and October due to geopolitical tensions and rising infection rates, markets rebounded in November and December, as positive sentiment about successful trials of COVID-19 vaccines, the beginning of vaccination programs in some countries and apparent resolution of political uncertainty supported markets.
In the U.S., pandemic-related restrictions caused stiff economic headwinds, including mass layoffs that drove the unemployment rate to 14.8% in April 2020.2 According to the National Bureau of Economic Research, the longest U.S. economic expansion in history ended in February, and the country slipped into a deep recession. Equities began to rebound in the spring amid the government’s fiscal and monetary stimulus, declining jobless claims, rising retail sales and optimism about treatments and potential vaccines for COVID-19. Following a record annualized decline in second-quarter gross domestic product (GDP), resilient consumer spending helped drive third-quarter GDP to expand at a record annualized rate, although growth slowed in the fourth quarter. Equities continued to rise during the
1.Source: Morningstar. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Please see Index Descriptions following the Fund Summaries.
2.Source: U.S. Bureau of Labor Statistics.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
TG-2
Annual Report
TEMPLETON GROWTH VIP FUND
summer but declined in the fall due to concerns about possible new restrictions amid rising COVID-19 infection rates and uncertainties about additional fiscal stimulus and the U.S. presidential election. Despite signs that the economic recovery was stalling as the unemployment rate remained relatively high (6.7% at period-end) and consumer spending declined, stocks rallied in November and December, buoyed by the outcome of the U.S. presidential election, the start of COVID-19 vaccination programs and the passage of a new U.S. stimulus bill.2
In an effort to support the economy, the U.S. Federal Reserve (Fed) lowered the federal funds target rate to a range of 0.00%–0.25% in March 2020. The Fed also enacted quantitative easing measures aimed at ensuring credit flows to borrowers and supporting credit markets with open- ended bond purchasing. Furthermore, the Fed signaled that interest rates would potentially remain low, even if inflation moderately exceeded its 2% target.
In the eurozone, the economy contracted again in the fourth quarter of 2020, following quarter-on-quarter expansion in the third quarter and contractions in the first and second quarters. After several months of gains due to easing restrictions and robust stimulus measures, European developed market equities, as measured by the MSCI Europe Index (USD), declined in September and October as rising infection rates heightened investor concerns that the nascent economic revival could stall. Nevertheless, successful vaccine development and a Brexit resolution supported European developed market equities, as measured by the MSCI Europe Index (USD), to post a +5.93% total return for the period.1
Asian developed and emerging market equities, as measured by the MSCI All Country Asia Index (USD), posted a +21.30% total return for the 12 months under review.1 Although pandemic-related lockdowns derailed economic growth in early 2020, sharp market declines were followed by rebounds as China’s economy, a key driver of the region’s economic activity, recovered from the contraction in the first quarter and expanded during the rest of 2020. Asian stocks rose as the region’s economies reopened, aided by robust stimulus measures and optimism that economic revitalization would be further spurred by COVID-19 vaccines.
Global emerging market stocks, as measured by the MSCI Emerging Markets Index (USD), posted a +18.69% total return for the period, despite steep pandemic-related declines in early 2020, benefiting from improving economic activity, stabilizing oil prices and U.S. dollar weakness.1 In spite of higher COVID-19 cases in some countries, emerging
market stocks rallied near the end of 2020, bolstered by easing political uncertainty, commencement of COVID-19 vaccinations and rising commodity prices.
Investment Strategy
Our investment philosophy is bottom up, value oriented and long term. When choosing equity investments for the Fund, we focus on the market price of a company’s securities relative to our evaluation of the company’s potential long- term earnings, asset value and cash flow. Our analysis includes an assessment of the potential impacts of material environmental, social and governance (ESG) factors on the long-term risk and return profile of a company. We also consider a company’s price/earnings ratio, price/cash flow ratio, profit margins and liquidation value.
The Fund may, from time to time, seek to hedge (protect) against currency risks, using certain currency-related derivative instruments. The Fund may also use a variety of equity-related derivatives for various purposes including enhancing Fund returns, increasing liquidity and gaining exposure to particular markets in more efficient or less expensive ways.
Manager’s Discussion
During the 12 months under review, significant detractors from the Fund’s performance relative to the MSCI ACWI included stock selection and a large underweighting in the information technology (IT) sector, as well as stock selection in the consumer discretionary, communication services and energy sectors. There are no consumer discretionary stocks among the Fund’s top individual detractors.
Within IT, our position in Japan-based electronic equipment and components manufacturer Kyocera hindered relative returns.
In the communication services sector, our positions in Luxembourg-based satellite operator SES and U.S. diversified telecommunication services provider Verizon Communications hurt relative results. SES reported weaker- than-expected fourth-quarter 2019 results and lowered fiscal-year 2020 revenue and earnings guidance due to lower-than-expected revenue growth in its video business and slowing growth in its networks business. Management also substantially cut the dividend, citing the need to protect its investment-grade debt rating.
Within energy, oil companies faced headwinds brought on by pandemic disruptions, pricing pressures and demand weakness. Our positions in U.S. oil and gas exploration
Annual Report
TG-3
TEMPLETON GROWTH VIP FUND
and production company Apache (not held at period-end), Netherlands-based oil and natural gas producer Royal Dutch Shell and U.K.-based integrated oil and gas company BP detracted from relative results.
Other key individual relative detractors included our positions in financial services firms ING Groep (Netherlands) and BNP Paribas (France). The Fund closed its positions in both firms during the period.
Conversely, key contributors to the Fund’s relative performance included stock selection and overweightings in the materials and industrials sectors.
Within materials, our positions in U.S. gold and copper mining company Freeport-McMoRan; Canadian mining firm Wheaton Precious Metals, which has operations in Brazil; and Netherlands-based steelmaking and mining company ArcelorMittal boosted relative performance. Freeport- McMoRan’s shares rallied over the summer as copper prices rose to the highest level in more two years and gold hit an all-time price high. The firm recently announced a well-received austerity plan to help weather this period
of uncertainty, including capital expenditure reduction, executive pay cuts and a suspension of the dividend. Wheaton Precious Metals benefited from higher gold prices amid investor concerns about excess debt, economic turmoil and the potentially inflationary impact of extreme monetary accommodation.
In the industrials sector, Denmark-based integrated logistics company AP Moller - Maersk, U.S. logistics and package delivery company United Parcel Service and German industrial conglomerate Siemens supported relative performance.
Elsewhere, South Korean semiconductor, electronics and computer peripherals manufacturer Samsung Electronics benefited relative performance. Its shares overcame the initial supply chain concerns amid the onset of the COVID-19 pandemic and rose amid an improving outlook for the memory chip market and expectations for the company to raise its dividends. New foundry orders from high-profile clients lifted market confidence in its chip-making business. Furthermore, many investors became optimistic about potential market share gains for the company across the semiconductor, smartphone, and 5G network equipment industries amid escalating U.S. restrictions against Chinese technology-related companies.
From a geographic perspective, key detractors from the Fund’s relative performance included stock selection and an overweighting in the eurozone, especially in France;
Top 10 Holdings 12/31/20
Company | % of Total |
Industry, Country | Net Assets |
a | a |
Samsung Electronics Co. Ltd. | 3.9% |
Technology Hardware, Storage & Peripherals, |
|
South Korea |
|
Sanofi | 2.6% |
Pharmaceuticals, France |
|
Walt Disney Co. (The) | 2.4% |
Entertainment, United States |
|
Anheuser-Busch InBev SA/NV | 2.3% |
Beverages, Belgium |
|
Roche Holding AG | 2.3% |
Pharmaceuticals, Switzerland |
|
Verizon Communications, Inc. | 2.2% |
Diversified Telecommunication Services, United |
|
States |
|
Dollar Tree, Inc. | 2.1% |
Multiline Retail, United States |
|
Comcast Corp. | 2.1% |
Media, United States |
|
Sysco Corp. | 2.0% |
Food & Staples Retailing, United States |
|
EPAM Systems, Inc. | 1.9% |
IT Services, United States |
|
stock selection and a large underweighting in the U.S.; and stock selection in Asia ex Japan, especially in China. Stock selection and an overweighting in the U.K., as well as stock selection in Japan, also hurt relative results. Conversely, stock selection and a modest overweighting in Canada, as well as positioning in Israel, benefited relative performance.
