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investments, and swung to a positive $18.2 billion in the second half as long-term sales increased, mostnotably in our fixed-income funds. Overall, we had negative net new flows of $5.5 billion for the fiscalyear.During fiscal year 2009, we took steps to manage our business and our cost structure to respond to themarket conditions and resulting decrease in revenue, including reducing expenditures in areas such as traveland entertainment, advertising, and contractor and professional fees, and deferring non-business criticalinitiatives and hiring. We also announced reductions to our global workforce of approximately 10%. Theseverance costs related to these workforce reductions amounted to $38.4 million for the fiscal year. Wecontinue to assess cost reduction measures as we adapt to the unprecedented changes affecting our industry.Despite the ongoing financial crisis, the relative performance of our sponsored investment productsremained strong, with 85% to 90% of our U.S.-registered long-term mutual funds in the top half of theLipper performance rankings as both equity and fixed-income funds showed significant improvement infiscal year 2009.Challenging and volatile market conditions might continue to be present in the foreseeable future. Aswe confront the challenges of this economic environment, we expect to continue to focus on the investmentperformance of our sponsored investment products and on providing high quality customer service to ourclients. While we are focused on reducing costs, we will also seek to attract, retain and develop employeesand invest strategically in systems and technology that will provide secure, stable environments andeconomies of scale. We will also seek to continue to protect and further our brand recognition whiledeveloping and maintaining broker/dealer and client relationships. The success of these and other strategiesmay be influenced by the factors discussed in Item 1A Risk Factors of this Annual Report, and other factorsas discussed herein.Results of Operations(dollar amounts in millions, except per share data)for the fiscal years ended September 30, 2009 2008 20072009vs. 20082008vs. 2007Operating Income .............................. $1,202.6 $2,099.0 $2,067.5 (43)% 2%Net Income .................................... 896.8 1,588.2 1,772.9 (44)% (10)%Earnings Per ShareBasic ..................................... $ 3.89 $ 6.72 $ 7.11 (42)% (5)%Diluted .................................... 3.87 6.67 7.03 (42)% (5)%Operating Margin 1 ............................. 29% 35% 33%1 Defined as operating income divided by total operating revenues.Net income decreased in fiscal year 2009 primarily due to an $896.4 million decline in operatingincome. Adverse market conditions led to a 27% decrease in our simple monthly average assets undermanagement, which resulted in a 30% decrease in our operating revenues. As described above, we havetaken actions to reduce our operating expenses in response to the market conditions and resulting revenuedecreases, which contributed to a 24% decrease in operating expenses for the fiscal year.Operating income increased in the fiscal year ended September 30, 2008 (“fiscal year 2008”),consistent with a 3% decrease in operating revenues and a 5% decrease in operating expenses. Operatingrevenues remained stable despite the sustained volatility experienced in the financial markets as we beganthe year with a high level of assets under management. We also benefited from the diversification of ourproducts and customer base and successful marketing campaigns. During fiscal year 2008 we initiated stepsto manage our business and our cost structure in response to the deteriorating market conditions.39