Gregory Eugene Johnson - Chairman, President & Chief Executive Officer Kenneth A. Lewis - Chief Financial Officer & Executive Vice President.

Welcome to Franklin Resources' Earnings Commentary for the Quarter Ended June 30, 2015. 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 pre-recorded..

Hello and thank you for joining today to discuss the third quarter results. I am Greg Johnson, CEO, along with Ken Lewis, our CFO. The current market environment with heightened concerns over volatility, currency exposure, fluctuating energy prices, and rising rates presents a number of challenges to investors.

First, I'd like to share a few highlights for the quarter. Delivering strong investment performance for our clients remains our top priority and we're pleased to see that relative investment performance of our U.S.

retail and cross-border fixed-income products remain strong with the percentage of assets in the top two quartiles increasing since March overall standard periods. The outperformance of our global fixed-income funds helped to ease redemption pressure on those funds resulting in lower outflows. The U.S.

and cross-border Franklin K2 Alternative Strategies funds, which together attracted over $600 million in net flows for the quarter have been our fastest growing new fund launch in the history of the company. The cross-border fund is now available in 23 countries after launching in 14 new countries since March with 9 more in progress.

Despite the current headwinds tempering flows we continue to deliver solid financial results and distribute excess capital to our shareholders. Operating income was up for the quarter at $770 million, a 2% increase despite flat revenue.

And on the capital management front we've returned $1.4 billion to shareholders over the trailing 12 months through dividends and repurchases. We also continue to enhance our product offerings and during the quarter launched a new range of Retirement Payout funds for Defined Contribution participants.

Our retirement planning has historically focused on asset accumulation. Products to optimize the distribution of those assets in retirement require further innovation so we designed these products to support the transition to this draw down phase. Turning to investment performance of our U.S.

retail and cross-border funds on slide six, overall relative performance of our equity excluding hybrid and fixed-income strategies remained solid with the majority of assets ranked in the top half their peer groups. Of course, there are many ways to look at performance and asset-weighted view of peer performance is just one.

In our 10-Q filing this morning we disclosed performance by investment objective against the benchmark and against peers.

Looking at that view equity performance strengthened against passive benchmarks for the one-year, three-year and five-year period while having mixed results against peers, which was opposite of what we saw for the U.S taxable and tax-free fixed-income strategies.

Underperformance of the Franklin Income Fund, which represents almost 30% of the assets in the equity and hybrid category, shown on slide six, weighed on aggregate performance for the one-year and three-year periods due to weakness in interest rate sensitive utilities, consumer discretionary and energy sector holdings.

Although, the fund had a good start at the beginning of the quarter with strong absolute relative returns, the market pulled back across several equity sectors later in the quarter which led to a decline in relative performance. As noted, other equity-focused strategies have generally had good relative performance.

The Mutual Global Discovery Fund, for example, outperformed its peer group across all periods as of June. On top of strong performance we have been working hard to promote this fund with new marketing materials highlighting our truly active management investment strategy and the consistent low-volatility track record.

In general, I believe that as a firm we are well position for investment capability and strategy perspective particularly when interest rates began to normalize. Such an environment has traditionally correlated with the outperformance of value investing.

Additionally, many of our fixed-income strategies have been defensively positioned in terms of duration for some time now. Assets under management ended the quarter at $867 billion, a decrease of about 1.5% since March. However, average assets under management increased slightly during the period. This divergence was due to the market pullback in June.

The mix of assets under management by investment objective and sales region is consistent with what we recorded at the end of March as we generally experience only gradual changes in the mix from quarter-to-quarter.

Net new outflows increased to $11 billion primarily the result of 19% decline in long-term sales which was felt across all investment objectives. Flows drove most of the decrease in lending assets as market depreciation was only about $2 billion this quarter.

From a retail perspective, we faced continued headwinds during the quarter as a result of a confluence of market factors that impacted the short-term performance of several U.S. and SICAV flagship funds. In the past we have seen that it takes time for funds flows to recover following periods of short-term underperformance.

Often we see a period of sharp redemptions followed by a period of slower sales which eventually recover and start driving improved organic growth. This quarter redemptions stabilized, but we did see a pronounced decline in sales particularly in some of our largest funds.

In the current market climate a number of our flagship funds have been impacted at the same time. We are confident however that this is the part of a natural business cycle and believe the demand for these products will recover has investment strategies of our portfolio teams play out.

In the meantime, we continue to keep advisors informed about the current positioning of the portfolios and the perspectives behind the portfolio managers' conviction. We also continue to look for opportunities to cross-sell and do enhance our product offerings.

Also contributing to the overall decrease in sales this quarter was a drop in institutional business volumes as that segment snapped its streak of quarterly sales growth.

While we did book a large funding for a global equity mandate, a handful of large redemptions resulted in net outflows in excess of $3 billion from global equity accounts while fixed-income strategies generated positive net sales.

Clearly, this was a disappointing quarter from a gross sales perspective, but net flows of our institutional business are always impacted by the timing of individual mandates and redemptions as well as client interest, which we think remains very strong.