It is important to recognize the effect of currency movements on the Fund’s performance. In general, if the value of the U.S. dollar goes up compared with a foreign currency, an investment traded in that foreign currency will go down in value because it will be worth fewer U.S. dollars. This can have a negative effect on Fund performance. Conversely, when the U.S. dollar weakens in relation to a foreign currency, an investment traded in that foreign currency will increase in value, which can contribute to Fund performance. For the 12 months ended December 31, 2020, the U.S. dollar declined in value relative to most currencies. As a result, the Fund’s performance was positively affected by the portfolio’s substantial investment in securities with non-U.S. currency exposure. However, one cannot expect the same result in future periods.
TG-4
Annual Report
TEMPLETON GROWTH VIP FUND
Thank you for your participation in Templeton Growth VIP Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2020, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
Annual Report
TG-5
TEMPLETON GROWTH VIP FUND
Class 1 Fund Expenses
As an investor in a variable insurance contract (Contract) that indirectly provides for investment in an underlying mutual fund, you can incur transaction and/or ongoing expenses at both the Fund level and the Contract Level: (1) transaction expenses can include sales charges (loads) on purchases, surrender fees, transfer fees and premium taxes; and (2) ongoing expenses can include management fees, distribution and service (12b-1) fees, contract fees, annual maintenance fees, mortality and expense risk fees and other fees and expenses. All mutual funds and Contracts have some types of ongoing expenses. The table below shows Fund-level ongoing expenses and can help you understand these costs and compare them with those of other mutual funds offered through the Contract. The table assumes a $1,000 investment held for the six months indicated. Please refer to the Fund prospectus for additional information on operating expenses.
Actual Fund Expenses
The table below provides information about the actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of ongoing Fund expenses but does not include the effect of ongoing Contract expenses, is used to calculate the “Ending Account Value.” You can estimate the Fund-level expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number under the headings “Actual” and “Fund-Level Expenses Paid During Period” (if Fund-Level Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the estimated expenses paid this period at the Fund level are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other mutual funds offered through the Contract. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds offered through the Contract.
Please note that expenses shown in the table are meant to highlight ongoing costs at the Fund level only and do not reflect any ongoing expenses at the Contract level, or transaction expenses at either the Fund or Contract levels. In addition, while the Fund does not have transaction expenses, if the transaction and ongoing expenses at the Contract level were included, the expenses shown below would be higher. You should consult your Contract prospectus or disclosure document for more information.
|
|
| Actual |
| Hypothetical |
|
| ||
|
|
| (actual return after expenses) |
| (5% annual return before expenses) |
|
| ||
|
|
|
| Fund-Level |
|
| Fund-Level |
|
|
|
|
|
| Expenses |
|
| Expenses |
| Net |
| Beginning | Ending | Paid During |
| Ending | Paid During |
| Annualized | |
Share | Account | Account | Period |
| Account | Period |
| Expense | |
Class | Value 7/1/20 |
| Value 12/31/20 | 7/1/20–12/31/201,2 |
| Value 12/31/20 | 7/1/20–12/31/201,2 | a | Ratio2 |
1 | $1,000 |
| $1,224.00 | $5.08 | $1,020.57 | $4.62 |
| 0.91% |
1.Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2.Reflects expenses after fee waivers and expense reimbursements. Does not include any ongoing expenses of the Contract for which the Fund is an investment option or acquired fund fees and expenses.
TG-6
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Financial Highlights
Templeton Growth VIP Fund
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 1
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $11.15 | $12.44 | $16.24 | $13.93 | $13.54 |
Income from investment operationsa: | 0.24c | 0.30 | 0.28 | 0.29 | 0.26 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 0.36 | 1.30 | (2.42) | 2.30 | 0.96 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.60 | 1.60 | (2.14) | 2.59 | 1.22 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.33) | (0.40) | (0.35) | (0.28) | (0.31) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | (2.49) | (1.31) | — | (0.52) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.33) | (2.89) | (1.66) | (0.28) | (0.83) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $11.42 | $11.15 | $12.44 | $16.24 | $13.93 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5.99% | 15.43% | (14.61)% | 18.77% | 9.90% |
Ratios to average net assets | 0.91% | 0.86% | 0.83% | 0.82%f | 0.82% |
Expensese. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 2.42%c | 2.52% | 1.90% | 1.94% | 2.01% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $92,653 | $97,988 | $354,164 | $466,207 | $453,997 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 63.65% | 19.69% | 29.25% | 26.46% | 22.88% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.13 per share related to an adjustment for EU reclaims in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.08%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%. fBenefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Annual Report
TG-7
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Templeton Growth VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 2
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $10.90 | $12.21 | $15.97 | $13.70 | $13.32 |
Income from investment operationsa: | 0.21c | 0.26 | 0.24 | 0.25 | 0.23 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 0.36 | 1.28 | (2.38) | 2.26 | 0.94 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.57 | 1.54 | (2.14) | 2.51 | 1.17 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.30) | (0.36) | (0.31) | (0.24) | (0.27) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | (2.49) | (1.31) | — | (0.52) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.30) | (2.85) | (1.62) | (0.24) | (0.79) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $11.17 | $10.90 | $12.21 | $15.97 | $13.70 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5.80% | 15.15% | (14.85)% | 18.50% | 9.62% |
Ratios to average net assets | 1.16% | 1.11% | 1.08% | 1.07%f | 1.07% |
Expensese. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 2.17%c | 2.27% | 1.65% | 1.69% | 1.76% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $603,996 | $659,412 | $625,311 | $879,521 | $876,128 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 63.65% | 19.69% | 29.25% | 26.46% | 22.88% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.13 per share related to an adjustment for EU reclaims in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.83%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%. fBenefit of expense reduction rounds to less than 0.01%.
TG-8
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL HIGHLIGHTS
Templeton Growth VIP Fund (continued)
|
| Year Ended December 31, |
| ||
a | 2020 | 2019 | 2018 | 2017 | 2016 |
Class 4
Per share operating performance
(for a share outstanding throughout the year) |
|
|
|
|
|
Net asset value, beginning of year. . . . . . . . . . . . . . . . . . . | $11.07 | $12.36 | $16.13 | $13.83 | $13.44 |
Income from investment operationsa: | 0.20c | 0.26 | 0.23 | 0.24 | 0.22 |
Net investment incomeb.. . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net realized and unrealized gains (losses).. . . . . . . . . . . | 0.36 | 1.29 | (2.40) | 2.28 | 0.94 |
Total from investment operations.. . . . . . . . . . . . . . . . . . . . | 0.56 | 1.55 | (2.17) | 2.52 | 1.16 |
Less distributions from: |
|
|
|
|
|
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . | (0.28) | (0.35) | (0.29) | (0.22) | (0.25) |
Net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | (2.49) | (1.31) | — | (0.52) |
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (0.28) | (2.84) | (1.60) | (0.22) | (0.77) |
Net asset value, end of year.. . . . . . . . . . . . . . . . . . . . . . . | $11.35 | $11.07 | $12.36 | $16.13 | $13.83 |
Total returnd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5.65% | 14.97% | (14.88)% | 18.38% | 9.47% |
Ratios to average net assets | 1.26% | 1.21% | 1.18% | 1.17%f | 1.17% |
Expensese. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |||||
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . | 2.04%c | 2.17% | 1.55% | 1.59% | 1.66% |
Supplemental data |
|
|
|
|
|
Net assets, end of year (000’s).. . . . . . . . . . . . . . . . . . . . . | $23,213 | $27,330 | $28,238 | $38,798 | $43,286 |
Portfolio turnover rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 63.65% | 19.69% | 29.25% | 26.46% | 22.88% |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.13 per share related to an adjustment for EU reclaims in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.70%.
