Franklin Templeton Global Plus

PRODUCT PROFILE FOURTH QUARTER 2012

STRATEGY OVERVIEW • High alpha-seeking global strategy that uses a research-driven, value-based approach that seeks to capitalize on global interest rates, and sovereign credit trends. Primary focus includes government and government-related issuance with a 25% maximum limit on below-investment grade. • Seek to maintain a portfolio risk profile commensurate with the volatility of the benchmark (6% to 9% standard deviation annually under normal market conditions). PERFORMANCE DATA** (AS OF 12/31/12) Average Annual Total Returns (USD%) Quarter 1 Year 3 Years 5 Years 10 Years Franklin Templeton Global Bond Plus Composite—Gross of Fees 4.1 17.2 9.5 11.2 11.9 Franklin Templeton Global Bond Plus Composite—Net of Fees 4.0 16.7 8.6 10.2 10.7 JP Morgan Global Index -1.8 1.3 4.9 5.7 6.2 17.2 20 9.5 11.2 11.9 4.9 5.7 6.2 10 4.1 -1.8 1.3 0 -10 Quarter 1 Year 3 Years 5 Years 10 Years Franklin Templeton Global Bond Plus Composite—Gross of Fees JP Morgan Global Government Bond Index Calendar Year Returns (%) 20.2 23.6 24 17.2 14.8 15.7 14.5 13.7 12.0 12.3 10.8 10.1 7.2 6.4 7.9 5.9 8 1.3 -1.5 1.9 -2.3 -6.5

-8 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Franklin Templeton Global Bond Plus Composite—Gross of Fees JP Morgan Global Government Bond Index

QUARTERLY MARKET REVIEW • During the fourth quarter, negotiations over the so-called “fiscal cliff” did not show signs of concluding in a grand fiscal bargain to address long-term fiscal problems in the United States. • Overall, financial markets remained fairly stable in the fourth quarter as investor concerns regarding Europe eased. While European economic activity continued to stagnate, we believe investors have become increasingly aware that a challenging growth environment in the eurozone is not likely to automatically lead the monetary union to break apart. • In China, evidence continued to affirm our view that the country has not been facing a “hard landing.” Many high- frequency indicators saw consecutive months of improvement during the fourth quarter.

QUARTERLY PERFORMANCE ATTRIBUTION1 • The strategy’s overall currency exposures contributed to absolute performance for the quarter. Exposure to in Asia ex-Japan contributed to absolute performance. The strategy’s net-negative exposure to the Japanese yen also added to absolute results. The strategy’s exposures to peripheral European currencies against the euro detracted from absolute performance over the quarter. • Interest-rate exposures, particularly in Europe, contributed to the strategy’s absolute performance for the quarter. The strategy’s sovereign credit exposures also added to absolute results.

INVESTMENT OUTLOOK AND STRATEGY • As central banks in several developed countries continue to print money and follow unorthodox monetary policies, the long-term consequences remain uncertain. • We believe that, ultimately, much of the excess liquidity being created is likely to seek more attractive opportunities globally, raising inflationary risks in many emerging markets and putting upward pressure on currencies as well as many commodity prices. • We have continued to seek to position ourselves to manage the interest-rate risks that we expect from the combination of historically low interest rates and easy monetary policy among the largest developed economies, rising price pressures emanating from China, and global demand that we believe is far from collapsing. Past performance does not guarantee future results. *There is no assurance that the strategy will achieve its investment objectives. The strategy is managed in a benchmark unconstrained manner, so the target risk profile is provided solely to illustrate the manager’s targets with respect to strategy characteristics, based on the strategy’s historical experience during normal market conditions. Thus, the characteristics do not take into account future market risks or changing economic conditions and are not a prediction or guarantee of future performance. An investor in the strategy may experience significantly different risk characteristics including greater volatility, higher tracking error and lower returns than the expected characteristics, including the potential for loss of principal amounts invested. **Periods of less than one year are not annualized. Franklin Templeton Global Bond Plus Information is supplemental to the Historical Performance

PORTFOLIO CHARACTERISTICS OF A REPRESENTATIVE ACCOUNT1 (AS OF 12/31/12)

Franklin Templeton Global Bond Plus JP Morgan Global Government Bond Index 3.8% 1.2% Average Duration 1.6 years 6.8 years Average Credit Quality* A- A

PORTFOLIO DIVERSIFICATION (%) OF A REPRESENTATIVE ACCOUNT (AS OF 12/31/12) Credit Rating Breakdown1,2 30%

22.2

16.8 16.2 14.5 15% 8.6 6.5 3.9 4.5 1.2 1.8 1.3 0.9 0.1 1.0 0.6 0.0 0% AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB- B+ B B- NR**

Geographic Weightings1,2 Active Allocations vs. JP Morgan Global Government Bond Index1,2

