10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(MARK ONE)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2009

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 001-09318

FRANKLIN RESOURCES, INC.

(Exact name of registrant as specified in its charter)

Delaware	13-2670991
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Franklin Parkway, San Mateo, California	94403
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (650) 312-2000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $.10 per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

                    x  YES    ¨  NO

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

                    ¨  YES    x  NO

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

                    x  YES    ¨  NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

                    x  YES    ¨  NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x	Accelerated filer  ¨
Non-accelerated filer  ¨ (Do not check if a smaller reporting company)	Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

                    ¨  YES    x  NO

The aggregate market value of the voting common equity (“common stock”) held by non-affiliates of the registrant, as of March 31, 2009 (the last business day of registrant’s second quarter of fiscal year 2009), was approximately $8.2 billion based upon the last sale price reported for such date on the New York Stock Exchange. For purposes of this calculation, shares of common stock held or controlled by executive officers and directors of the registrant and by persons who hold more than 5% of the outstanding shares of common stock have been treated as shares held by affiliates. However, such treatment should not be construed as an admission that any such person is an “affiliate” of the registrant. The registrant has no non-voting common equity.

Number of shares of the registrant’s common stock outstanding at October 31, 2009: 229,249,998.

DOCUMENTS INCORPORATED BY REFERENCE:

Certain portions of the registrant’s definitive proxy statement for its annual meeting of stockholders, to be filed with the Securities and Exchange Commission within 120 days after September 30, 2009, are incorporated by reference into Part III of this report.

INDEX TO ANNUAL REPORT ON FORM 10-K

FORM 10-K ITEM			PAGE NUMBER
PART I
	ITEM 1.	BUSINESS	3
		General	3
		Company History and Acquisitions	4
		Lines of Business	5
		Investment Management and Related Services	5
		Banking/Finance	18
		Financial Information About Segments and Geographic Areas	19
		Regulatory Considerations	19
		Competition	22
		Intellectual Property	23
		Employees	23
		Available Information	23
	ITEM 1A.	RISK FACTORS	23
	ITEM 1B.	UNRESOLVED STAFF COMMENTS	32
	ITEM 2.	PROPERTIES	33
	ITEM 3.	LEGAL PROCEEDINGS	33
	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	33
		Executive Officers of the Registrant	33
PART II
	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	36
	ITEM 6.	SELECTED FINANCIAL DATA	37
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	37
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	61
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	64
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	111
	ITEM 9A.	CONTROLS AND PROCEDURES	111
	ITEM 9B.	OTHER INFORMATION	111
PART III
	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	112
	ITEM 11.	EXECUTIVE COMPENSATION	112
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	112
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	113
	ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	113
PART IV
	ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	114
	SIGNATURES		119
EXHIBIT INDEX

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PART I

Forward-looking Statements. In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements that involve a number of known and unknown risks, uncertainties and other important factors, including the risks and other factors discussed in Item 1A (“Risk Factors”), that could cause the actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements. When used in this report, words or phrases generally written in the future tense and/or preceded by words such as “will”, “may”, “could”, “expect”, “believe”, “anticipate”, “intend”, or other similar words are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Moreover, statements in Risk Factors, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) and elsewhere in this report that speculate about future events are “forward-looking statements”. While forward-looking statements are our best prediction at the time that they are made, you should not rely on them. If a circumstance occurs after the date of this Annual Report on Form 10-K that causes any of our forward-looking statements to be inaccurate, we do not have an obligation, and we undertake no obligation, to announce publicly the change to our expectations, or to make any revision to our forward-looking statements, unless required by law.

Item 1. Business.

GENERAL

Franklin Resources, Inc. (“Franklin”) is a holding company that, together with its various subsidiaries (collectively, the “Company”), is referred to as Franklin Templeton Investments^®, a global investment management organization offering investment choices under the Franklin^®, Templeton^®, Mutual Series^®, Bissett^®, Fiduciary™ and Darby^® brand names. Franklin is regulated as a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and has elected to be a financial holding company under the Gramm-Leach-Bliley Act (the “GLB Act”). The common stock of Franklin is traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “BEN”, and is included in the Standard & Poor’s 500 Index. In this report, words such as “we”, “us”, “our” and similar terms refer to the Company. When used in this report, unless the context otherwise makes clear, our “funds” means all of the Franklin, Templeton, Mutual Series and Bissett mutual funds.

In our primary business and operating segment, investment management and related services, we provide services to investment funds and institutional, high net-worth and separately-managed accounts (collectively, our “sponsored investment products”) in the United States (“U.S.”) and internationally. As of September 30, 2009, we had $523.4 billion in assets under our management with approximately 21.4 million billable shareholder accounts worldwide. Our investment management and related services include fund administration, shareholder services, transfer agency, underwriting, distribution, custodial, trustee and other fiduciary services. Our sponsored investment products include a broad range of equity, hybrid, fixed-income and cash management funds and accounts. Cash management funds consist of U.S.-registered money market funds and non-U.S.-registered funds with similar investment objectives. We also manage certain sub-advised investment products, some of which may be sold to the public under our brand names.

The investment funds that we manage have various investment objectives designed to meet the needs and goals of different investors. Most of the investment funds we manage are mutual funds, also known as open-end funds that continuously offer their shares to investors. We also offer closed-end funds that issue a set number of shares to investors in a public offering and the shares are then traded on a public stock exchange. The funds themselves do not have direct employees. To support their operations, the funds contract with separate entities to provide investment management, administrative, custody, transfer agency,

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operational and other services required by the fund. An investment advisory entity would manage a fund’s portfolio of securities in accordance with the fund’s stated objectives. Investors may purchase shares of a closed-end fund on the stock exchange where the fund is traded, while investors may purchase shares of an open-end fund through a broker/dealer, bank or other intermediary which may provide investment advice to the investor. An open-end fund will typically pay fees to distributors that market and distribute the fund’s shares to broker/dealers who sell the shares directly to investors. Broker/dealers and other intermediaries may earn commissions and receive other compensation with respect to the shares sold to investors.

In our secondary business and operating segment, banking/finance, we provide clients with select retail banking, private banking and consumer lending services through our bank subsidiaries.

When the fiscal year ended September 30, 2009 (“fiscal year 2009”) began, global markets were experiencing unprecedented volatility, and, although the financial markets began to show stabilization and improvement as the fiscal year came to an end, an uncertain business climate is forecast for the foreseeable future. We continue to focus on the investment performance of our sponsored investment products and to seek to provide high quality customer service to our clients. The success of these and other strategies may be affected by the factors discussed below in Item 1A Risk Factors of this Annual Report, and other factors as discussed herein.

COMPANY HISTORY AND ACQUISITIONS

The Company and its predecessors have been engaged in the investment management and related services business since 1947. Franklin was incorporated in Delaware in November 1969. We originated our mutual fund business with the Franklin family of funds, which is now known as the Franklin Funds. We expanded our business, in part, by acquiring companies engaged in the investment management and/or related services business.

In October 1992, we acquired substantially all of the assets and liabilities of the investment management and related services business of Templeton, Galbraith & Hansberger Ltd. This acquisition added the Templeton family of funds to our organization. The Templeton funds are known for their global investment strategies and value style of investing.

In November 1996, we acquired certain assets and liabilities of Heine Securities Corporation, which provided investment management services to various accounts and investment companies, including Mutual Series Fund Inc., now known as Franklin Mutual Series Fund Inc. (“Mutual Series”). Mutual Series is known for its value-oriented equity funds.

We expanded our business in Korea in July 2000 when we purchased all of the remaining outstanding shares of a Korean asset management company, Ssangyong Templeton Investment Trust Management Co., Ltd. (currently known as Franklin Templeton Investment Trust Management Co., Ltd.), in which we previously held a partial interest. The acquisition has made us one of the larger independent foreign money managers in that country.

We acquired all of the outstanding shares of Bissett & Associates Investment Management Ltd. (“Bissett”) in October 2000. Bissett now operates as part of our Canadian subsidiary, Franklin Templeton Investments Corp. With the acquisition of Bissett, we added Bissett’s family of mutual funds to our then existing Canadian based funds (some of which we previously acquired as part of the Templeton family of funds) and expanded our investment management services throughout Canada to a broad range of clients, including institutional clients such as pension plans, municipalities, universities, charitable foundations and private clients.

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In April 2001, we acquired Fiduciary Trust Company International (“Fiduciary Trust”), a bank organized under the New York State Banking Law. Following the acquisition, Fiduciary Trust became a wholly-owned subsidiary of Franklin. Fiduciary Trust provides investment management and related services to institutional clients and high net-worth families and individuals. With the acquisition of Fiduciary Trust, we also added Fiduciary Trust’s mutual funds to our product line.

In July 2002, our subsidiary, Franklin Templeton Asset Management (India) Private Limited (“FTAMIPL”), acquired all of the outstanding shares of Pioneer ITI AMC Limited (“Pioneer”). In April 2007, we completed the purchase of the remaining 25% interest in each of FTAMIPL and Franklin Templeton Trustee Services Private Limited, each located in India. We are currently one of the largest private sector asset managers in India.

In October 2003, we acquired all of the remaining outstanding shares of Darby Overseas Investments, Ltd. and all of the remaining outstanding limited partnership interests of Darby Overseas Partners, L.P. (collectively, “Darby”). Darby, based in Washington, D.C., sponsors and manages funds for institutional investors and high net-worth individuals that invest primarily in emerging markets, private equity, and mezzanine finance transactions, including regional and specialized sector funds.

In July 2006, we completed the purchase of all of the remaining interests in a Brazilian asset management company, Bradesco Templeton Asset Management Ltda., in which we previously held a partial interest. Upon acquisition, the company was renamed Franklin Templeton Investimentos (Brasil) Ltda.

LINES OF BUSINESS

I. Investment Management and Related Services

We derive substantially all of our revenues from providing investment management and related services to our sponsored investment products and the sub-advised accounts that we manage. Our revenues depend to a large extent on the amount of assets under management and the types of investment management services provided. Underwriting and distribution fees, also a large source of our revenues, consist of sales charges and commissions derived from sales of our sponsored investment products and distribution fees.

Our investment management business is primarily conducted through our subsidiaries, including through subsidiaries registered with the United States Securities and Exchange Commission (the “SEC”) as investment advisers under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), subsidiaries registered as equivalent investment advisers in jurisdictions including Australia, Brazil, Canada, Hong Kong, India, Japan, Korea, Singapore, The Bahamas and the United Kingdom (“U.K.”), and certain other subsidiaries.

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A.     Assets Under Management (“AUM”)

Fees for providing investment management and related services (“investment management fees”), substantially all of our revenue, are generally based upon the monetary value of assets in the accounts that we advise, the investment category of the account and the types of services that we provide for an account. As of September 30, 2009, the types of assets under management by investment category for the various services described below and held by investors on a worldwide basis were:

Type of Asset	Value in Billions		Percentage of Total AUM
Equity
Growth potential, income potential or various combinations thereof	$	247.0	47.2	%
Hybrid
Asset allocation, balanced, flexible and income-mixed funds		98.2	18.8	%
Fixed-Income
Both long-term and short-term		171.3	32.7	%
Cash Management1
Short-term liquid assets		6.9	1.3	%
Total	$	523.4	100.0	%

¹ Includes both U.S.-registered money market funds and non-U.S.-registered funds with similar investment objectives.

Broadly speaking, the change in the net assets of our sponsored investment products depends primarily upon two factors: (1) the increase or decrease in the market value of the securities held in the portfolio of investments; and (2) the level of sales (inflows) as compared to the level of redemptions (outflows). We are subject to the risk of asset volatility, resulting from changes in the financial and equity markets, including changes due to the recent volatility in global financial markets. In addition, because we generally derive higher revenues and income from our equity assets, a shift in assets from equity to fixed-income or hybrid funds reduces total revenue and, thus, net income. Despite such a risk of volatility, we believe that we are more competitive as a result of the greater diversity of our sponsored investment products available to our customers.

B.     Types of Investment Management and Related Services

1. Investment Management Services

We provide investment management services pursuant to agreements in effect with each of our sponsored investment products, which include U.S.-registered open-end and closed-end funds (“U.S. Funds”), non-U.S.-registered funds (“Non-U.S. Funds”), unregistered funds, institutional, high net-worth and separately-managed accounts, and the sub-advised accounts that we manage. Investment management services include services to managed accounts with full investment discretion, and to advisory accounts with no investment discretion. Advisory accounts for which we do not have investment discretion may or may not include the authority to trade for the account. Our investment management services include fundamental investment research and valuation analyses, including original economic, political, industry and company research, and analyses of suppliers, customers and competitors. Our company research includes the utilization of such sources as company public records and activities, management interviews, company prepared information, and other publicly available information, as well as company visits and inspections. In addition, research services provided by brokerage firms are used to support our findings. Our management fee on an account varies, among other things, upon the types of services that we provide for the account.

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Our subsidiaries providing discretionary investment management services for our sponsored investment products and sub-advised accounts either perform or obtain investment research and determine which securities the sponsored investment products or sub-advised accounts will purchase, hold or sell under the supervision and oversight of the funds’ boards of directors or trustees, if applicable. In addition, these subsidiaries take all appropriate steps to implement such decisions, including arranging for the selection of brokers and dealers and the execution and settlement of trades in accordance with detailed criteria set forth in the management agreement for each account, internal policies, and applicable law and practice. Our subsidiaries conducting non-discretionary investment management services perform investment research for our clients and recommend which securities the clients will purchase, hold or sell. In such cases, the subsidiaries may or may not perform trading activities for the products.

The funds themselves do not have direct employees. Through our subsidiaries, we provide and pay the salaries of personnel who serve as officers of our funds, including the administrative personnel necessary to conduct such funds’ day-to-day business operations. Our subsidiaries either provide or arrange for the provision of: office space, telephone, office equipment and supplies; trading desk facilities (unless these facilities are provided by another subsidiary); authorization of expenditures and approval of bills for payment; preparation of annual and semi-annual reports to fund shareholders, notices of dividends, capital gains distributions and tax credits, and other regulatory reports; the daily pricing of fund investment portfolios, including collecting quotations from pricing services; accounting services, including preparing and supervising publication of daily net asset value quotations, periodic earnings reports and other financial data; services to ensure compliance with securities regulations, including recordkeeping requirements; preparation and filing of tax reports; the maintenance of accounting systems and controls; and other administrative services. In some cases our subsidiaries are compensated, based on a percentage of assets under management, under separate administration agreements with the funds. In other cases, our investment management subsidiary compensates our subsidiaries from fees received from our funds and clients. The funds generally pay their own expenses, such as external legal, custody and independent audit fees, regulatory registration fees, and other related expenses. The funds also share in board and shareholder meeting and reporting costs.

For the most part, the investment management agreements for our U.S. Funds must be renewed each year (after an initial two-year term), and must be specifically approved at least annually by a vote of each fund’s board of directors or trustees as a whole and separately by the directors/trustees that are not interested persons of such fund under the Investment Company Act of 1940 (the “Investment Company Act”), or by a vote of the holders of a majority of such fund’s outstanding voting securities.

Under the majority of investment management agreements, the funds pay us a monthly fee in arrears based upon a fund’s average daily net assets. Annual fee rates under the various global investment management agreements generally range from 0.15% to a maximum of 2.50% and are often reduced as net assets exceed various threshold levels.

We use a “master/feeder” fund structure in certain situations. This structure allows an investment adviser to manage a single portfolio of securities at the “master fund” level and have multiple “feeder funds” that invest all of their respective assets into the master fund. Individual and institutional shareholders invest in the “feeder funds”, which can offer a variety of service and distribution options. A management fee typically is charged at the master fund level and administrative and shareholder servicing fees are charged at the feeder fund level, although with certain funds, all fees may be charged at the feeder fund level.

Each U.S. investment management agreement between certain of our subsidiaries and each U.S. Fund automatically terminates in the event of its “assignment”, as defined in the Investment Company Act. In addition, either party may terminate the agreement without penalty after written notice ranging from 30 to

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60 days. If agreements representing a significant portion of our assets under management were terminated, it would have a material adverse impact on us.

Our investment management agreements generally permit us to provide investment management services to more than one fund and to other clients so long as our ability to render services to each of the funds is not impaired, and so long as purchases and sales of portfolio securities for various advised funds are made on an equitable basis.

Our management personnel and the fund directors or trustees regularly review the investment management services fee structures for U.S. Funds in light of fund performance, the level and range of services provided, industry conditions and other relevant factors. Investment management services fees are generally waived or voluntarily reduced when a new fund is established and then increased to contractual levels within an established timeline or as net asset values reach certain levels.

Our non-U.S. Funds, unregistered funds, institutional, high net-worth and separately-managed accounts, and the sub-advised accounts that we manage, have various termination rights and review and renewal provisions.