dTotal return does not include fees, charges or expenses imposed by the variable annuity and life insurance contracts for which Franklin Templeton Variable Insurance Products Trust serves as an underlying investment vehicle.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%. fBenefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Annual Report
TG-9
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Statement of Investments, December 31, 2020
Templeton Growth VIP Fund
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks 91.6% |
|
|
|
|
| Aerospace & Defense 1.1% |
|
|
|
|
| BAE Systems plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 1,134,492 |
| $7,566,224 |
| Air Freight & Logistics 1.2% |
|
|
|
|
| United Parcel Service, Inc., B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 49,933 |
| 8,408,717 |
| Airlines 2.1% |
|
|
|
|
| aInternational Consolidated Airlines Group SA.. . . . . . . . . . . . . . . . . | United Kingdom | 2,045,990 |
| 4,452,397 |
| aJapan Airlines Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 302,900 |
| 5,841,218 |
| Southwest Airlines Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 103,627 |
| 4,830,055 |
|
|
|
|
| 15,123,670 |
| Auto Components 1.4% |
|
|
|
|
| BorgWarner, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 127,369 |
| 4,921,538 |
| Lear Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 33,796 |
| 5,374,578 |
|
|
|
|
| 10,296,116 |
| Automobiles 1.6% |
|
|
|
|
| Honda Motor Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 303,704 |
| 8,569,403 |
| Isuzu Motors Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 304,100 |
| 2,894,921 |
|
|
|
|
| 11,464,324 |
| Banks 2.6% |
|
|
|
|
| Bangkok Bank PCL.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Thailand | 1,552,060 |
| 6,160,283 |
| KB Financial Group, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | South Korea | 159,595 |
| 6,329,057 |
| Sumitomo Mitsui Financial Group, Inc.. . . . . . . . . . . . . . . . . . . . . . | Japan | 203,248 |
| 6,300,313 |
|
|
|
|
| 18,789,653 |
| Beverages 5.7% |
|
|
|
|
| Anheuser-Busch InBev SA/NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Belgium | 235,533 |
| 16,433,044 |
| Kirin Holdings Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 479,892 |
| 11,331,688 |
| Pernod Ricard SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 35,070 |
| 6,735,347 |
| Suntory Beverage & Food Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 185,560 |
| 6,572,424 |
|
|
|
|
| 41,072,503 |
| Chemicals 1.5% |
|
|
|
|
| DuPont de Nemours, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 148,925 |
| 10,590,057 |
| Consumer Finance 1.1% |
|
|
|
|
| American Express Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 64,909 |
| 7,848,147 |
| Diversified Telecommunication Services 2.2% |
|
|
|
|
| Verizon Communications, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 272,877 |
| 16,031,524 |
| Electric Utilities 0.9% |
|
|
|
|
| Southern Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 102,073 |
| 6,270,344 |
| Electrical Equipment 1.2% |
|
|
|
|
| Mitsubishi Electric Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 565,700 |
| 8,549,793 |
| Electronic Equipment, Instruments & Components 1.6% |
|
|
|
|
| Kyocera Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 192,100 |
| 11,790,794 |
| Entertainment 3.1% |
|
|
|
|
| Nexon Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 168,055 |
| 5,185,321 |
| aWalt Disney Co. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 94,602 |
| 17,139,991 |
|
|
|
|
| 22,325,312 |
| Food & Staples Retailing 3.3% |
|
|
|
|
| Kroger Co. (The). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 301,469 |
| 9,574,656 |
TG-10
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Growth VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Food & Staples Retailing (continued) |
|
|
|
|
| Sysco Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 193,867 |
| $14,396,563 |
|
|
|
|
| 23,971,219 |
| Food Products 1.5% |
|
|
|
|
| Danone SA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 38,013 |
| 2,501,592 |
| Kellogg Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 134,062 |
| 8,342,678 |
|
|
|
|
| 10,844,270 |
| Health Care Equipment & Supplies 2.3% |
|
|
|
|
| Medtronic plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 72,120 |
| 8,448,137 |
| Zimmer Biomet Holdings, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 50,854 |
| 7,836,093 |
|
|
|
|
| 16,284,230 |
| Health Care Providers & Services 0.9% |
|
|
|
|
| aLaboratory Corp. of America Holdings.. . . . . . . . . . . . . . . . . . . . . . | United States | 32,468 |
| 6,608,861 |
| Hotels, Restaurants & Leisure 6.1% |
|
|
|
|
| Compass Group plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 473,633 |
| 8,834,544 |
| Galaxy Entertainment Group Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . | Macau | 985,743 |
| 7,673,557 |
| aInterContinental Hotels Group plc.. . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 105,260 |
| 6,822,932 |
| Starbucks Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 56,480 |
| 6,042,230 |
| aWhitbread plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 77,440 |
| 3,280,335 |
| Yum China Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 193,597 |
| 11,052,453 |
|
|
|
|
| 43,706,051 |
| Household Durables 3.4% |
|
|
|
|
| Gree Electric Appliances, Inc. of Zhuhai, A. . . . . . . . . . . . . . . . . . . | China | 418,320 |
| 3,972,992 |
| Panasonic Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 739,440 |
| 8,619,823 |
| Sony Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 116,299 |
| 11,719,228 |
|
|
|
|
| 24,312,043 |
| Industrial Conglomerates 2.1% |
|
|
|
|
| Honeywell International, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 31,539 |
| 6,708,345 |
| Siemens AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 60,461 |
| 8,709,551 |
|
|
|
|
| 15,417,896 |
| Insurance 1.9% |
|
|
|
|
| AIA Group Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Hong Kong | 1,101,645 |
| 13,424,781 |
| Internet & Direct Marketing Retail 3.2% |
|
|
|
|
| aAlibaba Group Holding Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | China | 347,140 |
| 10,096,404 |
| aBooking Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 5,950 |
| 13,252,256 |
|
|
|
|
| 23,348,660 |
| IT Services 1.9% |
|
|
|
|
| aEPAM Systems, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 37,826 |
| 13,554,947 |
| Machinery 3.2% |
|
|
|
|
| Komatsu Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 440,500 |
| 12,157,046 |
| Makita Corp... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 141,800 |
| 7,112,281 |
| Stanley Black & Decker, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 22,400 |
| 3,999,744 |
|
|
|
|
| 23,269,071 |
| Marine 1.2% |
|
|
|
|
| AP Moller - Maersk A/S, B.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Denmark | 3,925 |
| 8,734,832 |
| Media 3.2% |
|
|
|
|
| Comcast Corp., A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 283,862 |
| 14,874,369 |
The accompanying notes are an integral part of these financial statements.
