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LETTER TO STOCKHOLDERSHaving announced a unified approach to international distribution last year, we were able to successfullyintegrate our advisor-sold and institutional businesses during fiscal year 2009. The leadership in eachcountry outside of the U.S. has responsibility for all distribution in their region, which allows them tofocus on the best opportunities. The supporting marketing structure was also integrated, whichimproved service and generated significant efficiencies.During the first half of the fiscal year, our focus was to proactively reach out to our clients. As therecession intensified, the company featured a special section on its global websites addressing marketvolatility. This resource was created to provide information to financial advisors and investors to helpthem stay focused on their long-term goals.The strategic use of technology in marketing has enabled us to better meet the diverse and increasinglysophisticated needs of investors around the world. The company increased its use of video to delivertimely, direct messages from our portfolio managers to clients, and expanded its digital outreachcapabilities via email, websites and social media.In the U.S., Franklin Templeton ranked #1 in net new flows for the quarter ended June 30, 2009 within thenon-proprietary channel. 4 Topping this chart represents a significant milestone, particularly because ofthe firm’s broad diversification across asset classes. Typically, top sales rankings favor specific investmentstyles that mimic the current market sentiment and make it difficult for firms with diversified positioningto achieve this recognition.Capitalizing on its strong reputation in wealth management and solid results, Fiduciary Trust experiencedpositive net sales for the year, and for the second consecutive year, it enjoyed record new business.Quotential ® , Franklin Templeton’s asset allocation offering in Canada, now has 65 portfolios representedon 13 insurance company platforms, which solidifies its position as the country’s most widely usedinstitutional investment solution. In addition, in July, our Canadian business hosted its annualInvestment Outlook and Opportunities Forum 2009. The event featured presentations from portfoliomanagers and was attended by over 1,800 investment advisors and clients, as well as viewed by over100,000 individuals on Canada’s business television network.In Latin America, our long-term presence allowed us to leverage a diversified network of distributionpartners and close relationships with clients, which resulted in market share growth. For instance, inChile, our market share doubled from a year earlier. We partnered with local distributors in Brazil tolaunch four locally-managed funds. Our Mexico office officially opened a new local asset managementsubsidiary in January, and launched three funds available to Mexican investors.The company increased its ownership in Dubai-based Algebra Capital to 40% as we continue to investin a region that we believe has long-term strategic importance. In addition, we expanded our assetmanagement capabilities in Vietnam by securing our first balanced mandate managed by our local jointventure investment team.Our sovereign wealth business continues to develop. We opened an office in Kuala Lumpur, Malaysiaand won three separate mandates from the Malaysian government.3