EUROPE/AFRICA 39.6 EUROPE/AFRICA 5.6 NON-EMU EUROPE/AFRICA 30.1 NON-EMU EUROPE/AFRICA 21.9 Poland 10.7 Poland 10.7 Hungary 6.2 Hungary 6.2 Ukraine 3.8 Ukraine 3.8 Sweden 3.8 Sweden 3.3 Norway 1.3 Norway 1.3 Lithuania 1.3 Lithuania 1.3 Russia 1.3 Russia 1.3 Israel 1.0 Israel 1.0 Republic of Serbia 0.5 Republic of Serbia 0.5 Iceland 0.3 Iceland 0.3 Denmark 0.0 Denmark -0.6 United Kingdom 0.0 United Kingdom -7.3 EMU 9.4 EMU -16.2 Ireland 9.2 Ireland 9.2 Slovenia 0.3 Slovenia 0.3 Belgium 0.0 Belgium -1.8 France 0.0 France -6.8 Germany 0.0 Germany -5.9 Italy 0.0 Italy -6.2 Netherlands 0.0 Netherlands -1.9 Spain 0.0 Spain -3.0 ASIA 34.2 ASIA 4.8 ASIA, NON-JAPAN 34.2 ASIA, NON-JAPAN 33.1 South Korea 14.0 South Korea 14.0 Malaysia 8.5 Malaysia 8.5 Australia 3.9 Australia 2.9 Indonesia 3.0 Indonesia 3.0 Singapore 2.5 Singapore 2.5 Philippines 1.0 Philippines 1.0 Sri Lanka 0.9 Sri Lanka 0.9 Vietnam 0.4 Vietnam 0.4 JAPAN 0.0 JAPAN -28.4 AMERICAS 7.9 AMERICAS -28.7 NON-USA AMER. 7.6 NON-USA AMER. 5.9 Mexico 4.4 Mexico 4.4 Brazil 2.9 Brazil 2.9 Venezuela 0.2 Venezuela 0.2 Peru 0.1 Peru 0.1 Canada 0.0 Canada -1.7 USA 0.3 USA -34.6 United States 0.3 United States -34.6 SUPRANATIONAL 1.3 SUPRANATIONAL 1.3 ST CASH AND CASH EQUIVALENTS 17.0 ST CASH AND CASH EQUIVALENTS 17.0 0% 8% 16% 24% 32% 40% -35% -21% -7% 7% 21% 35%

*Source: Franklin Templeton Investments. The average credit quality (ACQ) rating may change over time. The portfolio itself has not been rated by an independent rating agency. The letter rating, which may be based on bond ratings from different agencies, is provided to indicate the average credit rating of the portfolio’s underlying bonds and generally ranges from AAA (highest) to D (lowest). The ACQ is determined by assigning a sequential integer to all credit ratings AAA to D, taking a simple, asset-weighted average of debt holdings by market value and rounding to the nearest rating. The risk of default increases as a bond’s rating decreases, so the ACQ provided is not a statistical measurement of the portfolio’s default risk because a simple, weighted average does not measure the increasing level of risk from lower rated bonds. The ACQ is provided for informational purposes only. Derivative positions and unrated securities are not reflected in the ACQ. **The NR category includes securities that are not rated and securities not covered by a ratings agency. The N/A category may encompass negative cash, net currency forwards, and negative derivative (market value). Information is supplemental to the Historical Performance FRANKLIN TEMPLETON INSTITUTIONAL

PORTFOLIO DIVERSIFICATION (%) OF A REPRESENTATIVE ACCOUNT (CONTINUED) Currency Weightings1,2 Active Allocations vs. JP Morgan Global Government Bond Index1,2

AMERICAS 64.6 AMERICAS 27.9 US DOLLAR 49.5 US DOLLAR 14.6 NON-USA AMER. 15.0 NON-USA AMER. 13.3 Mexican Peso 8.2 Mexican Peso 8.2 Chilean Peso 3.8 Chilean Peso 3.8 Brazilian Real 2.9 Brazilian Real 2.9 Peru Nuevo Sol 0.1 Peru Nuevo Sol 0.1 Canadian Dollar 0.0 Canadian Dollar -1.7 ASIA 39.4 ASIA 10.0 ASIA, NON-JAPAN 50.9 ASIA, NON-JAPAN 49.9 South Korean Won 15.7 South Korean Won 15.7 Malaysian Ringgit 13.4 Malaysian Ringgit 13.4 Singapore Dollar 8.3 Singapore Dollar 8.3 Australian Dollar 4.6 Australian Dollar 3.6 Indonesian Rupiah 3.0 Indonesian Rupiah 3.0 Indian Rupee 2.8 Indian Rupee 2.8 Philippine Peso 2.2 Philippine Peso 2.2 Sri Lanka Rupee 0.9 Sri Lanka Rupee 0.9 JAPANESE YEN -11.5 JAPANESE YEN -39.9 EUROPE/AFRICA -3.9 EUROPE/AFRICA -37.9 PERIPHERY EUROPE/E. EUROPE 28.2 PERIPHERY EUROPE/E. EUROPE 19.9 Polish Zloty 11.2 Polish Zloty 11.2 Swedish Krona 11.2 Swedish Krona 10.7 Hungarian Forint 3.0 Hungarian Forint 3.0 Norwegian Krone 1.9 Norwegian Krone 1.9 Israeli Shekel 1.0 Israeli Shekel 1.0 Danish Krone 0.0 Danish Krone -0.6 British Pound 0.0 British Pound -7.3 EURO -32.2 EURO -57.8 -33% -13% 7% 27% 47% 67% -58% -36% -14% 8% 30% 52%