2. Underwriting and Distribution

A significant portion of our revenues under the investment management and related services operating segment are generated from providing underwriting and distribution services. Franklin/Templeton Distributors, Inc. (“FTDI”), a wholly-owned subsidiary of Franklin, acts as the principal underwriter and distributor of shares of most of our open-end U.S. Funds. Certain of our non-U.S. subsidiaries provide underwriting and distribution services to our Non-U.S. Funds distributed outside the United States. Some of our Non-U.S. Funds, particularly the Luxembourg-domiciled Franklin Templeton Investment Funds Société d’Investissement à Capital Variable (“SICAV”), are distributed globally on a cross-border basis, while others are distributed exclusively in local markets. We earn underwriting and distribution fees primarily by distributing the funds pursuant to distribution agreements between FTDI or such non-U.S. subsidiaries and the funds. Under each distribution agreement, we offer and sell the fund’s shares on a continuous basis and pay certain costs associated with underwriting and distributing the fund’s shares, including the costs of developing and producing sales literature and printing prospectuses, which may be then either partially or fully reimbursed by the funds.

Most of our retail funds are distributed with a multi-class share structure. We adopted this share structure to provide investors with more sales charge alternatives for their investments. Class A shares represent a traditional fee structure whereby, unless the investor qualifies for a sales charge waiver, the investor pays a commission at the time of purchase. Class B shares, which are available in some of our Non-U.S. Funds and in the Section 529 college savings plan that we manage and distribute, have no front-end sales charges, but instead have a declining schedule of sales charges (called contingent deferred sales charges) if the investor redeems within a number of years from the original purchase date. Although our open-end U.S. Funds that had offered Class B shares no longer offer these shares, existing Class B shareholders may continue to exchange shares into Class B shares of different funds and may continue to reinvest dividends on Class B shares in additional Class B shares. Class C shares have no front-end sales charges, but do have a back-end sales charge for redemptions within 12 months from the date of purchase. Class R shares are available for purchase by certain retirement, college savings and health savings plan accounts in the United States only. Outside of the United States, we offer additional share classes in response to local needs.

In the United States, we offer Advisor Class shares in many of our funds, and we offer Class Z shares in the Mutual Series funds, both of which have no sales charges. Franklin Global Trust offers a share class with no sales charge primarily to high net-worth or institutional investors. Advisor and Class Z shares are

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offered to certain qualified financial intermediaries, institutions and high net-worth clients (both affiliated and unaffiliated) who have assets held in accounts managed by a subsidiary of Franklin and are also available to our full-time employees, current and former officers, trustees and directors. In the United States, we also offer money market funds to investors without a sales charge. Under the terms and conditions described in the prospectuses or the statements of additional information for some funds, certain investors can purchase shares at net asset value or at reduced sales charges. Outside the United States, we offer share classes similar to the Advisor Class shares to certain types of investors, although depending upon the fund and the country(ies) in which the fund is domiciled, the equivalent share class may be offered on a more restrictive or less restrictive basis than the similar U.S. Advisor Class shares.

Some of our insurance product funds offered for sale in the United States offer a four-class share structure, Class 1, Class 2, Class 3 and Class 4 shares, which are offered at net asset value without a sales charge directly to insurance company separate accounts.

Internationally, we offer types of share classes based on the local needs of the investors in a particular market. In the majority of cases, investors in any class of shares may exchange their shares for a like class of shares in another fund, subject to certain fees that may apply. Our Non-U.S. Funds have sales charges and fee structures that vary by region.

The distribution agreements with our open-end U.S. Funds generally provide for FTDI to pay commission expenses for sales of fund shares to qualifying broker/dealers and other intermediaries. These broker/dealers receive various sales commissions and other fees from FTDI for services in matching investors with funds whose investment objectives match such investors’ goals and risk profiles. Broker/dealers may also receive fees for their assistance in explaining the operations of the funds, in servicing the investor’s account, reporting and various other distribution services. Fund shares are sold primarily through a large network of independent intermediaries, including broker/dealers, banks and other similar financial advisers. We are heavily dependent upon these distribution channels and business relationships. FTDI may make payments to certain broker/dealers who provide marketing support services, as described further below. There is increasing competition for access to these channels, which has caused our distribution costs to rise and could cause further increases in the future as competition continues and service expectations increase. As of September 30, 2009, approximately 1,800 local, regional and national securities brokerage firms offered shares of our open-end U.S. Funds for sale to the U.S. investing public, and approximately 3,400 banks, securities firms and financial advisers offered shares of our cross-border Non-U.S. Funds for sale outside of the United States. In the United States, we have approximately 100 general wholesalers who interface with the broker/dealer community.

Most of our open-end U.S. Funds, with the exception of certain of our money market funds as well as certain high net-worth and institutional funds, have adopted distribution plans (the “Plans”) under Rule 12b-1 promulgated under the Investment Company Act (“Rule 12b-1”). The Plans are established for an initial term of one year and, thereafter, must be approved annually by each fund’s board of directors or trustees and by a majority of its directors or trustees who are not interested persons of the fund under the Investment Company Act (the “disinterested fund directors/trustees”). All of these Plans are subject to termination at any time by a majority vote of the disinterested fund directors/trustees or by the particular fund shareholders. Fees from the Plans that FTDI receives as revenue are paid primarily to third-party broker/dealers who provide services to the shareholder accounts and engage in distribution activities. The Plans permit the funds to bear certain expenses relating to the distribution of their shares, such as expenses for marketing, marketing support, advertising, printing and sales promotion, and may provide for the funds to reimburse such expenses that FTDI incurs in distributing the funds, subject to the Plans’ limitations on amounts. Each fund has a percentage limit for these types of expenses based on average daily net assets under management.

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Similar arrangements exist with the distribution of our Non-U.S. Funds where, generally, our subsidiary that distributes the funds in the local market arranges for and pays commissions and certain other fees to banks and other intermediaries, a portion of which fees is paid from maintenance fees received by the subsidiary and a portion of which may derive from the management fees paid to our various affiliates by the funds.

Class C shares are generally more costly to us in the year of sale, but they allow us to be competitive by increasing our presence in various distribution channels. Historically, Class B (or equivalent) and certain of our Class C deferred commission assets (“DCA”) arising from our U.S., Canadian and European operations were financed through transfers to or other arrangements with a company in which we held a 49% ownership interest as of September 30, 2009. We are in the process of selling our ownership interests in this company to the holder of the 51% ownership interest and expect to complete this divestiture in the fiscal year ending September 30, 2010 (“fiscal year 2010”). In September 2009, all DCA held by this company was sold to FTDI or the holder of the 51% ownership interest, and repayments to the company under these financing arrangements have been discontinued.

FTDI and/or its affiliates may make the following additional payments to broker/dealers that sell shares of our funds:

Marketing support payments. FTDI may make payments to certain broker/dealers who are holders or dealers of record for accounts in one or more of our open-end U.S. Funds. Consistent with the provisions and limitations set forth in a fund’s Rule 12b-1 Plan, the fund may reimburse a broker/dealer for the cost of some or all of the marketing support payments. A broker/dealer’s marketing support services may include business planning assistance, advertising, educating broker/dealer personnel about the funds and shareholder financial planning needs, placement on the broker/dealer’s list of offered funds, and access to sales meetings, sales representatives and management representatives of the broker/dealer. FTDI compensates broker/dealers differently depending upon, among other factors, sales and asset levels, redemption rates and the level and/or type of marketing and educational activities provided by the broker/dealer. Such compensation may include financial assistance to broker/dealers that enable FTDI to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other employees, client and investor events and other broker/dealer-sponsored events. These payments may vary depending upon the nature of the event. FTDI periodically reviews its marketing support arrangements to determine whether to continue such payments. In the case of any one broker/dealer, marketing support payments may not exceed the sum of 0.08% of that broker/dealer’s current year’s total sales of our U.S. Funds and 0.05% (or 0.03%) of the total assets of equity (or fixed income) of our U.S. Funds attributable to that broker/dealer, on an annual basis. The statement of additional information for each retail U.S. Fund, provided to investors in such funds upon request, provides a list of broker/dealers that receive such marketing support payments. FTDI may also make marketing support payments to financial intermediaries that serve as plan service providers to certain employer sponsored retirement plans. Marketing support or similar payments made to intermediaries located outside the United States, with respect to investments in Non-U.S. Funds, may exceed the above-stated limitations.

Transaction support payments. FTDI may pay ticket charges of up to $20 per purchase or exchange order placed by a broker/dealer or one-time payments for ancillary services, such as setting up funds on a broker/dealer’s fund trading system.

Other payments. From time to time, FTDI, at its expense, may make additional payments to broker/dealers that sell or arrange for the sale of shares of our U.S. Funds. FTDI routinely sponsors due diligence meetings for registered representatives during which they receive updates on various funds and are afforded the opportunity to speak with portfolio managers. Invitation to these meetings is not conditioned on selling a specific number of shares. Those who have shown an interest in our funds, however, are more likely to be

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considered. To the extent permitted by their firm’s policies and procedures, registered representatives’ expenses in attending these meetings may be covered by FTDI. Similar payments may be made by our internal Non-U.S. Fund distributors, to third party distributors of our non-U.S. Funds.

Other compensation may be offered to the extent not prohibited by federal or state laws or any self-regulatory agency, such as the Financial Industry Regulatory Authority (“FINRA”). FTDI makes payments for events it deems appropriate, subject to FTDI’s guidelines and applicable law.

3. Shareholder and Transfer Agency Services

One of our subsidiaries, Franklin Templeton Investor Services, LLC (“FTIS”), serves as shareholder servicing and dividend-paying agent for our open-end U.S. Funds. FTIS is registered with the SEC as a transfer agent under the Securities Exchange Act of 1934, as amended. Generally, FTIS is compensated under an agreement with each fund on the basis of an annual per account fee that varies with the fund and the type of services being provided. FTIS also is reimbursed for out-of-pocket expenses. Other subsidiaries provide similar services to our non-U.S. Funds, and in some cases are compensated based on assets under management.

FTIS may also pay servicing fees to third-party intermediaries primarily to help offset costs associated with client account maintenance support, statement preparation and transaction processing. Such third parties: (i) maintain omnibus accounts with the fund in the institution’s name on behalf of numerous beneficial owners of fund shares; or (ii) provide support for fund shareholder accounts by sharing account data with FTIS through the National Securities Clearing Corporation networking system. The funds reimburse FTIS for these third party payments.

C.     High Net-Worth Investment Management and Related Services

Through Fiduciary Trust (including its trust company and investment adviser subsidiaries), we provide investment management services to, among others, high net-worth individuals and families. Similarly, through our Canadian high net-worth business unit, Fiduciary Trust Company of Canada (“FTCC”), we provide investment management services and offer sponsored investment products to high net-worth individuals and families. Our high net-worth client business seeks to maintain relationships that span generations and help families plan the most appropriate method of intergenerational wealth transfer.

Individual client assets are typically held in accounts separately managed by individual portfolio managers. These portfolio managers determine asset allocation and stock selection for client accounts, taking into consideration each client’s specific long-term objectives while utilizing our macroeconomic and individual stock research.

Fiduciary Trust services that focus on managing family wealth from generation to generation include wealth management, estate planning, private banking, tax and custody services. We offer clients personalized attention and estate planning expertise in an integrated package of services known as Family Resource Management^® (“FRM”). Services under FRM provide clients with an integrated strategy to optimize wealth accumulation and maximize after-tax wealth transfer to the next generation. Evaluation of third-party investment management products or services is performed by the Strategic Advisory Group, an investment advisory group within Fiduciary Trust.

D.     Institutional Management

We provide a broad array of investment management services to institutional clients, focusing on foundations, endowment funds and government and corporate pension funds. Our subsidiaries offer a wide range of both U.S. and international equity, fixed-income and specialty strategies through a variety of investment vehicles, including separate accounts, open-end and closed-end funds and unregistered funds.

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We generally operate our institutional business under the trade name “Franklin Templeton Institutional”. Through various legal entities, including Franklin Templeton Institutional, LLC and various non-U.S. subsidiaries, we distribute and market globally the different investment management capabilities of our various investment management subsidiaries under the Franklin, Templeton, Mutual Series, Bissett and Darby brand names. We primarily attract new institutional business through our strong relationships with pension and management consultants and through additional mandates from our existing client relationships.

Our U.S. retirement business is conducted through divisions of FTDI that work closely with sponsors, consultants, record keepers and financial advisors of defined contribution plans, including 401(k) plans, variable annuity products and individual retirement accounts (“IRAs”). We offer our asset management capabilities to the U.S. retirement industry through a number of investment options, including sub-advised portfolios, funds, education savings plans and variable insurance funds.

Through our various subsidiaries, we also market and distribute our sponsored investment products to separately-managed accounts. Our subsidiaries, Franklin Templeton Financial Services Corp. and Templeton/Franklin Investment Services, Inc., also serve as direct marketing broker/dealers for institutional investors for certain of our institutional mutual funds, private investment funds and unregistered funds.

E.     Trust and Custody

Through various trust company subsidiaries, including Fiduciary Trust, we offer a wide range of investment management and related services, including trust services, custody and administration, estate planning, tax planning, and private banking, to high net-worth individuals, families, foundations and institutional clients. In addition, we also offer our clients a series of other services, including foreign exchange, performance measurement and securities lending. We provide planned giving administration and related custody services for non-profit organizations, including pooled income funds, charitable remainder trusts, charitable lead trusts and gift annuities, for which we may or may not act as trustee.

Our other subsidiaries involved in the trust business, either as trust companies or companies investing in trust companies, include: Fiduciary Investment Corporation, which is incorporated under the New York State Banking Law and serves as an indirect holding company for several of our trust company subsidiaries; FTCC, a trust company incorporated under the Trust and Loan Companies Act in Canada; Fiduciary Trust International of the South, a Florida state-chartered limited purpose trust company; Fiduciary Trust International of California, a California state-chartered limited purpose trust company; Fiduciary Trust International of Delaware, a Delaware state-chartered limited purpose trust company; FTCI (Cayman) Ltd., an offshore trust company holding an unrestricted trust license in the Cayman Islands; and Franklin Templeton Bank & Trust, F.S.B. (“FTB&T”), a chartered federal savings bank. All of the trust companies referenced above have full trust powers. FTB&T, among other functions, exercises full trust powers and serves primarily as custodian of IRAs and business retirement plans.

F.     Private Equity Investment Management

Darby is primarily engaged in sponsoring and managing funds that invest in private equity and mezzanine finance transactions in emerging markets in Asia, Latin America and Central/Eastern Europe. Darby offers these investment funds through private placements to institutional and high net-worth individual investors.

In addition, Templeton Asset Management Ltd., an investment adviser, sponsors and manages a limited number of private equity funds, which also invest primarily in emerging markets in Asia, Latin America and Central/Eastern Europe.

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G.     Summary of Our Sponsored Investment Products

Our sponsored investment products are offered globally to retail, institutional, high net-worth and separate account clients, which include individual investors, qualified groups, trustees, tax-deferred (such as IRAs in the United States and retirement saving plans, or RSPs, in Canada) or money purchase plans, employee benefit and profit sharing plans, trust companies, bank trust departments and institutional investors. Our sponsored investment products include portfolios managed for some of the world’s largest corporations, endowments, charitable foundations, pension funds, wealthy individuals and other institutions. We use various investment techniques to focus on specific client objectives for these specialized portfolios.

1. Investment Objectives

The sponsored investment products that we offer accommodate a variety of investment goals, spanning the spectrum of our clients’ risk tolerance – from capital appreciation (with our more growth-oriented products) to capital preservation (with our fixed-income offerings). In seeking to achieve such objectives, each portfolio emphasizes different strategies and invests in different types of securities.

Our equity investment products include some that are considered value-oriented, others that are considered growth-oriented, and some that use a combination of growth and value characteristics, generally identified as blend or core products. Value investing focuses on identifying companies that our research analysts and portfolio managers believe are undervalued based on a number of different factors, usually put in the context of historical ratios such as price-to-earnings or price-to-book value; however, we also consider the future earnings potential of each individual company on a multi-year basis. Growth investing focuses on identifying companies that our research analysts and portfolio managers believe have sustainable growth characteristics, meeting our criteria for sustainable growth potential, quality and valuation. In this effort, the key variables we examine include: market opportunity (overall size and growth); competitive positioning of the company; assessment of management (strength, breadth, depth, and integrity) and execution of plans; and the general financial strength and profitability of the enterprise, to determine whether the growth and quality aspects are properly reflected in the current share price. Paramount to all of our different equity products is the incorporation of independent, fundamental research through our own collaborative in-house group of investment professionals. Our approach, across the variety of equity products we manage, emphasizes bottom-up stock selection within a disciplined portfolio construction process, and is complemented by our ongoing assessment of risk at both the security and portfolio levels.

