portfolio summary aims to diversify fixed income …...actively allocating risk across three...

AIMS TO DIVERSIFY FIXED INCOME AND IMPROVE ALPHA POTENTIAL Templeton Global Bond Fund – Advisor Class (TGBAX)

As of March 31, 2018

PORTFOLIO SUMMARY

For Financial Professional Use Only / Not for Distribution to the Public

Franklin Retirement Payout Funds March 31, 2016


Uncertainties about the future rate environment, economic conditions, and political landscape can bring risk, but also opportunity. Diversifying beyond traditional fixed income may help hedge against those uncertainties and open a door to untapped opportunities. Run by a team of experienced macroeconomists, Templeton Global Bond Fund provides access to the world’s bond and currency markets, and has provided diversification and delivered strong performance over the long run.

An Unconstrained WorldviewWe actively manage three independent potential sources of alpha—

interest rate, currency, and credit, and focus on potential long-term

value without reference to traditional benchmarks.

A Truly Global Research PlatformWe have one of the largest, most well-established global fixed income

teams, leveraging on-the-ground research by 180 global fixed income

investment professionals.

A High-Conviction Process We seek to identify economic imbalances and isolate only the desired

risk exposures. We believe alignment among multiple research lenses

—in-depth country analysis, macroeconomic modeling and local

perspective—can lead to high-conviction opportunities.

TEMPLETON GLOBAL BOND FUNDAims to Diversify Fixed Income and Improve Alpha Potential

Our Investment Approach

Outcome of Our Investment Expertise

Strategy in Action

Active Management

Risk and Reward

Impact on a Fixed Income Allocation

Templeton Global Macro Team

Not FDIC Insured | May Lose Value | No Bank Guarantee

Topics Covered

1 Aims to Diversify Fixed Income and Improve Alpha Potential



OUR INVESTMENT APPROACH

Opportunistic Approach to Investing in Global Government Bonds and Currencies

Our approach is rooted in the following overarching investment philosophy:

An unconstrained approach to global fixed income investing can lead to long-term value potential

We run Templeton Global Bond Fund independently of its benchmark, allowing us to hold only the positions we believe have the best potential to maximize risk-adjusted returns.

Integrating global macroeconomic analysis with in-depth country research can help identify long-term economic imbalances

We employ a fundamental, research-driven investment approach that integrates top-down macro and bottom-up country research to identify mispriced opportunities. As value investors, our ultimate aim is to identify countries that are fundamentally strong but out of favor with investors.

Actively allocating risk across three potential independent sources of alpha can deliver diversification benefits and the potential for more consistent returns in diverse markets

We strive to identify economic imbalances that may lead to value opportunities (or alpha) in three distinct areas:

• Yield Curve (Duration): Seeking to position the fund to benefit from declining interest rates or to help mitigate the potential impact to the fund during periods of rising rates.

• Currencies: Seeking to position the fund in currencies we view as the most attractive and hedge currency risks.

• Sovereign Credit: Seeking to capture opportunities for strong growth and improving credit quality in select countries, which may occur during periods of rising inflation and growth.

The exposure to each alpha source will change over time depending on relative attractiveness and what point we are at in the business cycle.

1. This is a hypothetical example intended solely to illustrate our investment process. It is for illustrative purposes only and is not intended to reflect any actual positioning of the fund and does not constitute investment advice.Past performance is not an indicator or a guarantee of future performance.

Potential Alpha Sources Can Vary from Country to Country with the Economic Cycle1

The portfolio typically holds a few overarching macro views, expressed using a variety of instruments, in addition to many individual views, which are expressed using currency, interest rate, or credit positions. Position sizes are based on our view of attractiveness, valuation, conviction level and risk, as well as size and liquidity of the market.

Risk management is integral to our investment process, and we strive to ensure that every risk is recognized, rational, and rewarded. A quantitative team within our Templeton Global Macro team provides ongoing and timely active risk assessment in order to keep the risk/return profile in line with our more qualitative views. For risk management, we also leverage Franklin Templeton’s independent risk management team that reviews absolute and relative exposures and risk metrics on a daily basis.