Annual Report
TG-11
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST STATEMENT OF INVESTMENTS
Templeton Growth VIP Fund (continued)
a a
Country Shares
a
Value
a | a | a | a | a | a |
| Common Stocks (continued) |
|
|
|
|
| Media (continued) |
|
|
|
|
| SES SA, FDR.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Luxembourg | 881,520 |
| $8,273,574 |
|
|
|
|
| 23,147,943 |
| Metals & Mining 4.5% |
|
|
|
|
| aArcelorMittal SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Luxembourg | 437,880 |
| 10,014,705 |
| Freeport-McMoRan, Inc... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 373,795 |
| 9,726,146 |
| Wheaton Precious Metals Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Brazil | 305,786 |
| 12,778,542 |
|
|
|
|
| 32,519,393 |
| Multiline Retail 2.1% |
|
|
|
|
| aDollar Tree, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 138,131 |
| 14,923,673 |
| Multi-Utilities 1.9% |
|
|
|
|
| E.ON SE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 1,201,307 |
| 13,302,907 |
| Oil, Gas & Consumable Fuels 2.7% |
|
|
|
|
| BP plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 1,941,401 |
| 6,699,765 |
| Marathon Petroleum Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 205,827 |
| 8,513,005 |
| Royal Dutch Shell plc, B.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 257,095 |
| 4,357,747 |
|
|
|
|
| 19,570,517 |
| Pharmaceuticals 6.8% |
|
|
|
|
| Bayer AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 150,406 |
| 8,860,960 |
| Roche Holding AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Switzerland | 46,662 |
| 16,252,308 |
| Sanofi. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | France | 189,625 |
| 18,379,778 |
| Takeda Pharmaceutical Co. Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 156,896 |
| 5,677,968 |
|
|
|
|
| 49,171,014 |
| Road & Rail 0.7% |
|
|
|
|
| East Japan Railway Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 31,800 |
| 2,121,549 |
| Keisei Electric Railway Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . | Japan | 80,000 |
| 2,707,996 |
|
|
|
|
| 4,829,545 |
| Semiconductors & Semiconductor Equipment 2.0% |
|
|
|
|
| Infineon Technologies AG.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 155,086 |
| 5,922,763 |
| NXP Semiconductors NV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Netherlands | 55,236 |
| 8,783,076 |
|
|
|
|
| 14,705,839 |
| Specialty Retail 3.0% |
|
|
|
|
| Ross Stores, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 91,046 |
| 11,181,359 |
| TJX Cos., Inc. (The).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 151,643 |
| 10,355,701 |
|
|
|
|
| 21,537,060 |
| Technology Hardware, Storage & Peripherals 3.9% |
|
|
|
|
| Samsung Electronics Co. Ltd... . . . . . . . . . . . . . . . . . . . . . . . . . . . | South Korea | 373,630 |
| 27,858,828 |
| Textiles, Apparel & Luxury Goods 1.9% |
|
|
|
|
| aadidas AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Germany | 14,503 |
| 5,276,479 |
| aBurberry Group plc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United Kingdom | 339,141 |
| 8,282,463 |
|
|
|
|
| 13,558,942 |
| Wireless Telecommunication Services 0.6% |
|
|
|
|
| aT-Mobile US, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 34,074 |
| 4,594,879 |
| .. . . . . . . . .Total Common Stocks (Cost $505,801,221) | . . . . . . . . . . . . . . . . . . | . . . . . . . . . . |
| 659,324,579 |
|
|
|
|
|
|
TG-12
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
STATEMENT OF INVESTMENTS
Templeton Growth VIP Fund (continued)
Short Term Investments 2.0%
|
|
| Principal |
|
a | a | Country | Amount* | a |
Value
a | a | a | a | a | a |
| U.S. Government and Agency Securities 0.1% |
|
|
|
|
| bFFCB, 1/04/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | United States | 600,000 |
| $600,000 |
| . . . . . . . . .Total U.S. Government and Agency Securities (Cost $599,999) | . . . . . . . . . . . |
| 600,000 | |
|
|
|
|
|
|
a | a |
|
|
| a |
| Time Deposits 1.9% |
|
|
|
|
| Royal Bank of Canada, 0.06%, 1/04/21.. . . . . . . . . . . . . . . . . . . . . | Canada | 14,000,000 |
| 14,000,000 |
Total Time Deposits (Cost $14,000,000).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Short Term Investments (Cost $14,599,999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Investments (Cost $520,401,220) 93.6%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets, less Liabilities 6.4%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,000,000
14,600,000
$673,924,579 45,937,031
$719,861,610
See Abbreviations on page TG-26.
*The principal amount is stated in U.S. dollars unless otherwise indicated. a Non-income producing.
b The security was issued on a discount basis with no stated coupon rate.
The accompanying notes are an integral part of these financial statements.
Annual Report
TG-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2020
| Templeton |
| Growth VIP |
| Fund |
Assets: |
|
Investments in securities: |
|
Cost - Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $520,401,220 |
Value - Unaffiliated issuers .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $673,924,579 |
Cash.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 807,467 |
Foreign currency, at value (cost $34,509,513). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 35,548,865 |
Receivables: |
|
Capital shares sold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 55,835 |
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,446,438 |
European Union tax reclaims (Note 1d).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9,309,878 |
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 90 |
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 721,093,152 |
Liabilities: |
|
Payables: |
|
Capital shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 282,671 |
Management fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 504,914 |
Distribution fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 133,933 |
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 91,422 |
Accrued contingent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 90,131 |
Accrued expenses and other liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 128,471 |
Total liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,231,542 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $719,861,610 |
Net assets consist of: |
|
Paid-in capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $633,083,488 |
Total distributable earnings (losses).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 86,778,122 |
Net assets, at value.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $719,861,610 |
| Templeton |
| Growth VIP |
| Fund |
Class 1: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $92,653,108 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 8,110,910 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $11.42 |
Class 2: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $603,995,905 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 54,096,505 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $11.17 |
Class 4: |
|
Net assets, at value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $23,212,597 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Shares outstanding | 2,045,491 |
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net asset value and maximum offering price per share | $11.35 |
TG-14
Annual Report
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the year ended December 31, 2020
Templeton
Growth VIP
Fund
Investment income:
Dividends: (net of foreign taxes of $1,416,989)
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest:
Unaffiliated issuers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from securities loaned:
Unaffiliated entities (net of fees and rebates).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlled affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (Note 1d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Management fees (Note 3a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution fees: (Note 3c)
Class 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Custodian fees (Note 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports to shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustees' fees and expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses waived/paid by affiliates (Note 3e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments: (net of foreign taxes of $523,662)
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation of other assets and liabilities denominated in foreign currencies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in deferred taxes on unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in unrealized appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in net assets resulting from operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,909,452
147,585
19,585
1,765
8,848,969
21,927,356
5,550,784
1,384,369
79,528
86,248
136,743
127,673
3,960
82,486
7,451,791
(5,723)
7,446,068
14,481,288
(64,476,322)
289,094
(64,187,228)
77,670,255
1,454,312
388,289
79,512,856
15,325,628
$29,806,916
The accompanying notes are an integral part of these financial statements.
Annual Report
TG-15
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Templeton Growth VIP Fund | |
| Year Ended | Year Ended |
| December 31, 2020 | December 31, 2019 |
Increase (decrease) in net assets: |
|
|
Operations: |
|
|
Net investment income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $14,481,288 | $19,938,552 |
Net realized gain (loss).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (64,187,228) | (13,584,687) |
Net change in unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . | 79,512,856 | 128,174,019 |
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . | 29,806,916 | 134,527,884 |
Distributions to shareholders: |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (2,680,578) | (20,901,613) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (16,492,099) | (139,418,589) |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (659,619) | (6,044,047) |
Total distributions to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (19,832,296) | (166,364,249) |
Capital share transactions: (Note 2) |
|
|
Class 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (7,082,982) | (275,115,440) |
Class 2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (63,376,754) | 82,734,600 |
Class 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (4,382,946) | 1,233,451 |
Total capital share transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (74,842,682) | (191,147,389) |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net increase (decrease) in net assets | (64,868,062) | (222,983,754) |
Net assets: |
|
|
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 784,729,672 | 1,007,713,426 |
End of year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $719,861,610 | $784,729,672 |
TG-16
Annual Report
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
Templeton Growth VIP Fund
1. Organization and Significant Accounting Policies
Franklin Templeton Variable Insurance Products Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eighteen separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Templeton Growth VIP Fund (Fund) is included in this report. Shares of the Fund are generally sold only to insurance company separate accounts to fund the benefits of variable life insurance policies or variable annuity contracts. The Fund offers three classes of shares: Class 1, Class 2 and Class 4. Each class of shares may differ by its distribution fees, voting rights on matters affecting a single class and its exchange privilege.