Portfolios seeking income generally focus on one or more of the following securities: taxable and tax-exempt money market instruments; tax-exempt municipal bonds; global fixed-income securities; and fixed-income debt securities of corporations, of the U.S. government and its sponsored agencies and instrumentalities, such as the Government National Mortgage Association, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, or of the various states in the United States. Others focus on investments in particular countries and regions.

2. Types of Sponsored Investment Products

As of September 30, 2009 we had $523.4 billion in assets under management. Our open-end U.S. Funds (excluding our insurance products trust) accounted for $273.6 billion of our assets under management. As of September 30, 2009, our five largest open-end U.S. Funds and their net assets under management were Franklin Income Fund ($47.4 billion), Templeton Global Bond Fund ($19.2 billion), Templeton Growth Fund ($18.9 billion), Mutual Global Discovery Fund ($15.1 billion) and Mutual Shares Fund ($15.0 billion). These five funds represented, in the aggregate, approximately 22% of all of our sponsored investment product assets under management.

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Franklin Templeton Variable Insurance Products Trust, our insurance products trust, offers 22 funds to U.S. investors, with assets of $27.8 billion as of September 30, 2009. Our insurance products funds are available as investment options through variable insurance contracts and are also sold to certain funds of funds. Most of the insurance products funds have been fashioned after some of our more popular retail U.S. Funds offered to the general public and are managed, in most cases, by the same investment advisors.

We also provide investment management and related services to a number of closed-end investment companies whose shares are traded on various major U.S. stock exchanges. Our closed-end U.S. Funds accounted for $4.2 billion of our assets under management.

In addition, $94.3 billion of our assets under management were held in open-end and closed-end funds that are sold outside of the United States, and whose investment objectives vary, but are largely international and global equity and global fixed-income oriented. We provide investment management, marketing and distribution services to SICAV funds, contract-type funds and umbrella unit trusts organized in Luxembourg and Ireland, respectively, which are distributed in non-U.S. market places, as well as to locally organized funds in various countries outside the United States. In some countries, we offer products for the particular local market. For example, Franklin Templeton Asset Management (India) Private Limited, one of our subsidiaries in India, manages various local open-end and closed-end funds offered to investors in India, with assets under management of $5.9 billion as of September 30, 2009.

Our private investment funds, typically structured as limited partnerships or companies, which include our Darby products, accounted for $2.3 billion of our assets under management.

On a company-wide basis, our institutional, separate, high net-worth and other accounts accounted for $121.2 billion of assets under management.

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3. Open-End U.S. Funds and Non-U.S. Funds

In an effort to address changing market conditions and evolving investor needs, we periodically introduce new funds, merge existing funds or liquidate existing funds. The following table shows the various types of our open-end U.S. Funds and dedicated insurance product funds as of September 30, 2009 categorized by investment classification:

OPEN-END U.S. FUNDS

CATEGORY (and approximate amount of assets under management, as of September 30, 2009) In Billions	INVESTMENT CLASSIFICATION	NO. OF MUTUAL FUNDS	NO. OF INSURANCE PRODUCT FUNDS
I.     EQUITY FUNDS ($127.8)
A. Capital Appreciation Funds ($19.1)	Seek capital appreciation; dividends are not a primary consideration.
1. Aggressive Growth Funds	Invest mainly in common stocks of small, growth companies.	4	1
2. Growth Funds	Invest mainly in common stocks of well-established companies.	11	2
3. Sector Funds	Invest mainly in companies in related fields.	6	1
B. World Equity Funds ($72.7)	Invest mainly in stocks of non-U.S. companies.
1. Emerging Market Funds	Invest mainly in companies based in developing regions of the world.	4	1
2. Global Equity Funds	Invest mainly in equity securities traded worldwide, including those of U.S. companies.	11	3
3. International Equity Funds	Invest mainly in equity securities of companies located outside the United States.	6	1
4. Regional Equity Funds	Invest in companies based in a specific part of the world.	5	0
C. Total Return Funds ($36.0)	Seek a combination of current income and capital appreciation.
1. Growth and Income Funds	Invest mainly in common stocks of established companies with the potential for growth and a consistent record of dividend payments.	7	5
2. Income Equity Funds	Invest mainly in equity securities of companies with good dividend-paying records.	1	0
II.    HYBRID FUNDS ($57.3)	Invest in a mix of equities, fixed-income securities, and derivative instruments.
A. Asset Allocation Funds ($0.5)	Invest in various asset classes including, but not limited to, equities, fixed-income securities, and money market instruments.	17	2

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CATEGORY (and approximate amount of assets under management, as of September 30, 2009) In Billions	INVESTMENT CLASSIFICATION	NO. OF MUTUAL FUNDS	NO. OF INSURANCE PRODUCT FUNDS
B. Balanced Funds ($0.1)	Invest in a specific mix of equity securities and bonds with the three-part objective of conserving principal, providing income, and achieving long-term growth of both principal and income.	1	0
C. Flexible Portfolio Funds ($1.4)	Invest in various asset classes including, but not limited to, equities, fixed-income securities, and money market instruments.	2	0
D. Income-Mixed Funds ($55.3)	Invest in a variety of income-producing securities, including equities and fixed-income instruments.	3	1
III.    TAXABLE BOND FUNDS ($46.2)
A. High Yield Funds ($3.1)	Invest two-thirds or more of their portfolios in lower-rated U.S. corporate bonds (Baa or lower by Moody’s and BBB or lower by Standard & Poor’s rating services).	1	1
B. World Bond Funds ($22.9)	Invest in debt securities offered by non-U.S. companies and governments.
1. Global Bond Funds: General	Invest in debt securities worldwide with no stated average maturity or an average maturity of five years or more.	3	2
2. Global Bond Funds: Short-Term	Invest in debt securities worldwide with an average maturity of one to five years.	1	0
3. Other World Bond Funds	Invest in non-U.S. government and corporate debt instruments.	1	0
C. Government Bond Funds ($12.1)	Invest in U.S. government bonds of varying maturities.
1. Government Bond Funds: Intermediate Term	Invest two-thirds or more of their portfolios in U.S. government securities with an average maturity of five to ten years.	0	1
2. Government Bond Funds: Short-Term	Invest two-thirds or more of their portfolios in U.S. government securities with an average maturity of one to five years.	1	0
3. Mortgage-Backed Funds	Invest two-thirds or more of their portfolios in pooled mortgage-backed securities.	3	0
D. Strategic Income Funds ($6.7)	Invest in a combination of U.S. fixed-income securities.	4	1
E. Corporate Bond Funds ($1.4)	Seek current income by investing in high-quality debt securities issued by U.S. corporations.
1. Corporate Bond Funds: Short-Term	Invest two-thirds or more of their portfolios in U.S. corporate bonds with an average maturity of one to five years.	1	0

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CATEGORY (and approximate amount of assets under management, as of September 30, 2009) In Billions	INVESTMENT CLASSIFICATION	NO. OF MUTUAL FUNDS	NO. OF INSURANCE PRODUCT FUNDS
IV.    TAX-FREE BOND FUNDS ($65.2)
A. State Municipal Bond Funds ($43.7)	Invest mainly in municipal bonds issued by a particular state.
1. State Municipal Bond Funds: General	Invest mainly in single-state municipal bonds with an average maturity of greater than five years or no specific stated maturity. The income from these funds is largely exempt from federal as well as state income tax for residents of the state.	28	0
B. National Municipal Bond Funds ($21.5)	Invest mainly in bonds of various municipal issuers in the United States.
1. National Municipal Bond Funds: General	Invest mainly in municipal bonds with an average maturity of more than five years or no specific stated maturity.	4	0
2. National Municipal Bond Funds: Short-Term	Invest mainly in municipal bonds with an average maturity of one to five years.	1	0
V.    CASH MANAGEMENT FUNDS ($5.0)
A. Taxable Cash Management Funds ($4.2)	Invest in short-term, high-grade money market securities with average maturities of 90 days of less.
1. Taxable Cash Management Funds: Non-Government	Invest mainly in a variety of money market instruments, including certificates of deposit from larger banks, commercial paper, and bankers’ acceptances.	5	0
B. Tax-Exempt Cash Management Funds ($0.8)	Invest in short-term municipal securities with average maturities of 90 days or less.
1. National Tax-Exempt Cash Management Funds	Invest in short-term securities of various U.S. municipal issuers.	1	0
2. State Tax-Exempt Cash Management Funds	Invest mainly in a variety of short-term securities of municipal issuers in a single state to achieve tax-free income for residents of the state.	1	0

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The following table sets forth the types of our open-end Non-U.S. Funds as of September 30, 2009 categorized by investment classification and sales region.

OPEN-END NON-U.S. FUNDS¹

CATEGORY (and approximate amount of assets under management, as of September 30, 2009) In Billions	INVESTMENT CLASSIFICATION	NO. OF MUTUAL FUNDS BY SALES REGION
I.    EQUITY FUNDS ($51.9)
A. Global/International Equity  Funds ($48.0)	Invest in securities of companies traded world-wide, including U.S. and non-U.S. companies.	Asia-Pacific: Canada: Europe: Latin America:	74 23 44 3
B. Domestic (U.S.) Equity Funds  ($3.9)	Invest in equity securities of U.S. companies.	Asia-Pacific: Canada: Europe:	1 5 13
II.    HYBRID FUNDS ($3.0)	Invest in a mix of global equity, fixed-income securities and derivative instruments.	Asia-Pacific: Canada: Europe:	17 5 4
III.    FIXED-INCOME FUNDS ($33.0)
A. Global/International Fixed- Income Funds ($26.1)	Invest world-wide in debt securities offered by non-U.S. companies and governments. These funds may also invest assets in debt securities offered by companies located in the United States.	Asia-Pacific: Canada: Europe: Latin America:	37 6 13 3
B. Domestic (U.S.) Fixed-Income  Funds ($6.9)	Invest in debt securities offered by U.S. companies and the U.S. government and/or municipalities located in the United States.	Asia-Pacific: Canada: Europe:	1 2 6
IV.    TAXABLE CASH MANAGEMENT FUNDS ($1.9)	Invest in securities issued or guaranteed by U.S. or non-U.S. governments or agencies.	Asia-Pacific: Canada: Europe:	4 4 2

¹ Does not include the Franklin Templeton Global Fund, the Fiduciary Emerging Markets Bond Fund plc, and fund-of-funds. For purposes of this table, we consider the sales region to be where a fund is based and mainly sold and not necessarily the region where a particular fund is invested. Many funds are also distributed across different sales regions (e.g., SICAV funds are based, mainly sold in, and, therefore, considered to be within the Europe sales region, although also distributed in the Asia-Pacific and Latin America sales regions), but are only designated a single sales region in the table.

II. Banking/Finance

Our secondary business segment is banking/finance, which offers select retail banking, private banking and consumer lending services.

One of our subsidiaries, Fiduciary Trust, a New York state-chartered bank, with total assets of $788.7 million and total external customer deposits of $493.5 million as of September 30, 2009, is insured by the Federal Deposit Insurance Corporation (“FDIC”), and provides private banking services primarily to high net-worth clients who maintain trust, custody and/or management accounts. Fiduciary Trust’s private banking and credit products include, among others, loans secured by marketable securities, deposit accounts and other banking services. Deposits generally include demand and savings deposits, primarily from our private banking clients. Fiduciary Trust also offers investment management, custody and related services to high net-worth individuals and families and to institutional accounts.

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Another of our subsidiaries, Franklin Capital Corporation (“FCC”), engages primarily in the purchase, securitization and servicing of retail installment sales contracts (“automobile contracts”) originated by independent automobile dealerships. FCC is incorporated and headquartered in Utah and conducts its business primarily in the Western region of the United States. As of September 30, 2009, FCC’s total assets included $31.5 million of outstanding automobile loan principal, $110.6 million of trading securities, representing retained interests in FCC securitizations, and $1.0 million in other fixed term assets. During fiscal year 2009, FCC had no automobile loan securitization transactions. As of September 30, 2009, FCC was servicing $551.4 million of receivables that had been securitized to date. See Note 9 – Securitization of Loans Held for Sale in the notes to the consolidated financial statements in Item 8 of Part II of this Form 10-K.

Our securitized automobile contracts business is subject to marketplace fluctuation and competes with businesses with significantly larger portfolios. Automobile loan portfolio losses can be influenced significantly by trends in the economy and credit markets, which reduce borrowers’ ability to repay loans. A more detailed analysis of loan losses and delinquency rates in our consumer lending and dealer automobile loan business is contained in Note 9 – Securitization of Loans Held for Sale in the notes to the consolidated financial statements in Item 8 of Part II of this Form 10-K. See also “Risk Factors” in Item 1A of Part I of this Form 10-K.

Our subsidiary FTB&T, a chartered federal savings bank, with total assets of $327.2 million and total external customer deposits of $171.1 million as of September 30, 2009, is insured by the FDIC. FTB&T provides general consumer loan products, such as credit card loans, unsecured loans, loans secured by marketable securities, mortgage loans, debit card products and automobile loans, and a limited number of commercial real estate loans. FTB&T’s deposit products generally include demand, savings and time deposits from the general public and brokered time deposits. FTB&T also provides Advisor Director Trust^®, a directed trust service.

FINANCIAL INFORMATION ABOUT SEGMENTS AND GEOGRAPHIC AREAS

Certain financial information by business segment and geographic area is contained in Note 18 – Segment Information in the notes to consolidated financial statements in Item  8 of Part II of this Form 10-K, which is incorporated herein by reference.

REGULATORY CONSIDERATIONS

Virtually all aspects of our business are subject to various federal, state, and international regulation and supervision. In the U.S., we are subject to regulation and supervision by, among others, the SEC, FINRA, the Federal Reserve Board (the “FRB”), the FDIC, the Office of Thrift Supervision (“OTS”) and the New York State Banking Department (“NYSBD”). To the extent our operations or trading in our securities take place outside the U.S., we are subject to regulation by non-U.S. regulations and regulators, and U.S. regulations and regulators such as the Department of Justice and the SEC with respect to the Foreign Corrupt Practices Act of 1977. Globally, we are subject to regulation and supervision by, among others, the Australian Securities and Investment Commission; the Securities Commission of The Bahamas; the Comissão de Valores Mobiliários in Brazil; the Office of the Superintendent of Financial Institutions Canada as well as provincial and territorial regulators of financial services and securities in Canada and the Mutual Fund Dealers Association of Canada; the Cayman Islands Regulatory Authority; the China Securities Regulatory Commission; the Autorité des Marchés Financiers in France; the Federal Financial Supervisory Authority in Germany; the Securities and Futures Commission of Hong Kong; the Securities and Exchange Board of India; the Irish Financial Services Regulatory Authority; the Commissione Nazionale per le Società e la Borsa in Italy; the Financial Services Agency in Japan; the Korean Ministry of Finance and Economy, the Financial Supervisory Commission and the Financial Supervisory Services in

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Korea; the Commission de Surveillance du Secteur Financier in Luxembourg; the Malaysian Securities Commission; the Comision Nacional Bancaria y de Valores in Mexico; the Autoriteit Financiële Markten in The Netherlands; the Polish Securities and Exchange Commission; the Monetary Authority of Singapore; the Comisión Nacional del Mercado de Valores in Spain; the Finansinspektionen in Sweden; the Swiss Federal Banking Commission; the Taiwan Securities and Futures Bureau, the Ministry of Finance and the Commerce Department, Ministry of Economic Affairs in Taiwan; the Dubai Financial Services Authority in the United Arab Emirates; the Financial Services Authority in the United Kingdom; and the State Securities Commission of Vietnam.

The Advisers Act imposes numerous obligations on certain of our subsidiaries registered with the SEC as investment advisers, including record keeping, operating and marketing requirements, disclosure obligations and prohibitions on fraudulent activities. The Investment Company Act imposes similar obligations on the investment companies that are advised by our subsidiaries. The SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act and the Investment Company Act, ranging from fines and censure to termination of an investment adviser’s registration.

The Company and many of the investment companies advised by our various subsidiaries are subject to federal securities laws and state securities and corporate laws, including those affecting corporate governance, such as the Sarbanes-Oxley Act of 2002 and rules adopted by the SEC. As a NYSE-listed company, we are also subject to the rules of the NYSE, including its corporate governance standards. The federal securities laws have also been augmented by other measures, including the USA Patriot Act of 2001.

FINRA Conduct Rules limit the amount of aggregate sales charges that may be paid in connection with the purchase and holding of investment company shares sold through broker/dealers. The effect of the rule is to limit the amount of fees that could be paid pursuant to a fund’s Rule 12b-1 Plan to FTDI, our principal underwriting and distribution subsidiary in the United States, which earns underwriting commissions on the distribution of fund shares in the United States.

