Gregory Eugene Johnson - Chief Executive Officer, President, and Director Kenneth Allan Lewis - Chief Financial Officer, Principal Accounting officer and Executive Vice President

Welcome to the Franklin Resources Earnings Commentary for the quarter ended March 31, 2012. Statements made in this commentary regarding Franklin Resources Inc., which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from any future results expressed or implied by such forward-looking statements. These and other risks, uncertainties and other important factors are described in more detail in Franklin's recent filings with the Securities and Exchange Commission, including in the Risk Factors and MD&A sections of Franklin's most recent Form 10-K and 10-Q filing. This commentary was prerecorded.

Hello, and welcome to the second quarter earnings commentary. I'm Greg Johnson, CEO; along with Ken Lewis, our CFO. The March quarter got off to a strong start for us as increased sales activity and the market tailwind led to increased assets under management. Net new flows turned positive again this quarter, driven by the increase in sales, with long-term flows positive across all investment objectives for the first time in nearly 3 years. Most importantly, long-term relative investment performance remained strong across the firm. Net income also rebounded, and quarterly earnings per share of $2.32 reached a record high. Relative investment performance for the U.S. fund range is highlighted on Slide 6. Of course, this is specific to a subset of our overall business, and we encourage you to take a look at the broader performance summary in our 10-Q, which was also filed this morning. Overall, U.S. relative performance rankings were little changed from December as improving fixed income performance was offset by weaker equity performance. The biggest detractor from equity performance rankings was the Franklin Income Fund, which represents 53% of Franklin equity assets. The fund underperformed its Lipper peer group average by about 80 basis points for the 1-year period, or 66 percentile, due to its traditional overweighting in utility and energy sectors that underperformed the broad market in the quarter. Importantly, long-term performance remains outstanding. Fixed-income performance improved across-the-board, although the strong year-to-date rebound in Templeton Global Bond's performance has not yet fully turned the one-year number. Assets under management increased 8% for the quarter to $726 billion. Monthly AUM increased 5%. Turning to Slide 9. The mix of AUM by investment objective and sales region was little changed since December. Strong equity markets and fund performance added $51 billion to assets under management this…

Thanks, Greg. The strong rebound in assets under management and cost management efforts translated into improved earnings this quarter. Operating income was $617 million, a small decrease from last quarter, but net income increased 5% to $503 million. Earnings per share of $2.32 was a quarterly record and rose 3% higher year-over-year despite flat year-over-year net income due to the net decrease in shares outstanding. Investment management fees increased 5% from the prior quarter, consistent with the increase in average assets under management, a fairly stable effective fee rate, but this was partially offset by one less day in the quarter. Sales and distribution fees increased 12%. The asset-based component, which makes up about 2/3 of this line, increased about 4%, and that's consistent with the increase in average assets under management and the number of days in the period. The sales-based component increased about 30% due to the strong increase in commissionable sales in the quarter, particularly in the United States. Other net revenue was $10 million. The decrease from the prior quarter was mostly due to nonrecurring items of about $14 million, primarily related to the wind-down of our auto finance business and an accrual adjustment in our private equity business. As a reminder, we began consolidating certain private equity sponsored investment products this fiscal year, and as a result, we expect this line item to be higher than it was in 2011. Operating expenses increased 11%, which was more than the increase in revenue for the quarter. 3/4 of the increase in expense was due to sales, distribution and marketing expense that increased by $85 million. Almost half of the increase was related to higher sales and consistent with the increase in the sales component of sales and distribution fee revenue. The asset-based component increased $43.5 million.…