Hypothetical

Exposure

REDUCE Duration

UNHEDGED Currency

EXTEND Sovereign Credit

Strong Growth Environment

Yield Curve

Currencies

Credit Quality

Weak Growth Environment

Yield Curve

Currencies

Credit Quality

Hypothetical

Exposure

EXTEND Duration

HEDGED Currency

REDUCE Sovereign Credit

Aims to Diversify Fixed Income and Improve Alpha Potential 2



Low Correlation with Broad Markets May Offer Diversification Benefits

While short-term correlations to various asset classes will vary over time as our positioning changes with the market, Templeton Global Bond Fund—Advisor Class (TGBAX) has historically had low to negative correlations to US and global bond markets and moderate correlations to US and global equity markets over longer periods.

OUTCOME OF OUR INVESTMENT EXPERTISE

2. Source: Morningstar Direct. © 2018 Morningstar, Inc. All Rights Reserved. 1 = Perfect Positive Correlation; 0 = No Correlation; -1 = Perfect Negative Correlation. Past performance is not an indicator or a guarantee of future performance.

Templeton Global Bond Fund frequently has meaningfully different behavior than traditional fixed income strategies due to:

• Active management of portfolio-level duration

• Directional currency and duration views (both long and short) for alpha generation or risk management purposes

• Exposure to idiosyncratic opportunities, particularly emerging market countries that are more domestically driven and less vulnerable to external shocks

The resulting exposures may make Templeton Global Bond Fund a complement to traditional fixed income strategies due to its diversifying characteristics.

3-Year 5-Year 10-Year

US Treasuries (Citigroup 10-Year Treasury Index) -0.28 -0.07 -0.09

US Bonds (Bloomberg Barclays US Aggregate Index) -0.10 0.08 0.19

Global Government Bonds (Citigroup World Government Bond Index) -0.26 -0.04 0.31

Global Bonds (Bloomberg Barclays Global Aggregate Index) -0.19 0.05 0.42

US Stocks (S&P 500 Index) 0.50 0.54 0.64

Global Stocks (MSCI All Country World Index) 0.50 0.59 0.69

TGBAX’s Correlations to Select Markets2


-1.00

-0.50

0.00

0.50

1.00

1.50

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

US Treasuries (Citigroup 10-Year Treasury Index) Global Government Bonds (Citigroup World Government Bond Index)

US Stocks (S&P 500 Index) Global Stocks (MSCI All Country World Index)

TGBAX’s Monthly 1-Year Rolling Correlations to Select Markets2

10 Years Ended March 31, 2018




STRATEGY IN ACTION

Because we take a longer-term view and actively look for mispriced opportunities, we may have contrarian views for a certain amount of time. Below is an example of how our research identified an opportunity at a time when the market held a negative view.

BRAZIL

The case study in this portfolio summary reflects the analyses and opinions of Templeton Global Macro as of March 31, 2018 and may differ from the opinions of other portfolio managers, investment teams or platforms at Franklin Templeton Investments. The information provided is not a complete analysis of every material fact regarding any country, region, market, investment or strategy. Because market and economic conditions are subject to change, comments, opinions and analysis are rended as of the publication date and may change without notice. Holdings are subject to change. A portfolio manager’s assessment of a particular security, investment or strategy is not intended as individual investment advice or recommendation or solicitation to buy, sell or hold any security or to adopt an investment strategy; it is intended only to provide insight into the fund’s portfolio selection process.3. Source: FactSet. Brazilian bonds represented by Citigroup Brazilian Government Bond Index. Exchange rate chart inverted to illustrate the value movement of the Brazilian Real. This information is for general information only. The yields to maturity and exchange rates shown are intended solely to show general market conditions and do not represent the performance of any holdings of Templeton Global Bond Fund. Holdings are subject to change. As of March 31, 2018, Templeton Global Bond Fund had a 12.5% exposure to Brazil.