Following the acquisition of Fiduciary Trust in April 2001, Franklin registered as a bank holding company under the BHC Act and became subject to supervision, regulation and examination by the FRB. Franklin also elected to become a financial holding company in 2001. Under FRB policy, a bank holding company, including a financial holding company, is expected to act as a source of financial strength to each of its banking subsidiaries. In addition, bank holding companies should pay cash dividends on common stock only out of income available from the previous fiscal year and only if prospective earnings retention is consistent with anticipated future needs and financial condition.

The FRB also has adopted a system of risk-based capital guidelines to evaluate the capital adequacy of most bank holding companies, including Franklin. Under these guidelines, Franklin and our banking subsidiaries must meet specific capital adequacy requirements that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. To be considered “well capitalized” under the FRB capital guidelines, a bank holding company or bank must maintain a minimum Tier 1 leverage ratio of five percent, a minimum Tier 1 risk-based capital ratio of six percent and a minimum total risk-based capital ratio of ten percent. As of September 30, 2009, our Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital ratios were 75%, 97% and 97%. In addition, both Fiduciary Trust and FTB&T were well capitalized as of September 30, 2009. A depository institution generally is prohibited from making capital distributions, including paying dividends, or paying management fees to a holding company if the institution would thereafter be undercapitalized. Moreover, undercapitalized institutions may not accept, renew or roll over brokered deposits. Bank regulators are required to take prompt corrective action to resolve any problems associated with insured depository institutions, such as Fiduciary Trust and FTB&T, if they become undercapitalized. The GLB Act, however, generally prohibits the FRB from imposing similar capital requirements on regulated non-bank subsidiaries of a financial holding company.

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Pursuant to the GLB Act, a bank holding company may elect to become a financial holding company to engage in a broader range of activities that are financial in nature, including securities underwriting, dealing and market making, securitizing assets, sponsoring mutual funds and investment companies, engaging in insurance underwriting and brokerage activities and investing (without providing routine management) in companies engaged in non-financial activities. To qualify as a financial holding company, each of a bank holding company’s U.S. subsidiary banks and other depository institution subsidiaries, which are not subject to an exemption, must be and remain at all times well capitalized and well managed. In addition, each such subsidiary must have achieved at least a “satisfactory” rating under the Community Reinvestment Act (“CRA”) in the evaluation preceding the financial holding company election. While FTB&T is subject to CRA requirements, Fiduciary Trust remains exempt from such requirements because it qualifies as a special purpose bank. If, however, we do not continue to meet all of the requirements for status as a financial holding company, we would, depending on which requirement is not met, be required to (i) cause Fiduciary Trust or FTB&T to meet such requirement and, in the meantime, seek prior FRB approval to undertake certain new activities or certain banking and non-banking acquisitions, or (ii) either discontinue our banking (but not our thrift) business, or discontinue those activities not generally permissible for bank holding companies.

The BHC Act generally requires that a bank holding company obtain prior approval of the FRB before acquiring control of any bank. In addition, the FRB may impose limitations, restrictions, or prohibitions on the activities or acquisitions of a financial holding company if the FRB believes that the financial holding company does not have appropriate financial and managerial resources. The GLB Act establishes the FRB as the umbrella supervisor for financial holding companies and adopts an administrative approach to regulation that generally requires the FRB to defer to the actions and requirements of the U.S. “functional” regulators of subsidiary broker/dealers, investment advisers, investment companies, insurance companies, and other regulated non-depository institutions. The FRB, however, retains broad authority to prohibit activities of bank holding companies and their non-banking subsidiaries that represent unsafe and unsound banking practices or that constitute violations of law or regulation. Civil money penalties may be imposed for certain activities conducted on a knowing or reckless basis if those activities cause a substantial loss to the bank holding company.

Each of our banking subsidiaries is subject to restrictions under federal law that limit transactions with Franklin and its non-bank subsidiaries, including loans and other extensions of credit, investments, or asset purchases. These and various other transactions, including any payment of money to Franklin and its non-bank subsidiaries, must be on terms and conditions that are, or in good faith would be, offered to companies that are not affiliated with these entities. In addition, these laws and related regulations may limit the Company’s ability to obtain funds from subsidiary banks or affiliates.

The operations and activities of Fiduciary Trust are subject to extensive regulation, supervision and examination by the FDIC and NYSBD while the operations and activities of our other subsidiaries, including FTB&T, are subject to oversight by the OTS and various state regulators. The laws and regulations of these regulators generally impose restrictions and requirements, with which we must comply, on capital adequacy, anti-money laundering, management practices, liquidity, branching, earnings, loans, dividends, investments, reserves against deposits and the provision of services.

The federal banking agencies and the NYSBD have broad enforcement powers, including the power to terminate deposit insurance, impose substantial fines and other civil and criminal penalties and appoint a conservator or receiver. Failure to comply with applicable laws, regulations and supervisory agreements could subject Franklin, our thrift and banking subsidiaries, as well as officers, directors and other so-called “institution-affiliated parties” of these organizations to administrative sanctions and potentially substantial civil money penalties. In addition, the appropriate federal banking agency may appoint the FDIC as conservator or receiver for a banking institution, or the FDIC may appoint itself if certain circumstances exist.

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COMPETITION

The financial services industry is highly competitive and has increasingly become a global industry. There are approximately 9,700 open-end investment funds of varying sizes, and with varying investment policies and objectives, whose shares are offered to the public in the United States, and there are approximately 54,000 open-end investment funds whose shares are offered to the public outside the United States. Due to our international presence and varied product mix, it is difficult to assess our market position relative to other asset managers on a worldwide basis, but we believe that we are one of the more widely diversified asset managers based in the United States. We believe that our equity and fixed-income asset mix coupled with our global presence will serve our competitive needs well over the long term. We continue to focus on the performance of our investment products, service to customers and extensive marketing activities through our strong broker/dealer and other financial institution distribution network as well as with high net-worth and institutional customers. We believe that performance, diversity of products and customer service, along with fees and costs, are the primary drivers of competition in the asset management industry.

We face strong competition from numerous asset management companies, mutual fund, stock brokerage and investment banking firms, insurance companies, banks, savings and loan associations and other financial institutions, which offer a wide range of financial and investment management services to the same institutional accounts, separate accounts, retail investors and high net-worth customers that we are seeking to attract. Over the past decade, a significant number of new asset management firms and investment products have been established, increasing competition. Many of our competitors have long-standing and established relationships with broker/dealers and investment adviser customers. Others have focused on, offer and market specific product lines, which are able to provide strong competition to certain of our asset classes, since we have a broad range of products. Recently, there also has been a trend of consolidation in the financial services industry, resulting in stronger competitors, some with greater financial resources and broader distribution channels than our own.

We rely largely on intermediaries to distribute and sell our fund shares. We have and continue to pursue sales relationships with all types of intermediaries to broaden our distribution network. We have experienced increased costs related to maintaining our distribution channels and we anticipate that this trend will continue. A failure to maintain strong business relationships with the major intermediaries who currently distribute our products may also impair our distribution and sales operations. Any inability to access and successfully sell our products to clients through third-party distribution channels could have a negative effect on our level of assets under management, related revenues and overall business and financial condition.

We maintain an Internet platform to compete with rapidly developing and evolving technology capabilities. However, technology is subject to rapid change and we cannot guarantee that our competitors may not implement more advanced Internet platforms for their products, which could affect our business.

We believe that we are well positioned to deal with changes in marketing trends as a result of our already extensive advertising activities and broad based marketplace recognition. We conduct advertising and promotional campaigns through various media sources to promote brand recognition. We advertise in major financial publications, as well as on radio, television and the Internet to promote brand name recognition and to assist our distribution network. Such activities include purchasing network and cable programming, sponsorship of sporting events, and extensive newspaper and magazine advertising.

Diverse and strong competition affects the banking/finance segment of our business as well, and limits the fees that can be charged for our services. For example, in our banking/finance segment we compete with many types of institutions for consumer loans, including the finance subsidiaries of large automobile manufacturers, which offer special incentives, including no-interest loans, from time to time to stimulate automobile sales. These product offerings by our competitors limit the interest rates that we can charge on consumer loans.

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INTELLECTUAL PROPERTY

We have used, registered, and/or applied to register certain trademarks, service marks and trade names to distinguish our sponsored investment products and services from those of our competitors in the United States and in other countries and jurisdictions, including, but not limited to, Franklin^®, Templeton^®, Mutual Series^®, Bissett^®, Fiduciary™ and Darby^®. Our trademarks, service marks and trade names are important to us and, accordingly, we enforce our trademark, service mark and trade name rights. The Franklin Templeton Investments^® brand has been, and continues to be, extremely well received both in our industry and with our clients, reflecting the fact that our brand, like our business, is based in part on trust and confidence. If our brand is harmed, our future business prospects may be adversely affected.

EMPLOYEES

As of September 30, 2009, we employed approximately 7,700 employees and operated offices in 31 countries. We consider our relations with our employees to be satisfactory.

AVAILABLE INFORMATION

Franklin files reports with the SEC, including current and periodic reports, proxy statements and other information filed with or furnished to the SEC from time to time. The public may read and copy any of these filings at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers, including Franklin, who file electronically with the SEC, at http://www.sec.gov. Additional information about the Company can also be obtained at our website at www.franklinresources.com under “Investor Relations” on the “Our Company” page. We make available free of charge on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Corporate Governance Guidelines. The Company has adopted Corporate Governance Guidelines. The Corporate Governance Guidelines are posted on the Company’s website under “Corporate Governance” on the “Our Company” page and are available in print to any stockholder who requests a copy.

Committee Charters. The Company’s Board of Directors has an Audit Committee, Compensation Committee and Corporate Governance Committee. The Board of Directors has adopted written charters for each such committee, which are posted on the Company’s website under “Corporate Governance” on the “Our Company” page and are available in print to any stockholder who requests a copy.

Item 1A. Risk Factors.

Volatility and disruption of the capital and credit markets, and adverse changes in the global economy, may significantly affect our results of operations and may put pressure on our financial results. The capital and credit markets have experienced substantial volatility and disruption during the past fiscal year. Although global market conditions have shown some stabilization and improvement, the decline in global market conditions has in the past resulted in significant decreases in our assets under management, revenues and income, and future declines may negatively impact our performance. Such declines have had and may in the future have an adverse impact on our results of operations. Even if legislative or regulatory initiatives

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or other efforts successfully stabilize and add liquidity to the financial markets, we may need to modify our business, strategies or operations, and we may be subject to additional constraints or costs in order to satisfy new regulatory requirements or to compete in a changed business environment.

The amount and mix of our assets under management are subject to significant fluctuations. Fluctuations in the amount and mix of our assets under management may be attributable in part to market conditions outside of our control that have had, and could continue to have, a negative impact on our revenues and income. We derive the majority of our operating revenues and net income from providing investment management and related services. The level of our revenues depends largely on the level and mix of assets under management. Any decrease in the value or amount of our assets under management because of market volatility or other factors negatively impacts our revenues and income. We are subject to an increased risk of asset volatility from changes in the global financial and equity markets. Individual financial and equity markets may be adversely affected by economic, political, financial, or other instabilities that are particular to the country or regions in which a market is located, including without limitation local acts of terrorism, economic crises or other business, social or political crises. Declines in these markets have caused in the past, and would cause in the future, a decline in our revenues and income. Global economic conditions, exacerbated by war or terrorism or financial crises, changes in the equity market place, currency exchange rates, interest rates, inflation rates, the yield curve, defaults by derivative counterparties and other factors that are difficult to predict affect the mix, market values and levels of our assets under management. The funds we manage may be subject to an unanticipated large number of redemptions as a result of such events, causing the funds to sell securities they hold, possibly at a loss, or draw on any available lines of credit to obtain cash to settle these redemptions, or settle in-kind with securities held in the applicable fund. The Company, in its discretion, may also provide financial support to a fund to enable it to maintain sufficient liquidity in such event. Our investment management services revenues are derived primarily from fees based on a percentage of the value of assets under management and vary with the nature of the account or product managed. A decline in the price of stocks or bonds, or in particular market segments, or in the securities market generally, could cause the value and returns on our assets under management to decline, resulting in a decline in our revenues and income. Moreover, changing market conditions may cause a shift in our asset mix between international and U.S. assets, potentially resulting in a decline in our revenue and income depending upon the nature of our assets under management and the level of management fees we earn based on them. Additionally, changing market conditions may cause a shift in our asset mix towards fixed-income products and a related decline in our revenue and income, as we generally derive higher fee revenues and income from equity assets than from fixed-income products we manage. On the other hand, increases in interest rates, in particular if rapid, or high interest rates, as well as any uncertainty in the future direction of interest rates, may have a negative impact on our fixed-income products as rising interest rates or interest rate uncertainty typically decrease the total return on many bond investments due to lower market valuations of existing bonds. Any decrease in the level of our assets under management resulting from price declines, interest rate volatility or uncertainty, increased redemptions or other factors could negatively impact our revenues and income.

We are subject to extensive and complex, overlapping and frequently changing rules, regulations and legal interpretations. Our investment management and related services business and our banking/finance business are subject to extensive and complex, overlapping and frequently changing rules, regulations and legal interpretations in the countries in which we operate, including, among others, securities, banking, accounting and tax laws and regulations. Moreover, financial reporting requirements, and the processes, controls and procedures that have been put in place to address them, are often comprehensive and complex. While management has focused attention and resources on our compliance policies, procedures and practices, non-compliance with applicable laws or rules or regulations, conflicts of interest requirements or fiduciary principles, or our inability to keep up with, or adapt to, an ever changing, complex regulatory environment could result in sanctions against us, including fines and censures, injunctive relief, suspension

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or expulsion from a particular jurisdiction or market or the revocation of licenses, any of which could also adversely affect our reputation, prospects, revenues, and earnings.

We are subject to U.S. federal securities laws, state laws regarding securities fraud, other federal and state laws and rules and regulations of certain regulatory and self-regulatory organizations, including those rules and regulations promulgated by, among others, the SEC, the Financial Industry Regulatory Authority and the New York Stock Exchange. To the extent operations or trading in our securities take place outside the United States, we are subject to regulation by non-U.S. regulations and regulators, such as the U.K. Financial Services Authority, and U.S. regulations and regulators such as the Department of Justice and the SEC with respect to the Foreign Corrupt Practices Act of 1977. Certain of our subsidiaries are registered with the SEC under the Investment Advisers Act of 1940 and many of our funds are registered with the SEC under the Investment Company Act of 1940, both of which impose numerous obligations, as well as detailed operational requirements, on our subsidiaries which are investment advisers to registered investment companies. Our subsidiaries must comply with a myriad of complex and changing U.S. and/or non-U.S. rules and regulations, some of which may conflict, as well as complex tax regimes. Additionally, as we expand our operations, sometimes rapidly, into non-U.S. jurisdictions, the rules and regulations of these non-U.S. jurisdictions become applicable, sometimes with short compliance deadlines, and add further regulatory complexity to our ongoing compliance operations.

In addition, we are a bank holding company and a financial holding company subject to the supervision and regulation of the Federal Reserve Board (the “FRB”) and are subject to the restrictions, limitations, or prohibitions of the Bank Holding Company Act of 1956, as amended, and the Gramm-Leach-Bliley Act. The FRB may impose additional limitations or restrictions on our activities, including if the FRB believes that we do not have the appropriate financial and managerial resources to commence or conduct an activity or make an acquisition. Further, our subsidiary, Fiduciary Trust, is subject to extensive regulation, supervision and examination by the Federal Deposit Insurance Corporation and New York State Banking Department, while other subsidiaries are subject to oversight by the Office of Thrift Supervision and various state regulators. The laws and regulations imposed by these regulators generally involve restrictions and requirements in connection with a variety of technical, specialized, and expanding matters and concerns. For example, compliance with anti-money laundering and Know-Your-Customer requirements, both domestically and internationally, and the Bank Secrecy Act has taken on heightened importance with regulators as a result of efforts to, among other things, limit terrorism. At the same time, there has been increased regulation with respect to the protection of customer privacy and the need to secure sensitive customer information. As we continue to address these requirements or focus on meeting new or expanded ones, we may expend a substantial amount of time and resources, even though our banking/finance business does not constitute our dominant business sector. Any inability to meet these requirements, within the timeframes set by regulators, may subject us to sanctions or other restrictions by the regulators that could impact our broader business. Moreover, being subject to banking regulation may put us at a disadvantage compared to our competitors which are not subject to such requirements.

