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OverviewWe are a global investment management company and derive substantially all of our operatingrevenues and net income from providing investment management and related services to our retail andinstitutional mutual funds, unregistered funds, and to institutional, high net-worth and separately-managedaccounts and other investment products. Our services include fund administration, shareholder services,transfer agency, underwriting, distribution, custodial, trustee and other fiduciary services. Our sponsoredinvestment products and investment management and related services are distributed or marketed to thepublic globally under six distinct brand names: Franklin, Templeton, Mutual Series, Bissett, Fiduciary Trustand Darby.We offer a broad range of sponsored investment products under equity, hybrid, fixed-income and cashmanagement categories that meet a wide variety of specific investment needs of individual and institutionalinvestors. Cash management consists of U.S.-registered money market funds and non-U.S.-registered funds(“Non-U.S. Funds”) with similar investment objectives.The level of our revenues depends largely on the level and relative mix of assets under management.As noted in the “Risk Factors” section set forth above in Item 1A of this Annual Report on Form 10-K, theamount and mix of our assets under management are subject to significant fluctuations and can negativelyimpact our revenues and income. To a lesser degree, the level of our revenues also depends on the level ofmutual fund sales and the number of mutual fund shareholder accounts. The fees charged for our servicesare based on contracts with our sponsored investment products or our clients. These arrangements couldchange in the future.Our secondary business is banking/finance. Our banking/finance group offers retail banking andconsumer lending services and private banking services to high net-worth clients. Our consumer lendingand retail banking activities include consumer credit and debit cards, real estate equity lines, home equity/mortgage lending, and automobile lending related to the purchase, securitization, and servicing of retailinstallment sales contracts originated by independent automobile dealerships.During the fiscal year ended September 30, 2009 (“fiscal year 2009”), the global financial crisis thatbegan in 2008 continued and the economy remained in a recession. The turmoil in the global financialmarkets during the first half of the fiscal year, evidenced by 31% decreases in both the MSCI World andS&P 500 indexes, negatively impacted the entire asset management industry. The unprecedented downturnin the markets significantly affected our assets under management, fee revenues and non-operating income,all of which decreased sharply during the fiscal year.Governments and central banks around the world focused on increasing liquidity in the capital marketsand easing the financial crisis. Credit conditions began to improve during the second half of the fiscal year,as credit availability increased and credit spreads tightened. Improvement in market conditions was alsoindicated by increases of 42% and 34% in the MSCI World and S&P 500 indexes during the second half.Our results of operations improved during our third and fourth fiscal quarters consistent with the positivemarket performance.Our total assets under management at September 30, 2009 were $523.4 billion, 3% higher than theywere at September 30, 2008. However, simple monthly average assets under management for the twelvemonths ended September 30, 2009 decreased 27% from the prior fiscal year due to significantly lowerlevels of assets under management during the first half of the fiscal year. Total assets under managementwere negatively impacted by market depreciation of $90.0 billion during the first half of the fiscal year andthen benefited from market appreciation of $115.4 billion during the second half. Net new flows were anegative $23.7 billion during the first half of the fiscal year as investor demand shifted to lower risk38