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LETTER TO STOCKHOLDERSSTRONG FINANCIAL TRACK RECORDAlthough the first six months of the fiscal year were unsettled as a result of global financial events,maintaining a strong balance sheet and nimble structure has been a cornerstone of our long-termmanagement strategy. Additionally, it has provided us with the freedom to return a significant portion ofcurrent earnings to shareholders, including payment of $192.8 million in common stock dividends and$376.9 million in common stock repurchases.As cost reductions were generally required across the industry, our low levels of debt and substantialliquidity allowed us to take a measured and thoughtful approach to our expense reduction efforts duringthe first half of the fiscal year.The strategies we implemented have proven effective in reducing expenses and improving efficiencies,and thus have positioned us well for the future. Total expenses for the year were down $941.9 millionor 24% compared to last year, largely offsetting the 30% decrease in revenue.LOOKING FORWARDAs a firm, we were tested by a challenging market throughout the year, but the dedication, hard workand integrity of our employees did not waver. We are extremely proud of their efforts and pleased withtheir ability to act quickly under difficult circumstances, while persistently adhering to the values andideals that this company was founded on over 60 years ago.As we enter 2010, we will take with us the lessons learned during the past year. While the new yearpresents a challenging business environment, our top priorities remain our focus on investment excellenceand responding to the needs of our clients.Thank you for your continued support and trust.Sincerely,Gregory E. JohnsonPresident and Chief Executive OfficerFranklin Resources, Inc.1. Barron’s “The Best Families in a Bruising Year,” February 2, 2009. For the one- and five-year periods ended 12/31/08, Franklin Templetonranked 26 out of 59 and 16 out of 53 fund families, respectively. Barron’s did not include sales charges in calculating returns. Each fund’s returnwas measured against those of all funds in its Lipper category, resulting in a percentile ranking which was then weighted by asset size, relative tothe fund family’s other assets in its general classification. To qualify for Lipper/Barron’s Fund Survey, a group must have had at least three fundsin Lipper’s general U.S.-stock category, as well as one in the world equity category, which combines global and international funds. They alsomust have had at least one mixed-equity fund, which holds stocks and bonds, at least two taxable-bond funds and one tax-exempt offering. Pastperformance does not guarantee future results.2. Source: Lipper ® Inc. Lipper rankings do not include sales charges. Franklin Templeton funds are compared against a universe of all shareclasses. Past performance cannot predict or guarantee future results.3. Down market defined as period from December 1, 2007 through March 6, 2009.4. Includes long-term, U.S.-based, open-end retail mutual funds sold by non-proprietary firms that report data to the Investment Company Institute.Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. Toobtain a prospectus, which contains this and other information, for any U.S.-registered Franklin Templetonfund, investors should talk to their financial advisors or call Franklin Templeton Distributors, Inc. at(800) DIAL BEN ® or (800) 342-5236. Please read the prospectus carefully before investing.4