SUPPLEMENTAL PERFORMANCE STATISTICS* (AS OF 12/31/12) Risk and Return Characteristics** 10 Years 5 Years 3 Years Franklin Templeton Global Bond Plus Composite (Gross of Annualized Performance (USD%) Fees) vs. Mercer Global Fixed Unhedged Universe (USD) Franklin Templeton Global Bond Plus 11.9 11.2 9.5 5-Year Period Ending September 30, 2012 Composite—Gross of Fees 13 8.29 1.4 10.2 0.71 JP Morgan Global Government Bond Index 6.2 5.7 4.9

11 5.97 1.2 7.9 0.41 Tracking Error vs. JP Morgan Global Government Bond Index 7.5 9.4 9.5 9 3.65 1.0 5.6 0.11

Information Ratio3 vs. JP Morgan Global Government Bond Index 0.8 0.6 0.5 7 1.32 0.8 3.3 -0.20

Alpha 5 -1.00 0.6 1.0 -0.50 Return Alpha Reward to Tracking Information vs. JP Morgan Global Government Bond Index 6.9 7.9 6.8 Risk Error Ratio Franklin Templeton Global JP Morgan Global Bond Plus Composite Government Bond Index

*Periods of more than one year are annualized. **Source: Mercer Global Investment Manager Database. As of the quarter ended September 30, 2012. Peer universe data for the most recently completed quarter was not available at the time this material was printed. The peer universe includes unaffiliated institutional asset managers that manage similar mandates. Universe percentile rankings were calculated using gross of fees performance. Past performance does not guarantee future results and results may differ over future time periods. Franklin Templeton Global Bond Plus

INVESTMENT PHILOSOPHY We believe that applying our bottom-up, research-driven approach focused on identifying potential sources of high current income worldwide and seeking to capitalize on global interest rates and currency trends provides the best potential for strong risk-adjusted returns. This is a high alpha-seeking global strategy that may include allocations to both developed and emerging markets; however, below investment-grade exposure is typically limited to not more than 25% of total assets. INVESTMENT PROCESS AND PORTFOLIO CONSTRUCTION • In-Depth Macroeconomic Fundamental Research and Analysis: Conduct independent analysis of countries, interest rates, and exchange rates using proprietary models and research. Research analysts specialize by geographic region and conduct frequent discussions with key local decision makers. The team’s research drives country weightings in addition to target ranges for duration, currency, and cash. • Long-Term Focused: Maintain a 12- to 18-month outlook. • Portfolio Construction: Build diversified portfolios seeking the most attractive risk-return profile utilizing and horizon analysis. • Disciplined Approach: Adhere to long-term strategy through changing market environments, supported by analysis and monitoring from Franklin’s internal risk management group. INTEGRATED RESEARCH APPROACH The Franklin Templeton Global Team exchanges insight and information with fixed income and equity investment professionals around the globe.

WEEKLY Local Asset Management1 31 Investment Professionals AVERAGE EXPERIENCE: 12 YEARS* WEEKLY International Bond Team Templeton Emerging Markets (SAN MATEO, SINGAPORE) MONTHLY Franklin Templeton Equity Research Team Fixed Income Group 16 Investment Professionals AVERAGE EXPERIENCE: 12 YEARS* 53 Investment Professionals 148 Investment Professionals AVERAGE EXPERIENCE: 12 YEARS* AVERAGE EXPERIENCE: 14 YEARS* Corporate Credit Templeton Global Equity Mortgage MONTHLY Bank Research Team International Municipals 37 Investment Professionals Bond Team Quantitative AVERAGE EXPERIENCE: 17 YEARS*