Regulatory and legislative actions and reforms have made the regulatory environment in which we operate more costly and future actions and reforms could adversely impact our assets under management, increase costs and negatively impact our profitability and future financial results. Since 2001, the federal securities laws have been augmented substantially and made significantly more complex by, among other measures, the Sarbanes-Oxley Act of 2002 and the USA Patriot Act of 2001. Moreover, changes in the interpretation or enforcement of existing laws or regulations have directly affected our business. With new laws and changes in interpretation and enforcement of existing requirements, the associated time we must dedicate to, and related costs we must incur in, meeting the regulatory complexities of our business have increased. These outlays have also increased as we expand our business into new jurisdictions. Compliance activities to meet these new legal requirements have required us to expend additional time and resources,

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and, consequently, we are incurring increased costs of doing business, which potentially negatively impacts our profitability and future financial results. Moreover, any potential accounting or reporting error, whether financial or otherwise, if material, could damage our reputation, adversely affect our ability to conduct business, and decrease revenue and net income. Finally, any regulatory and legislative actions and reforms affecting the mutual fund industry, including compliance initiatives, may negatively impact revenues by increasing our costs of accessing or dealing in the financial markets or by making certain investment offerings less favorable to our customers.

Changes in tax laws or exposure to additional income tax liabilities could have a material impact on our financial condition, results of operations and liquidity. We are subject to income taxes as well as non-income based taxes, in both the United States and various foreign jurisdictions and are subject to ongoing tax audits in various jurisdictions. Tax authorities may disagree with certain positions we have taken and assess additional taxes. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcomes of these audits, and the actual outcomes of these audits could have a material impact on our net income or financial condition. Changes in tax laws or tax rulings could materially impact our effective tax rate. For example, proposals for fundamental U.S. international tax reform, such as the recent proposal by the Obama administration, if enacted, could have a significant adverse impact on our future results of operations.

Our ability to maintain the beneficial tax treatment we anticipate with respect to non-U.S. earnings we have repatriated is based on current interpretations of the American Jobs Creation Act of 2004 (the “Jobs Act”) and permitted use of such amounts in accordance with our domestic reinvestment plan and the Jobs Act. In September 2006, we completed our planned repatriation into the United States of undistributed earnings of our non-U.S. subsidiaries in accordance with our domestic reinvestment plan and the Jobs Act. However, our ability to maintain the anticipated beneficial tax treatment with respect to these non-U.S. earnings is subject to current interpretations and compliance with the Jobs Act (including Internal Revenue Code Section 965), as well as the rules and regulations promulgated by, among others, the Internal Revenue Service and the United States Treasury Department. Moreover, changes in the interpretation of these rules and regulations may have an effect on our ability to maintain the beneficial tax treatment with respect to our repatriated non-U.S. earnings. Our inability to appropriately use repatriated amounts for permitted purposes or to otherwise satisfy the requirements of our planned repatriation could also have a negative impact on the scope and breadth of our anticipated tax treatment with respect to such amounts.

Any significant limitation or failure of our software applications, technology or other systems that are critical to our operations could constrain our operations. We are highly dependent upon the use of various proprietary and third-party software applications and other technology systems to operate our business. We use our technology to, among other things, obtain securities pricing information, process client transactions, and provide reports and other customer services to the clients of the funds we manage. Any inaccuracies, delays, or systems failures in these and other processes could subject us to client dissatisfaction and losses. Although we take protective measures, including measures to effectively secure information through system security technology, our technology systems may still be vulnerable to unauthorized access, computer viruses or other events that have a security impact, such as an authorized employee or vendor inadvertently causing us to release confidential information, which could materially damage our operations or cause the disclosure or modification of sensitive or confidential information. Moreover, loss of confidential customer identification information could harm our reputation and subject us to liability under laws that protect confidential personal data, resulting in increased costs or loss of revenue.

Further, although we take precautions to password protect our laptops and other mobile electronic hardware, if such hardware is stolen, misplaced or left unattended, it may become vulnerable to hacking or

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other unauthorized use, creating a possible security risk and resulting in potentially costly actions by us. Most of the software applications that we use in our business are licensed from, and supported, upgraded and maintained by, third-party vendors. A suspension or termination of certain of these licenses or the related support, upgrades and maintenance could cause temporary system delays or interruption. In addition, although we currently outsource to a single third-party vendor the operation of our U.S. data centers, we are revising our operations such that the majority of the services currently performed by the vendor will be performed by us and by a separate third-party vendor in the future. The failure by the current vendor to provide adequate transition support services in connection with the termination and transition of their services, or the failure by us or the new third-party vendor to adequately perform the services performed by the current vendor, could have an adverse impact on our business. Although we have in place certain disaster recovery plans, we may experience system delays and interruptions as a result of natural disasters, power failures, acts of war, and third-party failures. Technology is subject to rapid change and we cannot guarantee that our competitors may not implement more advanced Internet platforms for their products, which could affect our business. Potential system failures or breaches, or advancements in technology, and the cost necessary to address them, could result in material financial loss or costs, regulatory actions, breach of client contracts, reputational harm or legal claims and liability, which in turn could negatively impact our revenues and income.

Our investment management business operations are complex and a failure to properly perform operational tasks or the misrepresentation of our products and services could have an adverse effect on our revenues and income. Through our subsidiaries, we provide investment management and related services to funds and institutional, high net-worth and separately-managed accounts (collectively, our “sponsored investment products”). Our investment management and related services include fund administration, shareholder services, transfer agency, underwriting, distribution, custodial, trustee and other fiduciary services. In order to be competitive, we must properly perform our fund and portfolio administration and related responsibilities, including portfolio recordkeeping and accounting, security pricing, corporate actions, investment restrictions compliance, daily net asset value computations, account reconciliations, and required distributions to fund shareholders. In addition, the intentional or unintentional misrepresentation of our products and services in advertising materials, public relations information or other external communications could adversely affect our reputation and business prospects. Further, certain of our subsidiaries may act as general partner for various investment partnerships, which may subject them to liability for the partnerships’ liabilities. If we fail to properly perform and monitor our investment management operations, our business could suffer and our revenues and income could be adversely affected.

We face risks, and corresponding potential costs and expenses, associated with conducting operations and growing our business in numerous countries. We sell mutual funds and offer investment management and related services in many different regulatory jurisdictions around the world, and intend to continue to expand our operations internationally. As we do so, we will continue to face challenges to the adequacy of our resources, procedures and controls to consistently and effectively operate our business. In order to remain competitive, we must be proactive and prepared to implement necessary resources when growth opportunities present themselves, whether as a result of a business acquisition or rapidly increasing business activities in particular markets or regions. As we grow, we face a heightened risk that the necessary resources and/or personnel will be unavailable to take full advantage of strategic opportunities when they appear or that strategic decisions can be efficiently implemented. Local regulatory environments may vary widely, as may the adequacy and sophistication of each. Similarly, local distributors, and their policies and practices as well as financial viability, may be inconsistent or less developed or mature. Notwithstanding potential long-term cost savings by increasing certain operations, such as transfer agent and other back-office operations, in countries or regions of the world with lower operating costs, growth of our international operations may involve near-term increases in expenses as well as additional capital costs,

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such as information, systems and technology costs and costs related to compliance with particular regulatory or other local requirements or needs. Local requirements or needs may also place additional demands on sales and compliance personnel and resources, such as meeting local language requirements, while also integrating personnel into an organization with a single operating language. Finding and hiring additional, well-qualified personnel and crafting and adopting policies, procedures and controls to address local or regional requirements remain a challenge as we expand our operations internationally. Moreover, regulators in non-U.S. jurisdictions could also change their policies or laws in a manner that might restrict or otherwise impede our ability to distribute or register investment products in their respective markets. Any of these local requirements, activities, or needs could increase the costs and expenses we incur in a specific jurisdiction without any corresponding increase in revenues and income from operating in the jurisdiction. In addition, from time to time we enter into international joint ventures in which we may not have control. These investments in joint ventures may involve risks, including the risk that the controlling joint venture partner may have business interests, strategies or goals that are inconsistent with ours, and the risk that business decisions or other actions or omissions of the controlling joint venture partner or the joint venture company may result in harm to our reputation or adversely affect the value of our investment in the joint venture.

We depend on key personnel and our financial performance could be negatively affected by the loss of their services. The success of our business will continue to depend upon our key personnel, including our portfolio and fund managers, investment analysts, investment advisers, sales and management personnel and other professionals as well as our executive officers and business unit heads. Competition for qualified, motivated, and highly skilled executives, professionals and other key personnel in the asset management and banking/finance industries remains significant. Our success depends to a substantial degree upon our ability to attract, retain, and motivate qualified individuals, including through competitive compensation packages, and upon the continued contributions of these people. As our business grows, we are likely to need to increase correspondingly the overall number of individuals that we employ. Moreover, in order to retain certain key personnel, we may be required to increase compensation to such individuals, resulting in additional expense without a corresponding increase in potential revenue. We cannot assure you that we will be successful in attracting and retaining qualified individuals, and the departure of key investment personnel, in particular, if not replaced, could cause us to lose clients, which could have a material adverse effect on our financial condition, results of operations and business prospects.

Strong competition from numerous and sometimes larger companies with competing offerings and products could limit or reduce sales of our products, potentially resulting in a decline in our market share, revenues and net income. We compete with numerous asset management companies, mutual fund, stock brokerage, and investment banking firms, insurance companies, banks, savings and loan associations and other financial institutions. Our investment products also compete with products offered by these competitors as well as real estate investment trusts, hedge funds and others. The periodic establishment of new asset management companies and other competitors increases the competition that we face in our business. At the same time, consolidation in the financial services industry has created stronger competitors with greater financial resources and broader distribution channels than our own. Competition is based on various factors, including, among others, business reputation, investment performance, product mix and offerings, service quality and innovation, distribution relationships, and fees charged. Additionally, competing securities broker/dealers whom we rely upon to distribute and sell our mutual funds may also sell their own proprietary funds and investment products, which could limit the distribution of our investment products. To the extent that existing or potential customers, including securities broker/dealers, decide to invest in or distribute the products of our competitors, the sales of our products as well as our market share, revenues and net income could decline. Our ability to attract and retain assets under our management is also dependent on the relative investment performance of our funds and other managed investment portfolios, offering a mix of sponsored investment products that meets investor demand and our ability to maintain our investment management services fees at competitive levels.

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Changes in the third-party distribution and sales channels on which we depend could reduce our revenues and hinder our growth. We derive nearly all of our fund sales through third-party broker/dealers and other similar investment advisers. Increasing competition for these distribution channels and recent regulatory initiatives have caused our distribution costs to rise and could cause further increases in the future or could otherwise negatively impact the distribution of our products. Higher distribution costs lower our net revenues and earnings. Additionally, recent consolidations in the broker/dealer industry could adversely impact our revenues and earnings. Moreover, if several of the major financial advisers who distribute our products were to cease operations or limit or otherwise end the distribution of our products, it could have a significant adverse impact on our revenues and earnings. There is no assurance we will continue to have access to the third-party broker/dealers and similar investment advisers that currently distribute our products, or continue to have the opportunity to offer all or some of our existing products through them. A failure to maintain strong business relationships with the major investment advisers who currently distribute our products may also impair our distribution and sales operations. Because we use broker/dealers and other similar investment advisers to sell our products, we do not control the ultimate investment recommendations given to clients. Any inability to access and successfully sell our products to clients through third-party distribution channels could have a negative effect on our level of assets under management, related revenues and overall business and financial condition.

Our increasing focus on international markets as a source of investments and sales of investment products subjects us to increased exchange rate and other risks in connection with earnings and income generated overseas. While we operate primarily in the United States, we also provide services and earn revenues in The Bahamas, Asia, Canada, Europe, Latin America, Africa, and Australia. As a result, we are subject to foreign exchange risk through our non-U.S. operations. Fluctuations in the exchange rates to the U.S. dollar may affect our financial results from one period to the next. While we have taken steps to reduce our exposure to foreign exchange risk, for example, by denominating a significant amount of our transactions in U.S. dollars, the situation may change in the future as our business continues to grow outside the United States. Appreciation of the U.S. dollar could moderate revenues from managing investment products internationally or could affect relative investment performance of certain funds invested in non-U.S. securities. However, depreciation of the U.S. dollar could positively affect our revenues from managing investment products internationally. Consequently, a downturn in international markets could have a significant effect on our revenues and income. Moreover, as our business grows in non-U.S. markets, any business, economic, social or political unrest affecting these markets, in addition to any direct consequences such unrest may have on our personnel and facilities located in the affected area, may also have a more lasting impact on the long-term investment climate in these and other areas and, as a result, our assets under management and the corresponding revenues and income that we generate from them may be negatively affected.

Poor investment performance of our products could affect our sales or reduce the level of assets under management, potentially negatively impacting our revenues and income. Our investment performance, along with achieving and maintaining superior distribution and client services, is critical to the success of our investment management and related services business. Strong investment performance often stimulates sales of our investment products. Poor investment performance as compared to third-party benchmarks or competitive products could lead to a decrease in sales of investment products we manage and stimulate redemptions from existing products, generally lowering the overall level of assets under management and reducing the management fees we earn. We cannot assure you that past or present investment performance in the investment products we manage will be indicative of future performance. Any poor investment performance may negatively impact our revenues and income.

We could suffer losses in earnings or revenue if our reputation is harmed. Our reputation is important to the success of our business. We believe that our Franklin Templeton Investments brand has been, and continues to be, well received both in our industry and with our clients, reflecting the fact that our brand,

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like our business, is based in part on trust and confidence. If our reputation is harmed, existing clients may reduce amounts held in, or withdraw entirely from, funds that we advise or funds may terminate their management agreements with us, which could reduce the amount of assets under management and cause us to suffer a corresponding loss in earnings or revenue. Moreover, reputational harm may cause us to lose current employees and we may be unable to continue to attract new ones with similar qualifications, motivations, or skills. If we fail to address, or appear to fail to address, successfully and promptly the underlying causes of any reputational harm, we may be unsuccessful in repairing any existing harm to our reputation and our future business prospects would likely be affected.

Our future results are dependent upon maintaining an appropriate level of expenses, which is subject to fluctuation. The level of our expenses is subject to fluctuation and may increase for the following or other reasons: changes in the level and scope of our advertising expenses in response to market conditions; variations in the level of total compensation expense due to, among other things, bonuses, changes in our employee count and mix, and competitive factors; changes in expenses and capital costs, including costs incurred to maintain and enhance our administrative and operating services infrastructure or to cover uninsured losses and an increase in insurance expenses including through the assumption of higher deductibles and/or co-insurance liability.

Our ability to successfully integrate widely varied business lines can be impeded by systems and other technological limitations. Our continued success in effectively managing and growing our business depends on our ability to integrate the varied accounting, financial, information, and operational systems of our various businesses on a global basis. Moreover, adapting or developing our existing technology systems to meet our internal needs, as well as client needs, industry demands and new regulatory requirements, is also critical for our business. The constant introduction of new technologies presents new challenges to us. We have an ongoing need to continually upgrade and improve our various technology systems, including our data processing, financial, accounting, and trading systems. Further, we also must be proactive and prepared to implement technology systems when growth opportunities present themselves, whether as a result of a business acquisition or rapidly increasing business activities in particular markets or regions. These needs could present operational issues or require, from time to time, significant capital spending. It also may require us to reevaluate the current value and/or expected useful lives of our technology systems, which could negatively impact our results of operations.

Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, regulatory actions, reputational harm, or legal liability. Should we experience a local or regional disaster or other business continuity problem, such as an earthquake, terrorist attack, pandemic or other natural or man-made disaster, our continued success will depend, in part, on the availability of our personnel, our office facilities, and the proper functioning of our computer, telecommunication and other related systems and operations. While our operational size, the diversity of locations from which we operate, and our redundant back-up systems provide us with a strong advantage should we experience a local or regional disaster or other business continuity event, we could still experience near-term operational challenges, in particular depending upon how a local or regional event may affect our human capital across our operations or with regard to particular segments of our operations, such as key executive officers or personnel in our technology group. Moreover, as we grow our operations in new geographic regions, the potential for particular types of natural or man-made disasters, political, economic or infrastructure instabilities, or other country- or region-specific business continuity risks increases. Past disaster recovery efforts have demonstrated that even seemingly localized events may require broader disaster recovery efforts throughout our operations and, consequently, we regularly assess and take steps to improve upon our existing business continuity plans and key management succession. However, a disaster on a significant scale or affecting certain of our key operating areas within or across regions, or our inability to successfully recover should we experience a disaster or

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other business continuity problem, could materially interrupt our business operations and cause material financial loss, loss of human capital, regulatory actions, reputational harm, or legal liability.

Certain of the portfolios we manage, including our emerging market portfolios, are vulnerable to significant market-specific political, economic, or other risks, any of which may negatively impact our revenues and income. Our emerging market portfolios and revenues derived from managing these portfolios are subject to significant risks of loss from political, economic, and diplomatic developments, currency fluctuations, social instability, changes in governmental policies, expropriation, nationalization, asset confiscation and changes in legislation related to foreign ownership. International trading markets, particularly in some emerging market countries, are often smaller, less liquid, less regulated and significantly more volatile than those in the U.S.