2015 2016 2017-Present

In late 2015, Brazil was in the midst of an economic crisis driven by previous pro-cyclical and overly-aggressive fiscal and monetary policies during the commodity boom cycle. This was compounded by a political crisis arising from a corruption scandal. However, we saw significant potential for improvement in governance in the country, as Brazilians began to reject the failed policies of the past. We increased our position in local-currency-denominated government bonds by a large amount in the fourth quarter of 2015.

Then-President Dilma Rousseff was impeached and the country began to embark on a new era of more responsible policies that should benefit the economy and the social welfare of its citizens. The new Brazilian government pushed forward with the first steps toward fiscal consolidation, lowering the ceiling on public spending and readying a possible reform of social security. The market viewed these developments favorably, and bond prices and the Brazilian real recovered meaningfully. We gained from both duration and currency exposure.

Overall, we view the country as fundamentally strong and its institutions continue to perform, despite ongoing political turmoil. We believe investors in Brazilian bonds are being appropriately compensated for the near-term risks through relatively high yields, and we continue to have a favorable outlook for the longer-term prospects of the country. Despite some volatility, Brazilian bonds and the Brazilian real continue to trend in a positive direction.

12/31/2013 12/31/2015 03/31/2018

3.96

8.59%3.32

Brazilian Real Per USD3

Yield to Maturity of Brazilian Bonds3

Gained from:

Bond Price Recovery

Appreciation of Brazilian Real

15.71%

Increased position in local-currency Brazilian government bonds




Markedly Different Exposure than the Benchmark

Our unconstrained approach allows us to invest in countries outside of the fund’s benchmark and take directional views in currencies. As such, the fund may look significantly different from its benchmark at times.

ACTIVE MANAGEMENT

Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. The Fund’s investment return and principal value will change with market conditions, and investors may have a gain or a loss when they sell their shares. Please call Franklin Templeton Investments at (800) DIAL BEN/(800) 342-5236 or visit franklintempleton.com for the most recent month-end performance.

Advisor Class shares are only offered to certain eligible investors as stated in the prospectus. They are offered without sales charges or Rule 12b-1 fees. The fund offers other share classes subject to different fees and expenses, which will affect their performance. Please see the prospectus for details.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 April 30, 2018. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.4. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change. Figures reflect certain derivatives held in the portfolio (or their underlying reference assets) and may not total 100% or may be negative due to rounding, use of any derivatives, unsettled trades or other factors.5. Fund duration reflects certain derivatives held in the portfolio (or their underlying reference assets).6. Source: Morningstar Direct. © 2018 Morningstar, Inc. All Rights Reserved. Important data provider notices and terms available at www.franklintempletondatasources.com. A rising rate period is defined as a rise of more than 1% in the yield of the 10-year US Treasury bonds. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges.

Geographic Exposures: Fund vs. Benchmark (%)4


Region Templeton Global

Bond Fund

Citigroup World Government Bond Index

Americas 44.67 35.79

Non-US Americas 34.19 2.32

USA 10.48 33.46

Asia 25.21 22.72

Asia ex-Japan 25.21 2.42

Japan 0.00 20.30

Europe 1.19 40.97

Non-EMU Europe 1.19 7.60

EMU Europe 0.00 33.37

Middle East/Africa 2.00 0.53

Supranational 0.36 0.00

Other -1.13 0.00

Cash & Cash Equivalents 27.70 0.00

Currency Exposures: Fund vs. Benchmark (%)As of March 31, 2018

Region Templeton Global

Bond Fund5


Americas 161.04 35.79

Non-US Dollar 43.73 2.32

US Dollar 117.31 33.46

Asia -19.99 22.72

Asia ex-Japan 17.93 2.42

Japanese Yen -37.92 20.30

Europe -43.05 40.97

Non-Euro 0.00 7.60

Euro -43.05 33.37

Middle East/Africa 2.00 0.53

Flexibility to Adapt to Changing Rate Environment

The fund’s current low duration reflects our view that interest rates will continue to rise in the medium term. Looking back, active duration management has helped the fund outpace its benchmark during the three most recent periods of rising interest rates, as illustrated in the table below. The outperformance was especially pronounced during the acute bond market correction in the second half of 2016.