The following summarizes the Fund's significant accounting policies.
a. Financial Instrument Valuation
The Fund's investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust's Board
of Trustees (the Board), the Fund's administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively.
Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade
in multiple markets or on multiple exchanges are valued
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund's pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.
Investments in open-end mutual funds are valued at the closing NAV. Investments in time deposits are valued at cost, which approximates fair value.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund's business day. Events can occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund . As a result, differences may arise between the value of the Fund's portfolio securities as determined at
Annual Report
TG-17
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Templeton Growth VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
a. Financial Instrument Valuation (continued)
the foreign market close and the latest indications of value at 4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the value of the Fund’s portfolio securities to the latest indications of fair value at 4 p.m. Eastern time. At December 31, 2020, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy. See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund's NAV is not calculated, which could result in differences between the value of the Fund's portfolio securities on the last business day and the last calendar day of the reporting period. Any security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Securities Lending
The Fund participates in an agency based securities lending program to earn additional income. The Fund receives collateral in the form of cash and/or U.S. Government
and Agency securities against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. Any cash collateral received is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor,
is reported separately in the Statement of Operations. The Fund bears the market risk with respect to any cash collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower. At December 31, 2020, the Fund had no securities on loan.
d. Income and Deferred Taxes
It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its
TG-18
Annual Report
Templeton Growth VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
d. Income and Deferred Taxes (continued)
taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected
as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities.
When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, when EU reclaims are received by the Fund and the Fund previously passed foreign tax credit on to its shareholders, the Fund will enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund’s shareholders.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2020, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
e. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Dividend income and capital gain distributions are recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
f. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Annual Report
TG-19
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Templeton Growth VIP Fund (continued)
1. Organization and Significant Accounting Policies
(continued)
g. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to Trust.
Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2020, there were an unlimited number of shares authorized (without par value). Transactions in the Fund's shares were as follows:
|
| Year Ended |
| Year Ended |
| December 31, 2020 | December 31, 2019 | ||
| Shares | Amount | Shares | Amount |
Class 1 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 2 Shares:
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued in reinvestment of distributions.. . . . . . . . . .
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 4 Shares:
111,654 | $1,099,154 | 68,873 | $790,173 |
287,000 | 2,680,578 | 2,083,910 | 20,901,613 |
(1,072,276) | (10,862,714) | (21,838,635) | (296,807,226) |
(673,622) | $(7,082,982) | (19,685,852) | $(275,115,440) |
4,395,675 | $41,408,273 | 3,619,417 | $39,550,989 |
1,804,387 | 16,492,099 | 14,197,412 | 139,418,589 |
(12,576,995) | (121,277,126) | (8,538,686) | (96,234,978) |
(6,376,933) | $(63,376,754) | 9,278,143 | $82,734,600 |
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 102,362 | $966,885 | 148,576 | $1,690,506 |
Shares issued in reinvestment of distributions.. . . . . . . . . . | 71,003 | 659,619 | 605,616 | 6,044,047 |
Shares redeemed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (596,081) | (6,009,450) | (571,458) | (6,501,102) |
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . | (422,716) | $(4,382,946) | 182,734 | $1,233,451 |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Templeton Global Advisors Limited (Global Advisors) | Investment manager |
|
|
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
|
|
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
|
|
TG-20
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Growth VIP Fund (continued)
3. Transactions with Affiliates (continued)
a. Management Fees
The Fund pays an investment management fee to Global Advisors based on the average daily net assets of the Fund as follows:
Annualized Fee Rate | Net Assets |
1.000% | Up to and including $100 million |
|
|
0.900% | Over $100 million, up to and including $250 million |
|
|
0.800% | Over $250 million, up to and including $500 million |
|
|
0.750% | Over $500 million, up to and including $1 billion |
0.700% | Over $1 billion, up to and including $5 billion |
|
|
0.675% | Over $5 billion, up to and including $10 billion |
0.655% | Over $10 billion, up to and including $15 billion |
|
|
0.635% | Over $15 billion, up to and including $20 billion |
0.615% | In excess of $20 billion |
|
|
For the year ended December 31, 2020, the gross effective investment management fee rate was 0.841% of the Fund’s average daily net assets.
b. Administrative Fees
Under an agreement with Global Advisers, FT Services provides administrative services to the Fund. The fee is paid by Global Advisers based on the Fund's average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for Class 2 and Class 4 shares pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund's shares up to 0.35% per year of its average daily net assets of each class. The Board has agreed to limit the current rate to 0.25% per year for Class 2. The plan year, for purposes of monitoring compliance with the maximum annual plan rate, is February 1 through January 31.
d. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Fund and is not paid by the Fund for the services.
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2020, the Fund held investments in affiliated management investment companies as follows:
Annual Report
TG-21
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Growth VIP Fund (continued)
3. Transactions with Affiliates (continued)
e. Investments in Affiliated Management Investment Companies (continued)
|
|
|
|
| Net Change in |
| Number of |
|
| Value at |
|
|
| Unrealized | Value | Shares Held |
|
| Beginning |
|
| Realized Gain | Appreciation | at End | at End | Investment |
aa | of Year | Purchases | Sales | (Loss) | (Depreciation) | of Year | of Year | Income |
Templeton Growth VIP Fund |
|
|
|
|
|
|
|
|
Non-Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income from |
|
|
|
|
|
|
|
| securities |
|
|
|
|
|
|
|
| loaned |
Institutional Fiduciary Trust - Money |
|
|
|
|
|
|
|
|
Market Portfolio, 0%.. . . . . . . . . | $— | $50,965,751 | $(50,965,751) | $— | $— | $—a | — | $1,765 |
Total Affiliated Securities. . . . . | $— | $50,965,751 | $(50,965,751) | $— | $— | $— |
| $1,765 |
aAs of December 31, 2020, no longer held by the fund.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended December 31, 2020, there were no credits earned.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains.
At December 31, 2020, the capital loss carryforwards were as follows:
Capital loss carryforwards not subject to expiration: |
|
|
|
Short term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $5,508,986 | ||
Long term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . |
| 78,076,436 |
Total capital loss carryforwards.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | . . . . . . . . . . . . . . . . |
| $83,585,422 |
The tax character of distributions paid during the years ended December 31, 2020 and 2019, was as follows: |
| ||
| 2020 |
| 2019 |
Distributions paid from: |
|
|
|
Ordinary income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $19,832,296 |
| $35,138,144 |
Long term capital gain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 131,226,105 | |
| $19,832,296 |
| $166,364,249 |
At December 31, 2020, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $521,308,120 |
TG-22
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST NOTES TO FINANCIAL STATEMENTS
Templeton Growth VIP Fund (continued)
5. Income Taxes (continued)
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized appreciation (depreciation).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributable earnings:
Undistributed ordinary income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$176,241,345 (23,624,886)
$152,616,459
$7,392,894
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of wash sales, foreign currency transactions, EU reclaims and corporate actions.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2020, aggregated $373,470,687 and $440,775,172, respectively.
7. Concentration of Risk
Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local, regional and global economic, political and social conditions, which may result in greater market volatility. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in securities in Europe. In addition, certain foreign securities may not be as liquid as U.S. securities.
8. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
9. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 5, 2021. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 5, 2021, the Borrowers, renewed the Global Credit Facility for a one year term, maturing February 4, 2022, for a total of $2.675 billion.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended December 31, 2020, the Fund did not use the Global Credit Facility.
Annual Report
TG-23
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Growth VIP Fund (continued)
10. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's financial instruments and are summarized in the following fair value hierarchy:
•Level 1 – quoted prices in active markets for identical financial instruments
•Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
•Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
TG-24
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Growth VIP Fund (continued)
10. Fair Value Measurements (continued)
A summary of inputs used as of December 31, 2020, in valuing the Fund's assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total |
Templeton Growth VIP Fund |
|
|
|
|
Assets: |
|
|
|
|
Investments in Securities: |
|
|
|
|
Common Stocks: |
|
|
|
|
Aerospace & Defense .. . . . . . . . . . . . . . . . . . . | $— | $7,566,224 | $— | $7,566,224 |
Air Freight & Logistics .. . . . . . . . . . . . . . . . . . . | 8,408,717 | — | — | 8,408,717 |
Airlines .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4,830,055 | 10,293,615 | — | 15,123,670 |
Auto Components .. . . . . . . . . . . . . . . . . . . . . . | 10,296,116 | — | — | 10,296,116 |
Automobiles .. . . . . . . . . . . . . . . . . . . . . . . . . . | — | 11,464,324 | — | 11,464,324 |
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 18,789,653 | — | 18,789,653 |
Beverages .. . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 41,072,503 | — | 41,072,503 |
Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 10,590,057 | — | — | 10,590,057 |
Consumer Finance .. . . . . . . . . . . . . . . . . . . . . | 7,848,147 | — | — | 7,848,147 |
Diversified Telecommunication Services . . . . . . | 16,031,524 | — | — | 16,031,524 |
Electric Utilities .. . . . . . . . . . . . . . . . . . . . . . . . | 6,270,344 | — | — | 6,270,344 |
Electrical Equipment .. . . . . . . . . . . . . . . . . . . . | — | 8,549,793 | — | 8,549,793 |
Electronic Equipment, Instruments & |
|
|
|
|
Components .. . . . . . . . . . . . . . . . . . . . . . . . | — | 11,790,794 | — | 11,790,794 |
Entertainment .. . . . . . . . . . . . . . . . . . . . . . . . . | 17,139,991 | 5,185,321 | — | 22,325,312 |
Food & Staples Retailing . . . . . . . . . . . . . . . . . | 23,971,219 | — | — | 23,971,219 |
Food Products . . . . . . . . . . . . . . . . . . . . . . . . . | 8,342,678 | 2,501,592 | — | 10,844,270 |
Health Care Equipment & Supplies .. . . . . . . . . | 16,284,230 | — | — | 16,284,230 |
Health Care Providers & Services .. . . . . . . . . . | 6,608,861 | — | — | 6,608,861 |
Hotels, Restaurants & Leisure . . . . . . . . . . . . . | 17,094,683 | 26,611,368 | — | 43,706,051 |
Household Durables .. . . . . . . . . . . . . . . . . . . . | — | 24,312,043 | — | 24,312,043 |
Industrial Conglomerates . . . . . . . . . . . . . . . . . | 6,708,345 | 8,709,551 | — | 15,417,896 |
Insurance .. . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 13,424,781 | — | 13,424,781 |
Internet & Direct Marketing Retail .. . . . . . . . . . | 13,252,256 | 10,096,404 | — | 23,348,660 |
IT Services .. . . . . . . . . . . . . . . . . . . . . . . . . . . | 13,554,947 | — | — | 13,554,947 |
Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,999,744 | 19,269,327 | — | 23,269,071 |
Marine .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 8,734,832 | — | 8,734,832 |
Media .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 14,874,369 | 8,273,574 | — | 23,147,943 |
Metals & Mining .. . . . . . . . . . . . . . . . . . . . . . . | 22,504,688 | 10,014,705 | — | 32,519,393 |
Multiline Retail . . . . . . . . . . . . . . . . . . . . . . . . . | 14,923,673 | — | — | 14,923,673 |
Multi-Utilities .. . . . . . . . . . . . . . . . . . . . . . . . . . | — | 13,302,907 | — | 13,302,907 |
Oil, Gas & Consumable Fuels .. . . . . . . . . . . . . | 8,513,005 | 11,057,512 | — | 19,570,517 |
Pharmaceuticals .. . . . . . . . . . . . . . . . . . . . . . . | — | 49,171,014 | — | 49,171,014 |
Road & Rail . . . . . . . . . . . . . . . . . . . . . . . . . . . | — | 4,829,545 | — | 4,829,545 |
Semiconductors & Semiconductor Equipment .. | 8,783,076 | 5,922,763 | — | 14,705,839 |
Specialty Retail . . . . . . . . . . . . . . . . . . . . . . . . | 21,537,060 | — | — | 21,537,060 |
Technology Hardware, Storage & Peripherals .. | — | 27,858,828 | — | 27,858,828 |
Textiles, Apparel & Luxury Goods .. . . . . . . . . . | — | 13,558,942 | — | 13,558,942 |
Wireless Telecommunication Services .. . . . . . . | 4,594,879 | — | — | 4,594,879 |
Short Term Investments. . . . . . . . . . . . . . . . . . . . | — | 14,600,000 | — | 14,600,000 |
Total Investments in Securities.. . . . . . . . . . . | $286,962,664 | $386,961,915 | $— | $673,924,579 |
11. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered
Annual Report
TG-25
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
NOTES TO FINANCIAL STATEMENTS
Templeton Growth VIP Fund (continued)
11. New Accounting Pronouncements (continued)
based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
12. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Abbreviations
Selected Portfolio
FDR | Foreign Depositary Receipt |
FFCB | Federal Farm Credit Banks Funding Corp. |
TG-26
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton Variable Insurance Products Trust and Shareholders of Templeton Growth VIP Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Templeton Growth VIP Fund (one of the funds constituting Franklin Templeton Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the five years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 19, 2021
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
Annual Report
TG-27
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Tax Information (unaudited)
Templeton Growth VIP Fund
Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 17.68% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2020.
At December 31, 2020, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. The Fund elects to treat foreign taxes paid as allowed under Section 853 of the Internal Revenue Code. This election will allow shareholders of record as of the 2021 distribution date, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.
TG-28
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Index Descriptions
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Net Returns (NR) include income net of tax withholding when dividends are paid.
For Russell Indexes: Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.
See www.franklintempletondatasources.com for additional data provider information.
Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index measures the performance of U.S. Treasury bills that have a remaining maturity of greater than or equal to one month and less than three months.
Bloomberg Barclays U.S. Aggregate Bond Index measures the performance of the U.S. investment-grade, fixed-rate, taxable bond market with index components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/ BBB-/BBB- or higher) using the middle rating of Moody’s, Standard & Poor’s and Fitch, respectively.
Bloomberg Barclays U.S. Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes U.S. dollar-denominated securities publicly issued by U.S. and non-U.S. industrial, utility and financial issuers.
Bloomberg Barclays U.S. Corporate High Yield Bond Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and Standard & Poor’s is Ba1/BB+/BB+ or below.
Bloomberg Barclays U.S. Corporate Investment Grade Index is a broad-based benchmark that measures the investment-grade, fixed-rate, taxable corporate bond market.
Bloomberg Barclays U.S. Government Index - Intermediate Index is the intermediate component of the Barclays U.S. Government Index, which includes public obligations of the U.S. Treasury with at least one year to
final maturity and publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. government.
Bloomberg Barclays U.S. High Yield Very Liquid Index is a component of the U.S. Corporate High Yield Index that is designed to track a more liquid component of the U.S. dollar- denominated, high-yield fixed-rate corporate bond market.