1. This unit is comprised of investment professionals located in affiliates of and joint venture partners with Franklin Templeton Investments. The Local Asset Management Group is not a part of, but does share research with, Franklin Templeton Fixed Income Group. As of December 31, 2012. Investment professionals include portfolio managers, analysts and traders. *Represents number of years of industry experience. INVESTMENT TEAM Franklin Templeton Global Bond Plus Portfolio Management Team Years with Firm Years Experience Michael Hasenstab, Ph.D. 14 18 Canyon Chan, CFA 21 21 Sonal Desai 319 Additional Resources Global Sovereign/EMD Local Asset Management Quantitative Product Managers Years with Firm Years Experience Elsa G. Goldberg 516 Susan Wong, CFA 78 Harry A. Phinney <1 6

COMPLIANCE STATEMENT AND OTHER INFORMATION Franklin claims compliance with the Global Investment Performance Standards (GIPS®). Franklin (the “firm”) encompasses the equity, fixed income and balanced accounts managed by Franklin Advisers, Inc., and related Franklin affiliates, including, effective January 1, 2007, the equity accounts managed by the institutional investment teams of Franklin Templeton Institutional, LLC under the former firm name of Fiduciary Global Advisors. The combined equity assets of Franklin and Fiduciary Global Advisors form the Franklin Equity Group (formerly Franklin Global Advisers prior to June 30, 2010) unit of Franklin. Effective January 1, 2006, the fixed income assets managed from that date forward by Franklin Templeton Institutional, LLC (“FTI”) or its related affiliates (managed previously by Fiduciary Trust Company International - Institutional Division or “FTCI’s Institutional Division”) that went through the institutional portfolio review process were combined with the fixed income assets of Franklin to form the Franklin Templeton Fixed Income unit of Franklin. Franklin Templeton Global Bond Plus Composite consists of all portfolios managed on a fully discretionary basis with an investment objective that seeks to achieve above average total return by investing principally in a portfolio of fixed or floating rate debt securities and debt obligations issued by government or government-related entities worldwide. The strategy may also purchase debt obligations issued by supranational entities organized or supported by several national governments, such as the International Bank for Reconstruction and Development or the European Investment Bank. The strategy may invest a portion in below investment grade bonds (rated below BBB-). The strategy may also utilize financial derivative instruments dealt in either regulated or over-the- counter markets for investment purposes. These financial derivative instruments which are used on a less frequent basis may include, inter alia, swaps (such as credit default swaps or total return swaps), forwards and cross forwards, futures contracts (including those on government securities), as well as options. The strategy regularly takes tactical exposure to various foreign currencies, including through the frequent use of foreign currency forward contracts and cross forwards, and, to a lesser degree, futures contracts and currency options. Total returns are presented in U.S. dollars both gross and net of investment advisory fees, are inclusive of commissions and transaction costs, and assume reinvestment of any dividends, interest 1 income, capital gains, or other earnings. If mutual funds are included in a composite, gross of fee returns are based on the primary share class (typically Class A) and are calculated by adding ⁄12 of the funds’ annual expense ratio, which includes management fees and all other fund expenses, to the 12 monthly returns for each fiscal year. Net of fee returns for separate accounts are net of actual management fees. Returns for periods of less than one year are not annualized. The performance presented for Franklin is in compliance with GIPS® from January 1, 2000 to the present. Past performance does not guarantee future results and results may differ over future time periods. The JP Morgan Global Government Bond Index is used as a benchmark. The benchmark is used for comparative purposes only and is provided to represent the investment environment existing during the time periods shown. The JP Morgan Global Government Bond Index is a market value weighted fixed income index comprised of government bonds in developed countries. Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request. To receive a complete list and description of Franklin composites (including any single account mutual fund composite) and/or a presentation that adheres to the GIPS® standards for any composite, contact your Franklin Templeton Institutional representative at 1.800.321.8563. Effective with the third quarter of 2008, composite returns in base currency are translated to other currencies using London FX rates instead of New York rates for all time periods presented, which may result in revisions to multi-currency returns compared to what was previously reported for prior periods. CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute. Explanatory Notes 1. Portfolio information is based solely on a representative account taken from the Franklin Templeton Global Bond Plus Composite. The information is historical, may not reflect current or future characteristics, and may vary among individual separate accounts depending on a variety of factors such as portfolio size, specific investment guidelines and inception dates of the individual accounts. 2. Percentages may not equal 100% due to rounding. Credit rating distribution, geographic diversification, active allocation information, and currency weightings information is historical and may not reflect current or future portfolio characteristics. 3. Information ratio is a way to evaluate a manager’s ability to outperform a benchmark in relation to the risk that manager is assuming, with risk defined as deviation from the benchmark. This measure is calculated by dividing the portfolio’s excess return (portfolio return less the benchmark return) by the tracking error (derived by taking the standard deviation of the monthly differences between the portfolio return and the benchmark return over time). This piece is intended for institutional investment management consultants or investors interested in institutional products and services available through Franklin Templeton. Various account minimums or other eligibility qualifications apply depending on the investment strategy or vehicle. © 2013 Franklin Templeton Investments. All rights reserved. 20121231_CO9550_INST_US_USD