Cumulative Returns during Rising Rate Periods: Fund vs. Benchmark (%)6


TGBAXCitigroup World

Government Bond Index

6/1/2003-6/30/2006 7.49 3.58

1/1/2009-4/30/2010 21.22 0.62

8/1/2012-1/31/2014 4.17 -1.66

8/1/2016-3/31/2018 7.08 0.33

Option-Adjusted Duration: Fund vs. BenchmarkAs of March 31, 2018

Templeton Global Bond Fund5


-0.85 7.87




RISK AND REWARD

Templeton Global Bond Fund seeks current income with capital appreciation and growth of income by investing predominantly in bonds of governments, government-related entities and government agencies located anywhere in the world.

As of March 31, 2018 Average Annual Total Returns (%) Annualized Standard Deviation (%)

1-Year 3-Year 5-Year 10-Year 15-Year 1-Year 3-Year 5-Year 10-Year 15-Year

TGBAX -0.60 2.02 1.82 5.40 7.53 3.20 6.48 5.97 8.03 7.89


8.49 3.45 1.18 1.97 3.99 3.62 5.77 5.40 6.49 6.65

Annualized Sharpe Ratios7


On a five-year rolling basis, TGBAX outperformed the Citigroup World Government Bond Index 94% of the time and outperformed the Morningstar US Fund World Bond category average 96% of the time.7

Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. The Fund’s investment return and principal value will change with market conditions, and investors may have a gain or a loss when they sell their shares. Please call Franklin Templeton Investments at (800) DIAL BEN/(800) 342-5236 or visit franklintempleton.com for the most recent month-end performance.

Advisor Class shares are only offered to certain eligible investors as stated in the prospectus. They are offered without sales charges or Rule 12b-1 fees. The fund offers other share classes subject to different fees and expenses, which will affect their performance. Please see the prospectus for details.

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 April 30, 2018. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

Total Annual Operating Expenses

With Waiver 0.68% Without Waiver 0.74%

7. Source: Morningstar Direct. © 2018 Morningstar, Inc. All Rights Reserved. Past performance is not an indicator or a guarantee of future performance.

-0.5

0.0

0.5

1.0

1.5

2.0

1 Year 3 Years 5 Years 10 Years 15 Years

TGBAX Citigroup World Government Bond Index Morningstar US Fund World Bond Category Average

Attractive Risk-Adjusted Returns

As shown below, TGBAX has offered better risk-adjusted returns than its benchmark and Morningstar category average over most major time periods.




IMPACT ON A FIXED INCOME ALLOCATION

The fund’s active duration and currency management and exposure to idiosyncratic opportunities may provide diversification benefits and improve the risk-adjusted return potential of your clients’ fixed income portfolios.

As illustrated below, the fund meaningfully improved historical risk-adjusted returns when added to a hypothetical 50% US fixed income/50% global fixed income portfolio.

Portfolio 1 Portfolio 2

US Bonds 50% 50%

Global Bonds 50% 25%

TGBAX 0% 25%

Performance data represents past performance, which does not guarantee future results. 8. Source: Morningstar Direct. © 2018 Morningstar, Inc. All Rights Reserve. All data as of March 31, 2018. Fund data is based on Templeton Global Bond Fund Advisor share class (TGBAX). For the portfolio allocations, US Bonds are represented by the Bloomberg Barclays US Aggregate Index, and Global Bonds are represented by the Bloomberg Barclays Global Aggregate Index. All hypothetical portfolios are rebalanced monthly with the reinvestment of all dividends and capital gains.Each asset class is represented by an index with the longest performance history within that asset class. If these hypothetical portfolios included other indexes and/or asset classes not shown here, they may have provided outcomes more or less favorable than those shown within these illustrations. This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. As a financial professional, only you can provide your customers with personalized advice and investment recommendations tailored to their specific goals, individual situation, and risk tolerance.Franklin Templeton does not provide legal or tax advice. Federal and state laws and regulations are complex and subject to change, which can materially impact results. Franklin Templeton cannot guarantee that such information is accurate, complete or timely; and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