Bloomberg Barclays U.S. Treasury Index measures U.S. dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury with at least one year until final maturity.
FTSE® EPRA®/NAREIT® Developed Index is a free float- adjusted index designed to measure the performance of publicly traded real estate securities in the North American, European and Asian real estate markets.
FTSE World Government Bond Index measures the performance of investment-grade world government bond markets.
J.P. Morgan (JPM) Global Government Bond Index (GGBI) tracks total returns for liquid, fixed-rate, domestic government bonds with maturities greater than one year issued by developed countries globally.
Lipper Multi-Sector Income Funds Classification Average is calculated by averaging the total returns of all funds within the Lipper Multi-Sector Income Funds Classification in the Lipper Open-End underlying funds universe. Lipper Multi-Sector Income Funds are defined as funds that seek current income by allocation of assets among different fixed income securities sectors (not primarily in one sector except for defensive purposes), including U.S. and foreign governments, with a significant portion rated below investment grade. For the 12-month period ended 12/31/20, there were 351 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.
Lipper VIP General U.S. Government Funds Classification Average is an equally weighted average calculation of performance figures for all funds within the Lipper General U.S. Government Funds classification in the Lipper VIP underlying funds universe. Lipper General U.S. Government Funds invest primarily in U.S. government and agency issues. For the 12-month period ended 12/31/20,
Annual Report
I-1
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST INDEX DESCRIPTIONS
there were 24 funds in this category. Lipper calculations do not include contract fees, expenses or sales charges, and may have been different if such charges had been considered.
MSCI All Country Asia Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in developed and emerging markets in Asia.
MSCI All Country World Index (ACWI) is a free float- adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and emerging markets.
MSCI All Country World Index (ACWI) ex USA Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and emerging markets, excluding the U.S.
MSCI Europe Index is a free float-adjusted market capitalization-weighted index designed to measure the equity market performance of developed markets in Europe.
MSCI Europe, Australasia, Far East (EAFE) Index is a free float-adjusted market capitalization-weighted index designed to measure the equity market performance of developed markets, excluding the U.S. and Canada.
MSCI Emerging Markets (EM) Index (and MSCI Emerging Markets (EM) Index-NR) is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global emerging markets.
MSCI USA High Dividend Yield Index is based on the MSCI USA Index, its parent index, and includes large- and mid-capitalization stocks. The index is designed to reflect the performance of equities in the parent index (excluding real estate investment trusts) with higher dividend income and quality characteristics than average dividend yields that are both sustainable and persistent.
MSCI World ex USA Index-NR is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets, excluding the U.S.
MSCI World Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets.
MSCI World Value Index-NR is a free float-adjusted, market capitalization-weighted index designed to measure performance of securities exhibiting overall value style characteristics in global developed markets.
Russell 1000® Growth Index is market capitalization weighted and measures performance of those Russell 1000® Index companies with relatively higher price-to-book ratios and higher forecasted growth values.
Russell 1000® Index is market capitalization weighted and measures performance of the largest companies in the Russell 3000® Index, which represents the majority of the U.S. market’s total capitalization.
Russell 1000® Value Index is market capitalization weighted and measures performance of those Russell 1000® Index companies with relatively lower price-to-book ratios and lower forecasted growth values.
Russell 2000® Index is market capitalization weighted and measures performance of the 2,000 smallest companies in the Russell 3000® Index, which represent a small amount of the total market capitalization of the Russell 3000® Index.
Russell 2000® Value Index is market capitalization weighted and measures performance of those Russell 2000® Index companies with relatively lower price-to-book ratios and lower forecasted growth values.
Russell 2500TM Index is market capitalization weighted and measures performance of the smallest companies in the Russell 3000® Index, which represent a modest amount of the Russell 3000® Index’s total market capitalization.
Russell 3000® Index is market capitalization weighted and represents the majority of the U.S. market’s total capitalization.
Russell 3000® Growth Index is market capitalization weighted and measures performance of those Russell 3000® Index companies with relatively higher price-to-book ratios and higher forecasted growth values.
Russell Midcap® Growth Index is market capitalization weighted and measures performance of those Russell Midcap® Index companies with relatively higher price-to-book ratios and higher forecasted growth values.
Russell Midcap® Index is market capitalization weighted and measures performance of the smallest companies in the Russell 1000® Index, which represents a modest amount of the Russell 1000® Index’s total market capitalization.
Standard & Poor’s® 500 Index (S&P 500®) is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.
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Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Board Members and Officers
The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.
Independent Board Members
|
|
| Number of Portfolios in |
|
Name, Year of Birth |
| Length of | Fund Complex Overseen | Other Directorships Held |
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years |
Harris J. Ashton (1932) | Trustee | Since 1988 | 125 | Bar-S Foods (meat packing |
One Franklin Parkway |
|
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| company) (1981-2010). |
San Mateo, CA 94403-1906 |
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|
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
Terrence J. Checki (1945) | Trustee | Since 2017 | 106 | Hess Corporation (exploration of oil |
One Franklin Parkway |
|
|
| and gas) (2014-present). |
San Mateo, CA 94403-1906 |
|
|
|
|
Principal Occupation During at Least the Past 5 Years:
Member of the Council on Foreign Relations (1996-present); Member of the National Committee on U.S.-China Relations (1999-present); member of the board of trustees of the Economic Club of New York (2013-present); member of the board of trustees of the Foreign Policy Association (2005-present); member of the board of directors of Council of the Americas (2007-present) and the Tallberg Foundation
(2018-present); and formerly, Executive Vice President of the Federal Reserve Bank of New York and Head of its Emerging Markets and Internal Affairs Group and Member of Management Committee (1995-2014); and Visiting Fellow at the Council on Foreign Relations (2014).
Mary C. Choksi (1950) | Trustee | Since 2014 | 125 | Omnicom Group Inc. (advertising |
One Franklin Parkway |
|
|
| and marketing communications |
San Mateo, CA 94403-1906 |
|
|
| services) (2011-present) and White |
|
|
|
| Mountains Insurance Group, Ltd. |
(holding company) (2017-present); and formerly, Avis Budget Group Inc. (car rental) (2007-May 2020).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); Founding Partner and Senior Managing Director, Strategic Investment Group (1987-2015); Founding Partner and Managing Director, Emerging Markets Management LLC (investment management firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension Investment Officer, World Bank Group (international financial institution) (1977-1987).
Annual Report
BOD-1
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Independent Board Members (continued)
|
|
| Number of Portfolios in |
|
Name, Year of Birth |
| Length of | Fund Complex Overseen | Other Directorships Held |
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years |
Edith E. Holiday (1952) | Lead | Trustee since 2005 | 125 | Hess Corporation (exploration |
One Franklin Parkway | Independent | and Lead Independent |
| of oil and gas) (1993-present), |
San Mateo, CA 94403-1906 | Trustee | Trustee since 2019 |
| Canadian National Railway |
|
|
|
| (railroad) (2001-present), White |
|
|
|
| Mountains Insurance Group, Ltd. |
|
|
|
| (holding company) (2004-present), |
|
|
|
| Santander Consumer USA |
|
|
|
| Holdings, Inc. (consumer finance) |
|
|
|
| (2016-present); Santander |
|
|
|
| Holdings USA (holding company) |
|
|
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| (2019-present); and formerly, |
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|
|
| RTI International Metals, Inc. |
|
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|
| (manufacture and distribution of |
|
|
|
| titanium) (1999-2015) and H.J. |
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|
| Heinz Company (processed foods |
|
|
|
| and allied products) (1994-2013). |
Principal Occupation During at Least the Past 5 Years:
Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
J. Michael Luttig (1954) | Trustee | Since 2009 | 125 | Boeing Capital Corporation (aircraft |
One Franklin Parkway |
|
|
| financing) (2006-2010). |
San Mateo, CA 94403-1906 |
|
|
|
|
Principal Occupation During at Least the Past 5 Years:
Private investor; and formerly, Counselor and Senior Advisor to the Chairman, CEO, and Board of Directors, of The Boeing Company (aerospace company), and member of the Executive Council (May 2019-January 1, 2020); Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (2006-2019); and Federal Appeals Court Judge, United States Court of Appeals for the Fourth Circuit (1991-2006).