Our revenues, earnings, and income could be adversely affected if the terms of our management agreements are significantly altered or these agreements are terminated by the funds and other sponsored investment products we advise. Our revenues are dependent on fees earned under investment management and related services agreements that we have with the funds and other sponsored investment products we advise. These revenues could be adversely affected if these agreements are altered significantly or terminated. The decline in revenue that might result from alteration or termination of our investment management services agreements could have a material adverse impact on our earnings or income.

Regulatory and governmental examinations and/or investigations, civil litigation relating to previously-settled regulatory and governmental investigations, and the legal risks associated with our business, could adversely impact our assets under management, increase costs and negatively impact our profitability and/or our future financial results. From time to time we may receive requests for documents or other information from governmental authorities or regulatory bodies or we also may become the subject of governmental or regulatory investigations and/or examinations. Moreover, governmental or regulatory investigations or examinations that have been inactive could become active. We may be obligated, and under our standard form of indemnification agreement with certain officers and directors in some instances, we are obligated, or we may choose, to indemnify directors, officers, or employees against liabilities and expenses they may incur in connection with such matters to the extent permitted under applicable law. In addition, we have been named as a defendant in mutual fund shareholder class action and fund derivative lawsuits, as well as in a corporate derivative lawsuit, that relate to previously settled regulatory and governmental investigations. While management believes that the claims made in these lawsuits are without merit, and intends to defend against them vigorously, litigation typically is an expensive process. Risks associated with legal liability often are difficult to assess or quantify and their existence and magnitude can remain unknown for significant periods of time. Moreover, settlements or judgments against us have the potential of being substantial if we are unsuccessful in settling or otherwise resolving matters early in the process and/or on favorable terms. Eventual exposures from and expenses incurred relating to current and future litigation, investigations, examinations and settlements could adversely impact our assets under management, increase costs and negatively impact our profitability and/or our future financial results. Judgments or findings of wrongdoing by regulatory or governmental authorities or in civil litigation against us could affect our reputation, increase our costs of doing business and/or negatively impact our revenues, any of which could have a material negative impact on our financial results.

Our ability to meet cash needs depends upon certain factors, including the market value of our assets, operating cash flows and our perceived credit worthiness. Our ability to meet anticipated cash needs depends upon factors such as the market value of our assets, our operating cash flows and our creditworthiness as perceived by lenders. If we are unable to obtain funds and financing, we may be forced to incur unanticipated costs or revise our business plans. Further, our access to the capital markets depends significantly on our credit ratings. A reduction in our long- or short-term credit ratings could increase our

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borrowing costs and limit our access to the capital markets. Volatility in the global financing markets may also impact our ability to access the capital markets should we seek to do so, and have an adverse affect on investors’ willingness to purchase our securities, interest rates, credit spreads and the valuation levels of equity markets. If we are unable to obtain funds and financing, or access the capital markets in a timely manner, we may be forced to incur unanticipated costs or revise our business plans, and our business could be adversely impacted.

Diverse and strong competition limits the interest rates that we can charge on consumer loans. We compete with many types of institutions for consumer loans, certain of which can provide loans at significantly below-market interest rates or, in some cases, zero interest rates in connection with automobile sales. Our inability to compete effectively against these companies or to maintain our relationships with the various automobile dealers through whom we offer consumer loans could limit the growth of our consumer loan business. Economic and credit market downturns could reduce the ability of our customers to repay loans, which could cause losses to our consumer loan portfolio.

Our business could be negatively affected if we or our banking subsidiaries fail to remain well capitalized, and liquidity needs could affect our banking business. Our bank and thrift subsidiaries are subject to significant regulation and supervision, which includes minimum regulatory capital standards. Franklin is also subject to minimum regulatory capital standards because it is a bank holding company and financial holding company registered with the FRB under the Bank Holding Company Act of 1956. Franklin and its bank and thrift subsidiaries are currently well capitalized under applicable guidelines. However, our business could be negatively affected if Franklin or its bank or thrift subsidiaries failed to remain well capitalized. For example, because our bank and thrift subsidiaries are well capitalized and we otherwise qualify as a financial holding company, we are permitted to engage in a broader range of activities than are permitted to a bank holding company. Loss of financial holding company status would require that we either cease these broader activities or divest our bank subsidiaries if we desire to continue such activities. The banking regulators are authorized (and sometimes required) to impose a wide range of requirements, conditions, and restrictions on banks, thrifts, and bank holding companies that fail to maintain adequate capital levels. In addition, liquidity needs could affect our banking business, which may be subject to an unanticipated large number of withdrawals as a result of a number of factors, such as changed or unstable economic conditions, adverse trends or events, business closings and lay-offs, rates paid by competitors, general interest rate levels, and returns available to clients on alternative investments. Our banking subsidiaries may be required from time to time to rely on secondary sources of liquidity, such as the sale of investment securities, Federal Home Loan Bank (“FHLB”) advances and federal funds lines to enable them to meet such withdrawal demands. These secondary sources may not be sufficient to meet liquidity needs.

We are dependent on the earnings of our subsidiaries. Substantially all of our operations are conducted through our subsidiaries, as a result, our cash flow and our ability to fund operations are dependent upon the earnings of our subsidiaries and the distribution of earnings, loans or other payments by our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation to provide us with funds for our payment obligations, whether by dividends, distributions, loans or other payments. Any payments to us by our subsidiaries could be subject to statutory or contractual restrictions and are contingent upon our subsidiaries’ earnings and business considerations.

Item 1B. Unresolved Staff Comments.

None.

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Item 2. Properties.

We conduct our worldwide operations using a combination of leased and owned facilities. While we believe we have sufficient facilities to conduct our business at present, we will continue to lease, acquire and dispose of facilities throughout the world as necessary.

We lease space in various states in the United States, including California, Connecticut, Delaware, Florida, New Jersey, New York, Utah and the District of Columbia, and in various non-U.S. locations, including Australia, Austria, Brazil, Canada, China (including Hong Kong), France, Germany, India, Italy, Japan, Korea, Luxembourg, Malaysia, Mexico, The Netherlands, Poland, Russia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, United Arab Emirates, the United Kingdom (including England and Scotland), and Vietnam. As of September 30, 2009, we leased and occupied approximately 1,219,000 square feet of space. We have also leased and subsequently subleased to third parties a total of 117,000 square feet of excess leased space.

In addition, we own four buildings in San Mateo, California, five buildings near Sacramento, California, two buildings in Stockton, California, five buildings in St. Petersburg, Florida, three buildings in Hyderabad, India and two buildings in Nassau, The Bahamas, as well as space in office buildings in Argentina, India and Singapore. The buildings we own consist of approximately 1,982,000 square feet of space. We have leased to third parties approximately 280,000 square feet of excess owned space.

We perform operations related to our investment management and related services in almost all locations. We perform operations related to our banking and finance business segment principally in New York, New York; Salt Lake City, Utah; and San Mateo, California.

Item 3. Legal Proceedings.

The information set forth in response to this Item 3 of Regulation S-K under “Legal Proceedings” is incorporated by reference from the “Legal Proceedings” section in Note 15 – Commitments and Contingencies in the notes to the consolidated financial statements in Item 8 of Part II of this Form 10-K, which is incorporated herein by reference.

Item 4. Submission of Matters to a Vote of Security Holders.

During the fourth quarter of the fiscal year covered by this report, no matter was submitted to a vote of the security holders of Franklin.

EXECUTIVE OFFICERS OF THE REGISTRANT

Pursuant to General Instruction G(3) to Form 10-K, the following description of our executive officers is included as an unnumbered item in Part I of this report in lieu of being included in our definitive proxy statement for our annual meeting of stockholders. Set forth below are the name, age, present title, and certain other information for each of our executive officers as of November 15, 2009. Each executive officer is appointed by Franklin’s Board of Directors and holds his/her office until the earlier of his/her death, resignation, retirement, disqualification or removal.

VIJAY C. ADVANI

AGE 48

Executive Vice President–Global Distribution of Franklin since June 2008, and formerly Executive Vice President–Global Advisor Services of Franklin from December 2005 to June 2008; officer and/or

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director of various subsidiaries of Franklin; employed by Franklin or its subsidiaries in various other capacities for more than the past five years.

PENELOPE S. ALEXANDER

AGE 49

Vice President, Human Resources–U.S. of Franklin since May 2003; Senior Vice President, Human Resources–U.S. of Franklin Templeton Companies, LLC, a subsidiary of Franklin; employed by Franklin or its subsidiaries in various other capacities for more than the past five years.

JENNIFER J. BOLT

AGE 45

Executive Vice President–Operations and Technology of Franklin since December 2005; formerly, Senior Vice President and Chief Information Officer of Franklin from May 2003 to December 2005; officer of Franklin for more than the past five years; officer or director of various subsidiaries of Franklin. Director, Keynote Systems, Inc. since April 2004.

NORMAN R. FRISBIE, JR.

AGE 42

Senior Vice President and Chief Administrative Officer of Franklin since December 2005; Senior Vice President of FTDI, a subsidiary of Franklin, since June 2003; employed by Franklin or its subsidiaries in various other capacities for more than the past five years.

HOLLY E. GIBSON

AGE 43

Vice President, Corporate Communications of Franklin since May 2003, and Director of Corporate Communications for more than the past five years.

DONNA S. IKEDA

AGE 53

Vice President, Human Resources–International of Franklin since May 2003; formerly, Vice President–Human Resources of Franklin; officer of Franklin for more than the past five years; Senior Vice President, Human Resources–International of Franklin Templeton Companies, LLC, a subsidiary of Franklin.

CHARLES B. JOHNSON

AGE 76

Chairman of the Board since December 1999 and director of Franklin since 1969; formerly, Chief Executive Officer of Franklin; officer and/or director of various subsidiaries of Franklin; officer and/or director or trustee of various investment companies managed or advised by subsidiaries of Franklin.

GREGORY E. JOHNSON

AGE 48

President of Franklin since December 1999 and Chief Executive Officer of Franklin since January 2004; officer and/or director of various subsidiaries of Franklin.

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RUPERT H. JOHNSON, JR.

AGE 69

Vice Chairman since December 1999 and director of Franklin since 1969; officer and/or director of various subsidiaries of Franklin; officer and/or director or trustee of various investment companies managed or advised by subsidiaries of Franklin.

LESLIE M. KRATTER

AGE 64

Senior Vice President of Franklin since January 2000 and Assistant Secretary of Franklin since October 2003; formerly, Secretary of Franklin from March 1998 to October 2003 and Vice President of Franklin from March 1993 to January 2000; officer and/or director of various subsidiaries of Franklin.

KENNETH A. LEWIS

AGE 48

Executive Vice President of Franklin since October 2007 and Chief Financial Officer of Franklin since October 2006; formerly Senior Vice–President and Treasurer of Franklin from October 2006 to October 2007, Vice President–Enterprise Risk Management of Franklin from April 2006 to October 2006 and Vice President and Treasurer of Franklin from June 2002 to April 2006; officer and/or director of various subsidiaries of Franklin for more than the past five years.

JOHN M. LUSK

AGE 51

Executive Vice President–Portfolio Operations of Franklin since December 2005; formerly, Vice President of Franklin from January 2004 to December 2005; officer and/or director of various subsidiaries of Franklin; employed by Franklin or its subsidiaries in various other capacities for more than the past five years.

CRAIG S. TYLE

AGE 49

Executive Vice President and General Counsel of Franklin since August 2005; formerly, a partner at Shearman & Sterling LLP (a law firm) from March 2004 to July 2005 and General Counsel for the Investment Company Institute (a trade group for the U.S. fund industry) from September 1997 through March 2004; officer of various investment companies of the Company.

WILLIAM Y. YUN

AGE 50

Executive Vice President–Alternative Strategies of Franklin since June 2008, and formerly Executive Vice President–Institutional of Franklin from December 2005 to June 2008; President of Fiduciary Trust, a subsidiary of Franklin, from 2000 to December 2005; officer and/or director of other subsidiaries of Franklin; employed by Franklin or its subsidiaries in various other capacities since the acquisition of Fiduciary Trust in April 2001.

Family Relations. Charles B. Johnson and Rupert H. Johnson, Jr. are brothers. Peter M. Sacerdote, a director of Franklin, is a brother-in-law of Charles B. Johnson and Rupert H. Johnson, Jr. Gregory E. Johnson is the son of Charles B. Johnson, the nephew of Rupert H. Johnson, Jr. and Peter M. Sacerdote and the brother of Jennifer J. Bolt. Jennifer J. Bolt is the daughter of Charles B. Johnson, the niece of Rupert H. Johnson, Jr. and Peter M. Sacerdote and the sister of Gregory E. Johnson.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is traded on the NYSE under the ticker symbol “BEN”. On September 30, 2009, the closing price of our common stock on the NYSE was $100.60 per share. At October 31, 2009, there were approximately 5,065 stockholders of record of our common stock.

The following table sets forth the high and low sales prices for our common stock on the NYSE for each full quarterly period of the two most recently completed fiscal years of Franklin.

	2009 Fiscal Year				2008 Fiscal Year
Quarter	High		Low		High		Low
October-December	$	95.49	$	45.52	$	143.08	$	108.46
January-March	$	70.82	$	37.19	$	114.49	$	86.06
April-June	$	77.62	$	52.93	$	108.00	$	91.21
July-September	$	104.00	$	65.48	$	113.70	$	81.39

We declared regular cash dividends of $0.84 per share (or $0.21 per share per quarter) in fiscal year 2009 and $0.80 per share (or $0.20 per share per quarter) in the fiscal year ended September 30, 2008. We currently expect to continue paying comparable cash dividends on a quarterly basis to holders of our common stock depending upon earnings and other relevant factors.

The equity compensation plan information called for by Item 201(d) of Regulation S-K is set forth in Item 12 of Part III of this Form 10-K under the heading “Equity Compensation Plan Information.”

The following table provides information with respect to the shares of common stock we purchased during the three months ended September 30, 2009.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2009 through July 31, 2009	77,066	$	71.40	77,066	11,207,169
August 1, 2009 through August 31, 2009	926,158	$	92.51	926,158	10,281,011
September 1, 2009 through September 30, 2009	695,484	$	96.40	695,484	9,585,527
Total	1,698,708			1,698,708

Under our stock repurchase program, we can repurchase shares of Franklin’s common stock from time to time in the open market and in private transactions in accordance with applicable laws and regulations, including without limitation applicable federal securities laws. From time to time we have announced the existence of the Company’s continuing policy of repurchasing shares of its common stock, including recent announcements made in June 2007, January 2008 and March 2009. From fiscal year 2002 through 2009, our Board of Directors had authorized and approved the repurchase of up to 70.0 million shares of our common stock under our stock repurchase program of which approximately 9.6 million shares of our common stock remained available for repurchase at September 30, 2009. Our stock repurchase program is not subject to an expiration date. There were no unregistered sales of equity securities during the period covered by this report.

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Item 6. Selected Financial Data.

FINANCIAL HIGHLIGHTS

as of and for the fiscal years ended September 30,	2009		2008		2007		2006		2005
Summary of Operations (in millions)
Operating revenues	$	4,194.1	$	6,032.4	$	6,205.8	$	5,050.7	$	4,310.1
Net income		896.8		1,588.2		1,772.9		1,267.6		1,057.6
Financial Data (in millions)
Total assets	$	9,468.5	$	9,176.5	$	9,932.3	$	9,499.9	$	8,893.9
Long-term debt1		42.0		156.4		162.1		627.9		1,208.4
Stockholders’ equity		7,632.2		7,074.4		7,332.3		6,684.7		5,684.4
Operating cash flows		641.4		1,409.2		1,673.6		1,277.9		850.0
Assets Under Management (in billions)
Ending	$	523.4	$	507.3	$	645.9	$	511.3	$	453.1
Simple monthly average		442.2		604.9		582.0		482.4		410.8
Per Common Share
Earnings
Basic	$	3.89	$	6.72	$	7.11	$	4.97	$	4.22
Diluted		3.87		6.67		7.03		4.86		4.06
Cash dividends		0.84		0.80		0.60		0.48		2.40
Book value		33.28		30.39		29.87		26.40		22.49
Employee Headcount		7,745		8,809		8,699		7,982		7,156

¹ Includes non-current portion of FHLB advances classified as banking/finance liabilities on our consolidated balance sheets.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

In this section, we discuss and analyze the results of operations and financial condition of Franklin Resources, Inc. (“Franklin”) and its subsidiaries (collectively, the “Company”). In addition to historical information, we also make statements relating to the future, called “forward-looking” statements, which are provided under the “safe harbor” protection of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “will”, “may”, “could”, “expect”, “believe”, “anticipate”, “intend”, or other similar words. Moreover, statements that speculate about future events are forward-looking statements. These forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that could cause the actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements. You should carefully review the “Risk Factors” section set forth in Item 1A of this Annual Report on Form 10-K and in any more recent filings with the U.S. Securities and Exchange Commission (the “SEC”), each of which describe these risks, uncertainties and other important factors in more detail. While forward-looking statements are our best prediction at the time that they are made, you should not rely on them. If a circumstance occurs after the date of this Annual Report on Form 10-K that causes any of our forward-looking statements to be inaccurate, we do not have an obligation, and we undertake no obligation, to announce publicly the change to our expectations, or to make any revisions to our forward-looking statements, unless required by law.

