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

Welcome to Franklin Resources Earnings Commentary for the quarter ended June 30, 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 filings. This commentary was prerecorded.

Hello, and welcome to the third quarter earnings commentary. I'm Greg Johnson, CEO; along with Ken Lewis, our CFO. We're pleased to report another strong quarter of results despite persistent global market headwinds. Most importantly, relative investment performance remains solid across all time periods. Long-term net new flows were $4.7 billion, reflecting continued penetration of our global investment capabilities into institutional distribution channels. And profitability remains strong, as did capital management for a combination of opportunistic share repurchases, and cash dividends have returned $1.7 billion or 92% of net income to shareholders over the trailing 4 quarters. Overall, U.S. relative performance rankings remain strong, especially within our fixed income and hybrid funds, taxable and tax-free fixed income. Relative performance percentages were essentially unchanged for March with strong long-term performance in municipal bonds and global fixed income. Franklin equity performance continues to be a standout with strong relative performance across hybrid growth and value strategies. Mutual Series was essentially unchanged, although we did see modest improvements in long-term performance since March. Eurozone exposure in a corresponding underweight to a more resilient U.S. market contributed to weakness in Templeton equity performance. As and when Eurozone market conditions improve, we expect to see a rebound in the performance of Templeton products. Assets under management ended the quarter about 2.5% lower at $707 billion, and the simple monthly average AUM increased slightly to almost $711 billion. The change in monthly average AUM, however, does not fully reflect the daily market movements that we experienced. Daily average AUM, which was about $711 billion in Q2, decreased almost 1% to $705 billion this quarter. And as you know, it's the daily average AUM that drives much of our revenue. The European debt crisis and concerns of a weakening global economy pushed equity markets lower during the…

Thanks, Greg. We're pleased to report another solid quarter of operating results, despite the challenging market backdrop for asset managers. Operating income for the quarter was $643 million, a 4% increase from the prior quarter due to a combination of lower expenses in the current quarter and the nonrecurring items that impacted last quarter's results. Net income was $455 million, a 10% decrease from last quarter, as net nonoperating expenses were $28 million. Earnings per share was $2.12, only a 9% decrease due to the continued net decrease in shares outstanding. Investment management fees decreased 1% due to the several elements of the change in assets under management that Greg highlighted. First, it's important to remember that we earn much of our revenue based on daily average assets under management. And sometimes, the daily average can differ from the monthly average as it often does during more volatile quarters. For example, the daily average of the MSCI All Country World Index was 1.6% lower than the monthly average this quarter. And second, the slight mix shift in assets under management away from equities and internationally sourced assets under management factored into the quarter's effective fee rate. I'd like to remind everyone that the effective fee rate is only a ratio of revenues to assets under management and does not reflect a change in product level fees. Those factors were partially offset by $10 million of performance fees in the quarter. Sales and distribution fees were lower by 3%, reflecting both the decline in average assets under management and lower sales in the quarter. Shareholder servicing fees increased a bit, reflecting the increase in billable accounts and the normal shift between open and closed accounts. During the quarter, 200,000 closed accounts were purged in Canada. In July, about 4.3 million U.S.…