Larry D. Thompson (1945) | Trustee | Since 2007 | 125 | Graham Holdings Company |
One Franklin Parkway |
|
|
| (education and media organization) |
San Mateo, CA 94403-1906 |
|
|
| (2011-present); and formerly, |
The Southern Company (energy company) (2014-May 2020; previously 2010-2012), Cbeyond, Inc. (business communications provider) (2010-2012).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; Counsel, Finch McCranie, LLP (law firm) (2015-present); John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2015-present; previously 2011-2012); and formerly, Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017-September 2020); Executive Vice President - Government Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc. (consumer products) (2012-2014); Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (2004-2011); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S. Department of Justice (2001-2003).
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Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Interested Board Members and Officers
|
|
| Number of Portfolios in |
|
Name, Year of Birth |
| Length of | Fund Complex Overseen | Other Directorships Held |
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years |
**Gregory E. Johnson | Trustee | Since 2013 | 136 | None |
(1961) |
|
|
|
|
One Franklin Parkway |
|
|
|
|
San Mateo, CA 94403-1906 |
|
|
|
|
Principal Occupation During at Least the Past 5 Years:
Executive Chairman, Chairman of the Board and Director, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 39 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, Chief Executive Officer (2013-2020) and President (1994-2015), Franklin Resources, Inc.
**Rupert H. Johnson, Jr. | Chairman of | Chairman of the | 125 | None |
(1940) | the Board and | Board since 2013 |
|
|
One Franklin Parkway | Trustee | and Trustee |
|
|
San Mateo, CA 94403-1906 |
| since 1988 |
|
|
Principal Occupation During at Least the Past 5 Years:
Director (Vice Chairman), Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 37 of the investment companies in Franklin Templeton.
Alison E. Baur (1964) | Vice President | Since 2012 | Not Applicable | Not Applicable |
One Franklin Parkway |
|
|
|
|
San Mateo, CA 94403-1906 |
|
|
|
|
Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Breda M. Beckerle (1958) | Chief Compliance Since October 2020 | Not Applicable | Not Applicable |
280 Park Avenue | Officer |
|
|
New York, NY 10017 |
|
|
|
Principal Occupation During at Least the Past 5 Years:
Chief Compliance Officer, Fiduciary Investment Management International, Inc., Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Mutual Advisers, LLC, Franklin Templeton Institutional, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Steven J. Gray (1955)
One Franklin Parkway
San Mateo, CA 94403-1906
Vice President Vice President since Not ApplicableNot Applicable
and Co-Secretary 2009 and Co-Secretary since 2019
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Matthew T. Hinkle (1971) | Chief | Since 2017 | Not Applicable | Not Applicable |
One Franklin Parkway | Executive |
|
|
|
San Mateo, CA 94403-1906 | Officer – |
|
|
|
| Finance and |
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|
|
| Administration |
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|
|
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; officer of 41 of the investment companies in Franklin Templeton; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).
Annual Report
BOD-3
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Interested Board Members and Officers (continued)
|
|
| Number of Portfolios in |
|
Name, Year of Birth |
| Length of | Fund Complex Overseen | Other Directorships Held |
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years |
Robert G. Kubilis (1973) | Chief Financial | Since December 2020 | Not Applicable | Not Applicable |
300 S.E. 2nd Street | Officer, Chief |
|
|
|
Fort Lauderdale, FL 33301- | Accounting Officer |
|
|
|
1923 | and Treasurer |
|
|
|
Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Fund Administration & Reporting and officer of 39 of the investment companies in Franklin Templeton.
Robert Lim (1948) | Vice President – Since 2016 | Not Applicable | Not Applicable |
One Franklin Parkway | AML Compliance |
|
|
San Mateo, CA 94403-1906 |
|
|
|
Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Edward D. Perks (1970) | President and | Since 2018 | Not Applicable | Not Applicable |
| Chief Executive |
|
|
|
One Franklin Parkway | Officer – |
|
|
|
San Mateo, CA 94403-1906 | Investment |
|
|
|
| Management |
|
|
|
Principal Occupation During at Least the Past 5 Years:
President and Director, Franklin Advisers, Inc.; and officer of eight of the investment companies in Franklin Templeton (since December 2018).
Navid J. Tofigh (1972) | Vice President | Since 2015 | Not Applicable | Not Applicable |
One Franklin Parkway |
|
|
|
|
San Mateo, CA 94403-1906 |
|
|
|
|
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel and officer of 41 of the investment companies in Franklin Templeton.
Craig S. Tyle (1960) | Vice President | Since 2005 | Not Applicable | Not Applicable |
One Franklin Parkway |
|
|
|
|
San Mateo, CA 94403-1906 |
|
|
|
|
Principal Occupation During at Least the Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Lori A. Weber (1964) | Vice President | Vice President since | Not Applicable | Not Applicable |
300 S.E. 2nd Street | and Co-Secretary 2011 and Co-Secretary |
|
| |
Fort Lauderdale, FL 33301- |
| since 2019 |
|
|
1923 |
|
|
|
|
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary,
Templeton Investment Counsel, LLC; and officer of 41 of the investment companies in Franklin Templeton.
*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton fund complex. These portfolios have a common investment manager or affiliated investment managers.
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated Mary C. Choksi as its audit committee financial expert. The Board believes that Ms. Choksi qualifies as such an expert in view of her extensive business background and experience. She served as a director of Avis Budget Group, Inc. (2007-May 2020) and formerly, Founder and Senior Advisor, Strategic Investment Group (1987 to 2017). Ms. Choksi has been a Member of the Fund’s
BOD-4
Annual Report
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Interested Board Members and Officers (continued)
Audit Committee since 2014. As a result of such background and experience, the Board believes that Ms. Choksi has acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Ms. Choksi is an independent Board member as that term is defined under the relevant Securities and Exchange Commission Rules and Releases.
The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.
Annual Report
BOD-5
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Shareholder Information
Proxy Voting Policies and Procedures
The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-
7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.
Quarterly Statement of Investments
The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year as an exhibit to its report on Form N-PORT. Shareholders may view the filed Form N-PORT by visiting the Commission’s website at sec. gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.
Annual Report
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Franklin Templeton Variable Insurance Products Trust (FTVIP) shares are not offered to the public; they are offered and sold only to: (1) insurance company separate accounts (Separate Account) to serve as the underlying investment vehicle for variable contracts; (2) certain qualified plans; and (3) other mutual funds (funds of funds).
Authorized for distribution to investors in Separate Accounts only when accompanied or preceded by the current prospectus for the applicable contract, which includes the Separate Account and the FTVIP prospectuses. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. The prospectus contains this and other information; please read it carefully before investing.
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.
Annual Report
Franklin Templeton Variable Insurance Products Trust
Investment Managers | Fund Administrator | Distributor |
Franklin Advisers, Inc. | Franklin Templeton Services, LLC | Franklin Templeton |
Franklin Mutual Advisers, |
| Distributors, Inc. |
LLC |
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Franklin Templeton |
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Institutional, LLC |
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Templeton Asset |
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Management Ltd. |
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Templeton Global Advisors |
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Limited |
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Templeton Investment |
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Counsel, LLC |
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© 2021 Franklin Templeton Investments. All rights reserved. | VIP1 A 02/21 |