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Overview

We are a global investment management company and derive substantially all of our operating revenues and net income from providing investment management and related services to our retail and institutional mutual funds, unregistered funds, and to institutional, high net-worth and separately-managed accounts and other investment products. Our services include fund administration, shareholder services, transfer agency, underwriting, distribution, custodial, trustee and other fiduciary services. Our sponsored investment products and investment management and related services are distributed or marketed to the public globally under six distinct brand names: Franklin, Templeton, Mutual Series, Bissett, Fiduciary Trust and Darby.

We offer a broad range of sponsored investment products under equity, hybrid, fixed-income and cash management categories that meet a wide variety of specific investment needs of individual and institutional investors. 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, the amount and mix of our assets under management are subject to significant fluctuations and can negatively impact our revenues and income. To a lesser degree, the level of our revenues also depends on the level of mutual fund sales and the number of mutual fund shareholder accounts. The fees charged for our services are based on contracts with our sponsored investment products or our clients. These arrangements could change in the future.

Our secondary business is banking/finance. Our banking/finance group offers retail banking and consumer lending services and private banking services to high net-worth clients. Our consumer lending and 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 retail installment sales contracts originated by independent automobile dealerships.

During the fiscal year ended September 30, 2009 (“fiscal year 2009”), the global financial crisis that began in 2008 continued and the economy remained in a recession. The turmoil in the global financial markets during the first half of the fiscal year, evidenced by 31% decreases in both the MSCI World and S&P 500 indexes, negatively impacted the entire asset management industry. The unprecedented downturn in 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 markets and 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 also indicated 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 positive market performance.

Our total assets under management at September 30, 2009 were $523.4 billion, 3% higher than they were at September 30, 2008. However, simple monthly average assets under management for the twelve months ended September 30, 2009 decreased 27% from the prior fiscal year due to significantly lower levels of assets under management during the first half of the fiscal year. Total assets under management were negatively impacted by market depreciation of $90.0 billion during the first half of the fiscal year and then benefited from market appreciation of $115.4 billion during the second half. Net new flows were a negative $23.7 billion during the first half of the fiscal year as investor demand shifted to lower risk

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investments, and swung to a positive $18.2 billion in the second half as long-term sales increased, most notably in our fixed-income funds. Overall, we had negative net new flows of $5.5 billion for the fiscal year.

During fiscal year 2009, we took steps to manage our business and our cost structure to respond to the market conditions and resulting decrease in revenue, including reducing expenditures in areas such as travel and entertainment, advertising, and contractor and professional fees, and deferring non-business critical initiatives and hiring. We also announced reductions to our global workforce of approximately 10%. The severance costs related to these workforce reductions amounted to $38.4 million for the fiscal year. We continue 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 products remained strong, with 85% to 90% of our U.S.-registered long-term mutual funds in the top half of the Lipper performance rankings as both equity and fixed-income funds showed significant improvement in fiscal year 2009.

Challenging and volatile market conditions might continue to be present in the foreseeable future. As we confront the challenges of this economic environment, we expect to continue to focus on the investment performance of our sponsored investment products and on providing high quality customer service to our clients. While we are focused on reducing costs, we will also seek to attract, retain and develop employees and invest strategically in systems and technology that will provide secure, stable environments and economies of scale. We will also seek to continue to protect and further our brand recognition while developing and maintaining broker/dealer and client relationships. The success of these and other strategies may be influenced by the factors discussed in Item 1A Risk Factors of this Annual Report, and other factors as discussed herein.

Results of Operations

(dollar amounts in millions, except per share data)

for the fiscal years ended September 30,	2009			2008			2007			2009 vs. 2008		2008 vs. 2007
Operating 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 Share
Basic	$	3.89		$	6.72		$	7.11		(42	)%	(5	)%
Diluted		3.87			6.67			7.03		(42	)%	(5	)%
Operating Margin1		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 operating income. Adverse market conditions led to a 27% decrease in our simple monthly average assets under management, which resulted in a 30% decrease in our operating revenues. As described above, we have taken actions to reduce our operating expenses in response to the market conditions and resulting revenue decreases, 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. Operating revenues remained stable despite the sustained volatility experienced in the financial markets as we began the year with a high level of assets under management. We also benefited from the diversification of our products and customer base and successful marketing campaigns. During fiscal year 2008 we initiated steps to manage our business and our cost structure in response to the deteriorating market conditions.

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Net income decreased in fiscal year 2008 primarily due to a 65% decline in other income, net. The decrease in other income, net reflects a 38% decrease in investment and other income, net primarily due to lower realized gains on sale of investment securities, a decline in income from our investments in equity method investees, and lower interest and dividend income. Also contributing to the decrease in other income, net were net losses recognized by our consolidated sponsored investment products in fiscal year 2008, as compared to net gains in the prior fiscal year. The decrease in other income, net was partially offset by a 3% increase in investment management fees.

Diluted earnings per share decreased in fiscal years 2009 and 2008, consistent with the decreases in net income, partially offset by 3% and 5% decreases in diluted average common shares outstanding primarily resulting from the repurchase of shares of our common stock.

Assets Under Management

Assets under management by investment objective were as follows:

(dollar amounts in billions)

as of September 30,	2009		2008		2007		2009 vs. 2008		2008 vs. 2007
Equity
Global/international	$	183.1	$	190.3	$	286.7	(4	)%	(34	)%
Domestic (U.S.)		63.9		72.9		100.5	(12	)%	(27	)%
Total equity		247.0		263.2		387.2	(6	)%	(32	)%
Hybrid		98.2		93.9		117.2	5	%	(20	)%
Fixed-Income
Tax-free		69.6		59.7		59.0	17	%	1	%
Taxable
Global/international		63.3		52.7		44.3	20	%	19	%
Domestic (U.S.)		38.4		30.5		31.8	26	%	(4	)%
Total fixed-income		171.3		142.9		135.1	20	%	6	%
Cash Management1		6.9		7.3		6.4	(5	)%	14	%
Total	$	523.4	$	507.3	$	645.9	3	%	(21	)%
Simple Monthly Average for the Year2	$	442.2	$	604.9	$	582.0	(27	)%	4	%

¹ Includes both U.S.-registered money market funds and Non-U.S. Funds with similar investment objectives.

² Investment management fees from approximately 53% of our assets under management at September 30, 2009 were calculated using daily average assets under management.

Our assets under management at September 30, 2009 were 3% higher than they were at September 30, 2008 primarily due to market appreciation of $25.4 billion during fiscal year 2009, as compared to market depreciation of $123.4 billion during fiscal year 2008. The appreciation during fiscal year 2009 related primarily to fixed-income products, while the depreciation in fiscal year 2008 occurred predominantly in equity products as market volatility led to significant valuation decreases and a shift in investor demand to lower risk investments. The depreciation and net outflows persisted throughout the first half of fiscal year 2009 before the market recovery began in the second half, resulting in a 27% decrease in simple monthly average assets under management during the year. The simple monthly average is generally more indicative of trends in revenue for providing investment management and fund administration services than the year over year change in ending assets under management.

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The simple monthly average mix of assets under management is shown below. The change in mix during fiscal year 2009 is reflective of investor shifts to lower risk investments during the prior twelve months.

for the fiscal years ended September 30,	2009		2008		2007
Equity	47	%	57	%	60	%
Hybrid	19	%	18	%	18	%
Fixed-income	32	%	24	%	21	%
Cash management	2	%	1	%	1	%
Total	100	%	100	%	100	%

Assets under management by sales region were as follows:

(dollar amounts in billions)

as of September 30,	2009		% of Total		2008		% of Total		2007		% of Total
United States1	$	389.3	74	%	$	376.6	74	%	$	467.2	72	%
Europe2		54.7	11	%		53.6	11	%		76.6	12	%
Asia-Pacific3		48.3	9	%		42.9	8	%		54.2	8	%
Canada		31.1	6	%		34.2	7	%		47.9	8	%
Total	$	523.4	100	%	$	507.3	100	%	$	645.9	100	%

¹ Approximately 70%, 63% and 65% of our operating revenues originated from our U.S. operations in fiscal years 2009, 2008 and 2007.

² Europe sales region includes Middle East and Africa.

³ Asia-Pacific sales region includes Latin America and Australia.

Due to the global nature of our business operations, investment management and related services may be performed in locations unrelated to the sales region.

Components of the change in our assets under management were as follows:

(dollar amounts in billions)

for the fiscal years ended September 30,	2009			2008			2007			2009 vs. 2008		2008 vs. 2007
Beginning assets under management	$	507.3		$	645.9		$	511.3		(21	)%	26	%
Long-term sales		110.4			170.0			176.1		(35	)%	(3	)%
Long-term redemptions		(115.6	)		(177.9	)		(130.2	)	(35	)%	37	%
Net cash management		(0.3	)		(1.0	)		0.6		(70	)%	NM
Net new flows		(5.5	)		(8.9	)		46.5		(38	)%	NM
Reinvested distributions		14.1			28.9			20.7		(51	)%	40	%
Net flows		8.6			20.0			67.2		(57	)%	(70	)%
Distributions		(17.9	)		(35.2	)		(26.0	)	(49	)%	35	%
Appreciation (depreciation) and other		25.4			(123.4	)		93.4		NM		NM
Ending Assets Under Management	$	523.4		$	507.3		$	645.9		3	%	(21	)%

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Investment Management Fee Rate

The following table presents industry asset-weighted average management fee rates¹. Our actual effective investment management fee rates may vary from these rates.

for the fiscal years ended September 30,	Industry Average 2009		Industry Average 2008		Industry Average 2007
Equity
Global/international	0.62	%	0.60	%	0.63	%
Domestic (U.S.)	0.47	%	0.47	%	0.47	%
Hybrid	0.39	%	0.38	%	0.38	%
Fixed-Income
Tax-free	0.36	%	0.37	%	0.38	%
Taxable
Global/international	0.53	%	0.56	%	0.55	%
Domestic (U.S.)	0.38	%	0.37	%	0.37	%
Cash Management	0.20	%	0.22	%	0.22	%

¹ Industry asset-weighted average management fee rates were calculated using information available from Lipper^® Inc. at September 30, 2009, 2008 and 2007 and include all U.S.-registered open-end funds that reported expense data to Lipper Inc. as of the funds’ most recent annual report date, and for which expenses were equal to or greater than zero. As defined by Lipper Inc., management fees include fees from providing advisory and fund administration services. The averages combine retail and institutional funds data and include all share classes and distribution channels, without exception. Variable annuity products are not included.

Our effective investment management fee rate (investment management fees divided by simple monthly average assets under management) was 0.566% for fiscal year 2009, compared to 0.609% for fiscal year 2008 and 0.614% for fiscal year 2007. The decreases in each of the past two years were primarily due to shifts in the mix of assets under management from equity products towards fixed-income products during both years. The shifts mainly resulted from depreciation and net new outflows of equity products, partially offset by net new inflows of fixed-income products.

Operating Revenues

The table below presents the percentage change in each revenue category and the percentage of total operating revenues represented by each category.

	Percentage Change				Percentage of Total Operating Revenues
for the fiscal years ended September 30,	2009 vs. 2008		2008 vs. 2007		2009		2008		2007
Investment management fees	(32	)%	3	%	60	%	61	%	58	%
Underwriting and distribution fees	(30	)%	(12	)%	34	%	33	%	37	%
Shareholder servicing fees	(8	)%	4	%	6	%	5	%	4	%
Consolidated sponsored investment products income, net	(25	)%	40	%	—		—		—
Other, net	(85	)%	(33	)%	—		1	%	1	%
Total Operating Revenues	(30	)%	(3	)%	100	%	100	%	100	%

Investment Management Fees

Investment management fees are generally calculated under contractual arrangements with our sponsored investment products and sub-advised accounts as a percentage of the market value of assets under management. Annual rates vary by investment objective and type of services provided.

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Investment management fees decreased in fiscal year 2009 resulting from a 27% decrease in simple monthly average assets under management and a lower effective investment management fee rate resulting from a higher mix of fixed-income assets, which generally carry lower investment management fees.

Investment management fees increased in fiscal year 2008 resulting from a 4% increase in simple monthly average assets under management, partially offset by a lower effective investment management fee rate resulting from a higher mix of fixed-income assets.

Underwriting and Distribution Fees

We earn underwriting fees from the sale of certain classes of sponsored investment products on which investors pay a sales commission at the time of purchase. Sales commissions are reduced or eliminated on some share classes and for some sale transactions depending upon the amount invested and the type of investor. Therefore, underwriting fees will change with the overall level of gross sales, the size of individual transactions, and the relative mix of sales between different share classes and types of investors.

Globally, our mutual funds and certain other products generally pay us distribution fees in return for sales, marketing and distribution efforts on their behalf. Specifically, the majority of U.S.-registered mutual funds, with the exception of certain of our money market mutual funds, have adopted distribution plans (the “Plans”) under Rule 12b-1 promulgated under the Investment Company Act. The Plans permit the mutual funds to bear certain expenses relating to the distribution of their shares, such as expenses for marketing, advertising, printing and sales promotion, subject to the Plans’ limitations on amounts. The individual Plans set a percentage limit for Rule 12b-1 expenses based on average daily net assets under management of the mutual fund. Similar arrangements exist for the distribution of our non-U.S. funds and where, generally, the distributor of the funds in the local market arranges for and pays commissions.

We pay a significant portion of underwriting and distribution fees to the financial advisers and other intermediaries who sell our sponsored investment products to the public on our behalf. See the description of underwriting and distribution expenses below.

Overall, underwriting and distribution fees decreased in fiscal year 2009. Underwriting fees decreased 25% primarily due to a shift in sales from equity products to fixed-income products, which typically generate lower underwriting fees, combined with a 24% decrease in gross commissionable sales. Distribution fees decreased 32% primarily due to a 27% decrease in simple monthly average assets under management and a higher mix of fixed-income assets. Distribution fees are generally higher for equity products, as compared to fixed-income products.

Total underwriting and distribution fees decreased in fiscal year 2008. Underwriting fees decreased 32% primarily due to a 19% decrease in gross sales of Class A shares, mainly in the United States, and a shift in sales of equity products to fixed-income products. Distribution fees increased 1% primarily due to a 4% increase in simple monthly average assets under management, partially offset by a higher mix of assets fixed-income assets.

Shareholder Servicing Fees

We receive shareholder servicing fees as compensation for providing transfer agency services, which include providing customer statements, transaction processing, customer service, and tax reporting. These fees are generally fixed charges per shareholder account that vary with the particular type of fund and the service being rendered. In some instances, we charge sponsored investment products these fees based on the level of assets under management. In the United States, transfer agency service agreements provide that

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accounts closed in a calendar year generally remain billable at a reduced rate through the second quarter of the following calendar year. In Canada, such agreements provide that accounts closed in the calendar year remain billable for four months after the end of the calendar year. Accordingly, the level of fees will vary with the change in open accounts and the level of closed accounts that remain billable. Approximately 2.1 million accounts closed in the U.S. during calendar year 2008 were no longer billable effective July 1, 2009, as compared to approximately 1.7 million accounts closed during calendar year 2007 that were no longer billable effective July 1, 2008. Approximately 0.3 million accounts closed in Canada during calendar year 2008 were no longer billable effective May 1, 2009, as compared to approximately 0.2 million accounts closed during calendar year 2007 that were no longer billable effective May 1, 2008.

Shareholder servicing fees decreased in fiscal year 2009 primarily due to an unfavorable currency impact and a 1% decrease in simple monthly average billable shareholder accounts during the year. The unfavorable currency impact mainly resulted from a 14% decrease in value of the Canadian dollar against the U.S. dollar. The account decrease was predominantly related to shareholder accounts originated in Canada and the United States.

Shareholder servicing fees increased in fiscal year 2008 primarily due to a 7% increase in simple monthly average billable shareholder accounts, partially offset by an increase in shareholder accounts originated in Asia.

Consolidated Sponsored Investment Products Income, Net

Consolidated sponsored investment products income, net reflects the net investment income, including dividend and interest income, of sponsored investment products that we consolidate in our financial statements.

Consolidated sponsored investment products income, net decreased in fiscal year 2009 and increased in fiscal year 2008, reflecting the investment performance and the net asset balances of the specific sponsored investment products that we consolidated during each period.