Hypothetical Portfolios8

Hypothetical Annualized Portfolio Returns, Standard Deviations & Sharpe Ratios8


Portfolio 1Portfolio 2with 25% TGBAX

2.34

3.94

2.042.75

Return (%) Standard Deviation (%)

1.53

3.81

1.72

2.98


2.83

4.52

3.744.02


4.80

2.512.55

1.58


1-Year 3-Year

5-Year 10-Year

1.33

0.79

Sharpe Ratio

0.45 0.53

Sharpe Ratio

0.320.46

Sharpe Ratio

0.56

0.84

Sharpe Ratio

Portfolio 1 Portfolio 2




TEMPLETON GLOBAL MACRO TEAM

Cross-Border Research by a Deep Bench of Economists, Analysts, and Local Experts

Templeton Global Bond Fund is grounded in the in-depth research generated by the Templeton Global Macro team. The team members come from a variety of backgrounds, including the IMF, World Bank, the US Federal Reserve, and the private sector. The team complements its rigorous academic analysis with numerous in-person meetings with central bank officials, government policy

makers, and local business leaders around the world to assess fundamental economic prospects and trends.

The Templeton Global Macro team also leverages the capabilities and resources of the broader Franklin Templeton platform, including on-the-ground research from the Franklin Local Asset Management teams, which are located in various countries around the globe. This structure enables the Templeton Global Macro team to gain a true global perspective of the interaction between global economies and the world’s bond and currency markets.

Michael Hasenstab, Ph.D.Chief Investment Officer, Templeton Global Macro23 years industry experience

Sonal Desai, Ph.D. Director of Research, Templeton Global Macro24 years industry experience

Data as of March 31, 2018. Investment professionals include portfolio managers, analysts and traders.9. Joint venture partners with Franklin Templeton Investments.10. Majority ownership interest.

42RESEARCH OFFICES

12GLOBAL TRADING OFFICES

Franklin Templeton’s global footprint offers local market knowledge and around-the-clock trading

Templeton Global Macro

Franklin Local Asset Management

1944

1415

Investment Professionals

Average Years of Experience

Portfolio Managers


Americas

Bogota9

Boston

Buenos Aires

Calgary

Coral Gables

Ft. Lauderdale

Los Angeles

Mexico City

Nassau

New York City

Rio de Janeiro

Rancho Cordova

Short Hills

San Mateo

São Paulo

Stamford10

Toronto

Washington, D.C.

Europe, Middle East, Africa

Bucharest

Budapest

Cape Town

Dubai

Edinburgh

Frankfurt

Asia Pacific

Bangkok

Chennai

Ho Chi Minh City9

Hong Kong

Hyderabad

Kuala Lumpur

Melbourne

Mumbai

Seoul

Shanghai9

Singapore

Sydney


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TGB B 03/18

Franklin Templeton Distributors, Inc.One Franklin ParkwaySan Mateo, CA 94403-1906(800) DIAL BEN® / 342-5236franklintempleton.com

For Financial Professional Use Only / Not For Distribution to the Public.© 2018 Franklin Templeton Investments. All rights reserved.

WHAT ARE THE RISKS

All investments involve risks, including possible loss of principal. 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 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 markets for particular securities or types of securities are or may become relatively illiquid. Reduced liquidity will have an adverse impact on the security's value and on the fund's ability to sell such securities when necessary to meet the fund's liquidity needs or in response to a specific market event. Foreign securities involve special risks, including currency fluctuations (which may be significant over the short term) and economic and political uncertainties; investments in emerging markets involve heightened risks related to the same factors. 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 government entity may be unwilling or unable to pay interest and repay principal on its sovereign debt, or otherwise meet its obligations when due. Investments in lower-rated bonds include higher risk of default and loss of principal. Bond prices generally move in the opposite direction of interest rates. As the 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. These and other risks are discussed in the fund's prospectus.

Your clients should carefully consider a fund's investment goals, risks, charges and expenses before investing. They should read the summary prospectus and/or prospectus carefully before they invest or send money. To obtain a prospectus, which contains this and other information, please call Franklin Templeton Investments at (800) DIAL BEN/(800) 342-5236.

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