Looking now at flows by investment objective, global equity flows declined this quarter due mostly to the institutional redemptions I just mentioned, but also because of the increased redemptions from the Templeton Asian Growth Fund.

To the positive, we continue to see interest in European equity-oriented products managed by our Mutual Series team, including the Mutual Global Discovery Fund that had almost $300 million in net flows this quarter. Additionally, global fixed-income outflows improved a bit this quarter.

The Templeton Global Bond and Total Return Funds continue to deliver strong out-performance versus their peers and benchmark. However, short-term absolute performance in broad market flows out of fixed-income due to fears of rising rates and market volatility, continue to pressure net flows.

This has remained largely a retail channel phenomenon as institutional investors have not redeemed as heavily and net flows remain positive in that segment. U.S. equity outflows increased a bit this quarter, but we continue to see interest in a number of growth strategies, including the strong performing Small Cap Growth and DynaTech Funds.

Hybrid flows turned negative this quarter due to outflows of about $1.6 billion from U.S. and cross-border versions of the Franklin Income Fund, due to the performance issues I discussed earlier.

As I mentioned previously, our Franklin K2 Alternative Strategies Funds generated over $600 million in net inflows and the cross-border version was among the best selling funds firm-wide this quarter. Taxable U.S.

fixed-income slipped into outflows this quarter due to a large drop off in institutional sales as well as outflows from some high yield and government bond funds. Tax-free fixed-income funds also experienced outflows this quarter, though we did see continued interest in intermediate term strategies.

I'd now like to turn it over to Ken to discuss operating results..

Thanks, Greg. Overall, the quarter's financial results were strong. Stable revenues and disciplined expense management drove the growth in operating income, which increased to $770 million. However, the impact of non-operating items decreased net income to $504 million and diluted earnings per share to $0.82.

Looking at revenues, investment management fees remained essentially unchanged at about $1.3 billion this quarter. Lower performance fees and a slightly lower daily average fee rate were essentially offset by the additional day in the quarter. Sales and distribution revenue was $567 million this quarter. Lower average non-U.S.

assets and a decline in sales drove the decrease, but this was partially offset by a higher U.S. assets and the impact of a longer quarter. Shareholder servicing fees were about $67 million and were relatively unchanged over the prior quarter and other revenue was about $27 million due to the increased interest income from some consolidated products.

Looking now at expenses on slide 18, sales and distribution expense was $694 million this quarter and the majority of this decrease was due to the changes in assets under management that also impacted sales and distribution revenue.

Compensation and benefits expense decreased this quarter to $364 million, which was lower than I originally anticipated back in April, due mostly to lower variable compensation as well as a foreign exchange benefit of about $5 million.

Based on where we are now, I continue to anticipate that the full year compensation expense will only increase by about 1% over 2014. Information systems and technology expense increased to $58 million this quarter.

Although it's hard to predict the exact timing of these expenses, as I mentioned before, this expense tends to be higher in the fourth quarter due to the fact that some larger projects like software renewal and infrastructure development are typically finalized in the second half of our fiscal year.

Investments in our security and communications infrastructure and desktop server and storage updates have driven these costs higher this year. And we continue to have a healthy pipeline for strategic projects that will enhance our fund administration, performance, risk and human resource management platforms.

Due to these items, I now expect the full year expense to be in the range of 2.5% to 3% higher than fiscal year 2014. Occupancy expense decreased to $31 million this quarter, and general, administrative and other expense increased a bit to $85 million.

Looking now at profitability, the operating margin increased to 38% for the fiscal year-to-date period and we remain focused on expense control in the current environment. The quarterly tax rate increased to 28.9% due to some prior quarter benefits that did not recur which brings the fiscal year-to-date rate to 29.2%.

We continue to expect the fiscal year rate to be within the range of 29% to 30%. Other income net of non-controlling interest negatively impacted earnings this quarter by $28 million. By far, the biggest detractor was the impact of a stronger U.S. dollar, which resulted in realized and unrealized foreign exchange losses of $30 million.

Interest expense increased to $13.7 million this quarter, while the rate of our 10-year notes issued in March was actually lower than that of the five-year notes that matured in May. There was a net increase in debt outstanding and we obviously only realized a partial quarter benefit from the maturity.

Moving on to equity capital management, we repurchased 4.3 million shares during the quarter at a total cost of about $218 million, which represents an increase over the prior few quarters and was one of the highest quarterly levels in the past several years.

In fact, open market repurchases increased 20% versus the prior quarter despite an 11% decrease in 10b-18 buyable trading volumes.

As you can see on slide 23, over the course of the past year, we returned over $1.4 billion to shareholders via repurchases and dividends, pushing the nominal payout ratio well above the 50% level which approximates our U.S. cash flow generation.

Finally, we are pleased to see signs of increased bipartisan support for international corporate tax reform on the horizon which may include favorable repatriation provisions. With that, I'd like to conclude our comments. Thank you for listening..