Other, Net

Other, net revenue primarily consists of revenues from the banking/finance segment as well as income from custody services. Banking/finance revenues include interest income on loans, servicing income, and realized and unrealized gains (losses) on residual interests from securitization transactions, and are reduced by interest expense and the provision for loan losses.

Other, net revenue decreased in fiscal year 2009 primarily due to a $41.1 million higher loss from declines in the fair value of residual interests from securitization transactions and a $21.8 million decrease in interest income from automobile loans, partially offset by a $12.4 million decrease in interest expense on swap contracts and a $7.6 million decrease in provision for loan losses. We have consistently followed our methodology in determining our allowance for loan losses, which incorporates current economic factors.

Other, net revenue decreased in fiscal year 2008 primarily due to a $26.3 million increase in net realized and unrealized losses on investments and a $10.5 million increase in provision for loan losses, partially offset by a $10.4 million increase in interest income from automobile loans.

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Operating Expenses

The table below presents the percentage change in each expense category and the percentage of total operating expenses represented by each category.

	Percentage Change				Percentage of Total Operating Expenses
for the fiscal years ended September 30,	2009 vs. 2008		2008 vs. 2007		2009		2008		2007
Underwriting and distribution	(30	)%	(10	)%	45	%	49	%	52	%
Compensation and benefits	(14	)%	4	%	32	%	28	%	26	%
Information systems, technology and occupancy	(15	)%	1	%	9	%	8	%	8	%
Advertising and promotion	(37	)%	(3	)%	4	%	5	%	5	%
Amortization of deferred sales commissions	(20	)%	13	%	5	%	5	%	4	%
Other	(23	)%	(17	)%	5	%	5	%	5	%
Total Operating Expenses	(24	)%	(5	)%	100	%	100	%	100	%

Underwriting and Distribution

Underwriting and distribution expenses include payments to financial advisers and other third parties for providing sales, marketing and distribution services to investors in our sponsored investment products. The decreases in underwriting and distribution expenses in fiscal years 2009 and 2008 were consistent with the 30% and 12% decreases in underwriting and distribution revenues during both periods.

Compensation and Benefits

Compensation and benefit expenses decreased in fiscal year 2009 primarily due to declines in salaries, wages and benefits and variable compensation. Salaries, wages and benefits decreased $123.4 million, mainly resulting from lower staffing levels and a favorable currency impact. The decrease was partially offset by severance costs of $38.4 million related to reductions to our global workforce of approximately 10% announced during the first half of fiscal year 2009. Variable compensation decreased $77.1 million.

The decreased expenses during fiscal year 2009 reflect in part some of the actions we have taken to contain costs, including reducing variable compensation and not providing annual merit salary increases. As of September 30, 2009, we had approximately 7,700 employees, a decrease from approximately 8,800 at September 30, 2008.

Compensation and benefit expenses increased in fiscal year 2008 primarily due to annual merit salary adjustments that were effective December 1, 2007 and higher staffing levels. Another contributing factor was an increase in variable compensation, primarily resulting from the impact of adopting a new accounting pronouncement in October 2006 requiring us to recognize an additional compensation expense. These increases were partially offset by a one-time pre-tax charge of $16.4 million recorded in fiscal year 2007 and a decrease in costs related to matching contributions under our amended and restated 1998 Employee Stock Investment Plan.

We continue to place a high emphasis on our pay for performance philosophy. As such, any changes in the underlying performance of our sponsored investment products or changes in the composition of our incentive compensation offerings could have an impact on compensation and benefits going forward. However, in order to attract and retain talented individuals, our level of compensation and benefits may increase more quickly or decrease more slowly than our revenue.

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Information Systems, Technology and Occupancy

Information systems, technology and occupancy costs decreased in fiscal year 2009 primarily due to lower costs incurred for external data services, technology consulting, technology supplies, and occupancy. The lower costs resulted in part from our cost reduction efforts to defer non-business critical initiatives and to reduce expenditures for contractors and professional fees.

Information systems, technology and occupancy costs increased slightly in fiscal year 2008 primarily due to higher occupancy costs related to our existing offices as well as global expansion. This increase was partially offset by a decrease in external data services costs and technology consulting costs.

Details of capitalized information systems and technology costs, which exclude occupancy costs, are shown below.

(in millions)

for the fiscal years ended September 30,	2009			2008			2007
Net carrying value at beginning of period	$	66.5		$	61.6		$	44.9
Additions during period, net of disposals		30.2			32.5			42.0
Amortization during period		(31.5	)		(27.6	)		(25.3	)
Net Carrying Value at End of Period	$	65.2		$	66.5		$	61.6

Advertising and Promotion

Advertising and promotion expenses decreased in fiscal year 2009 primarily due to a $29.5 million decrease in marketing support payments to intermediaries resulting from lower product sales and assets under management. Also contributing to the decrease were lower advertising, sales promotions and travel expenses primarily as a result of our global cost reduction initiatives.

Advertising and promotion expenses decreased in fiscal year 2008 primarily due to a $2.5 million decrease in printing costs. Also contributing to the decrease were lower global media advertising and promotion expenses.

We are committed to investing in advertising and promotion in response to changing business conditions, and to advance our products where we see continued or potential new growth opportunities. As a result of potential changes in our strategic marketing campaigns, the level of advertising and promotion expenditures may increase more rapidly, or decrease more slowly, than our revenues.

Amortization of Deferred Sales Commissions

Certain fund share classes sold globally, including Class C and Class R shares marketed in the United States, are sold without a front-end sales charge to shareholders, although our distribution subsidiaries pay an up-front commission to financial intermediaries on these sales. In addition, certain share classes, such as Class A shares sold in the United States, are sold without a front-end sales charge to shareholders when minimum investment criteria are met, although our distribution subsidiaries pay an up-front commission to financial intermediaries on these sales. We defer all up-front commissions paid by our distribution subsidiaries and amortize them over the periods in which commissions are generally recovered from distribution and service fee revenues and contingent sales charges received from shareholders of the funds upon redemption of their shares. We evaluate deferred commission assets (“DCA”) for recoverability on a periodic basis using undiscounted expected cash flows from the shares of mutual funds sold without a front-end sales charge.

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Amortization of deferred sales commissions decreased in fiscal year 2009 mainly due to lower product sales with up-front commissions, primarily related to U.S. funds. Amortization of deferred sales commissions increased in fiscal year 2008 mainly due to higher product sales with up-front commissions, primarily related to U.S. and Canadian funds.

Other Operating Expenses

Other operating expenses primarily consist of professional fees, fund administration services and shareholder servicing fees payable to external parties, corporate travel and entertainment, and other miscellaneous expenses.

Other operating expenses decreased in fiscal year 2009 primarily due to a $17.4 million decline in fund administration services and shareholder servicing fees payable to external parties, which resulted from lower average assets under management, and a $16.4 million decrease in corporate travel and entertainment expenses resulting from our cost reduction initiatives.

Other operating expenses decreased in fiscal year 2008 primarily due to a $19.6 million decrease in litigation costs and an $11.8 million decline in consulting and professional fees.

Other Income (Expenses)

Other income (expenses) consisted of the following:

(in millions)

for the fiscal years ended September 30,	2009			2008			2007
Consolidated sponsored investment products gains (losses), net	$	21.7		$	(71.6	)	$	57.7
Investment and other income, net		60.6			224.9			363.3
Interest expense		(3.8	)		(15.7	)		(23.2	)
Other income, net	$	78.5		$	137.6		$	397.8

Other income (expenses) includes net realized and unrealized investment gains (losses) on consolidated sponsored investment products, investment and other income, net and interest expense from our investment management and related services business. Investment and other income, net is comprised primarily of income related to our investments, including interest and dividend income, realized gains and losses on sale of and other-than-temporary impairments of available-for-sale investment securities, income from equity method investees, and foreign currency exchange gains and losses.

Other income (expenses) decreased 43% in fiscal year 2009 primarily due to lower investment valuations during the first half of the year. The significant decline in interest rates and the global market downturn resulted in a $68.5 million decrease in interest income, a $49.2 million increase in other-than-temporary impairments on available-for-sale investment securities, a $26.7 million decline in net realized gains on sale of available-for-sale investment securities, and a $10.6 million decline in income from equity method investees. These decreases were partially offset by a $93.3 million increase in net gains from securities held by our consolidated sponsored investment products, resulting from improved market conditions during the second half of the fiscal year.

Other income (expenses) decreased 65% in fiscal year 2008 primarily due to $129.2 million in net losses recognized by our consolidated sponsored investment products, driven mainly by market value declines in equity products, as compared to net gains in the prior fiscal year. Net realized gains on sale of investment securities, available-for-sale declined $58.3 million, income from equity method investees declined $35.2 million, interest income declined $33.0 million and dividend income declined $29.1 million primarily due to unfavorable market conditions.

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Our investments in sponsored investment products primarily consist of the initial cash investments made in the course of launching mutual fund and other investment product offerings; however we may also invest in our products for other business reasons. The market conditions that impact our assets under management similarly affect the investment income earned or losses incurred on our sponsored investment product investments.

Taxes on Income

As a multi-national corporation, we provide investment management and related services to a wide range of international sponsored investment products, often managed from locations outside the United States. Some of these jurisdictions have lower tax rates than the United States. The mix of pre-tax income (primarily from our investment management and related services business) subject to these lower rates, when aggregated with income originating in the United States, produces a lower overall effective income tax rate than existing U.S. federal and state income tax rates.

Our effective income tax rate for fiscal year 2009 was 30.00%, as compared to 28.99% in fiscal year 2008 and 28.08% in fiscal year 2007. The increase in fiscal year 2009 was primarily due to a shift in the mix of pre-tax income from lower tax jurisdictions to higher tax jurisdictions. The increase in fiscal year 2008 was primarily due to an income tax charge related to repatriated earnings of our non-U.S. subsidiaries and our mix of foreign earnings. The effective income tax rate for future reporting periods will continue to reflect the relative contributions of non-U.S. earnings that are subject to reduced tax rates and that are not currently included in U.S. taxable income.

During September 2008, we amended our repatriation plan for undistributed foreign earnings to include repatriation to the U.S. of the excess net earnings after debt service payments and regulatory capital requirements of our U.K. consolidated subsidiaries. As a result of the amendment, we recognized a provision for U.S. income taxes of $19.7 million and a net deferred income tax liability of $3.4 million in relation to $294.8 million of accumulated and current earnings from the United Kingdom, of which $210.9 million was repatriated as of September 30, 2008.

Liquidity and Capital Resources

The following table summarizes certain key financial data relating to our liquidity, capital resources and uses of capital:

(in millions)

as of and for the fiscal years ended September 30,	2009			2008			2007
Balance Sheet Data
Assets
Liquid assets	$	5,832.6		$	5,443.6		$	5,834.0
Cash and cash equivalents		3,104.5			2,527.6			3,584.2
Liabilities
Debt
Commercial paper	$	64.2		$	13.3		$	—
Medium-term notes		—			—			420.0
Variable funding notes		—			28.6			240.8
Federal Home Loan Bank advances		57.0			109.0			—
Long-term debt		—			118.4			162.1
Total debt	$	121.2		$	269.3		$	822.9
Cash Flow Data
Operating cash flows	$	641.4		$	1,409.2		$	1,673.6
Investing cash flows		289.9			(1,096.1	)		(306.2	)
Financing cash flows		(340.6	)		(1,300.0	)		(1,449.2	)

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Liquidity

Liquid assets consist of cash and cash equivalents, current receivables, and current and certain other investments (trading, available-for-sale and other). Cash and cash equivalents include cash on hand, non-interest-bearing and interest-bearing deposits with financial institutions, federal funds sold, time deposits, securities of the U.S. Treasury and federal agencies, debt instruments with original maturities of three months or less at the purchase date, and other highly liquid investments, including money market funds, which are readily convertible into cash. Cash and cash equivalents at September 30, 2009 increased primarily due to net cash provided by operating activities. At September 30, 2009, the percentage of cash and cash equivalents held by our U.S. and non-U.S. operations were approximately 49% and 51%, as compared to approximately 51% and 49% at September 30, 2008. The percentage of cash and cash equivalents held by our non-U.S. operations increased primarily due to liquidation of investments, mainly time deposits with original maturities greater than three months but not exceeding one year from the date of purchase, partially offset by dividends paid to our U.S. operations.

The decrease in total debt outstanding during fiscal year 2009 primarily relates to amortization and reduction of long-term debt, a reduction in Federal Home Loan Bank (“FHLB”) advances, and repayment of variable funding notes, partially offset by an increase in commercial paper outstanding.

We experienced a decrease in net cash provided by operating activities in fiscal year 2009, primarily due to decreases in net income and proceeds from the securitization of loans held for sale, partially offset by a lower increase in trading securities. Net cash provided by investing activities increased mainly due to an increase in liquidation of investments and a decrease in loans receivable. Net cash used in financing activities decreased primarily due to a decrease in common stock repurchases and a decrease in payments on debt, partially offset by a decrease in proceeds from issuance of debt and a decrease in minority interest cash receipts in our consolidated sponsored investment products.

Capital Resources

During fiscal year 2009, we experienced a significant reduction in operating revenues primarily resulting from lower assets under management due to decreased market valuations and customer redemptions. Despite this reduction and decrease in liquidity and credit availability in the market, we believe that we can meet our present and reasonably foreseeable operating cash needs and future commitments through existing liquid assets, continuing cash flows from operations, borrowing capacity under current credit facilities and the ability to issue debt or equity securities.

At September 30, 2009, our current debt consisted of commercial paper with a total face value of $64.2 million that was issued at a weighted-average annualized interest rate of 0.27% and matures during the quarter ending December 31, 2009.

The banking/finance segment has financed its automobile lending business primarily through FHLB advances, securitizations and the issuance of variable funding notes under one-year revolving variable funding note warehouse credit facilities. We terminated the warehouse credit facilities in November 2008 and did not replace them. The variable funding notes issued under these facilities were secured by cash and a pool of automobile loans that were expected to meet certain eligibility requirements.

At September 30, 2009, our banking/finance operating segment had $57.0 million of total outstanding FHLB advances. Approximately $15.0 million of these advances mature in the fiscal year ending September 30, 2010 (“fiscal year 2010”), while the remaining $42.0 million mature from October 2010 to January 2039. These advances had a weighted-average interest rate of 2.94% at September 30, 2009 and are subject to collateralization requirements.

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At September 30, 2009, we had $355.8 million in short-term revolving credit available under a $420.0 million five-year credit agreement with certain banks and financial institutions expiring on June 9, 2010. This credit facility supports an uncommitted $500.0 million commercial paper program under which $435.8 million remained available for issuance via private placement at September 30, 2009. We also had $14.0 million available in uncommitted short-term bank lines of credit. The revolving credit facility is subject to various financial covenants, including, but not limited to, minimum requirements related to our interest coverage ratio and maintenance of working capital as well as limitations on our capitalization ratio, indebtedness, investments and liens. Interest rates on loans under the revolving credit facility are determined at the time of issuance and depend on the type of loan issued. As of September 30, 2009, there were no amounts outstanding under the revolving credit facility and we were in compliance with the financial covenants related to this facility. In addition, at September 30, 2009, the banking/finance segment had $295.0 million available in uncommitted short-term bank lines of credit under the Federal Reserve system, $235.1 million available in secured Federal Reserve Bank short-term discount window and $63.8 million available in secured FHLB short-term borrowing capacity.

In March 2008, we filed an automatic shelf registration statement with the SEC as a “well-known seasoned issuer”. Using the shelf registration statement, we may sell, at any time and from time to time, in one or more offerings, our shares of common stock, shares of preferred stock, debt securities, convertible securities, warrants or units.

Our ability to access the capital markets in a timely manner depends on a number of factors, including our credit rating, the condition of the global economy, investors’ willingness to purchase our securities, interest rates, credit spreads and the valuation levels of equity markets. If we are unable to access capital markets in a timely manner, our business could be adversely impacted.

Uses of Capital

We expect that our main uses of cash will be to expand our core business, make strategic acquisitions, acquire shares of our common stock, fund property and equipment purchases, pay operating expenses of the business, enhance technology infrastructure and business processes, pay stockholder dividends and repay and service debt.

On September 17, 2009, our Board of Directors declared a regular quarterly cash dividend of $0.21 per share payable on October 15, 2009 to stockholders of record on October 5, 2009.

We maintain a stock repurchase program to manage our equity capital with the objective of maximizing shareholder value. Our stock repurchase program is affected through regular open-market purchases and private transactions in accordance with applicable laws and regulations. During fiscal year 2009, we repurchased 5.5 million shares of our common stock at a cost of $376.9 million. The common stock repurchases made as of September 30, 2009 reduced our capital in excess of par value to nil and the excess amount was recognized as a reduction to retained earnings. At September 30, 2009, approximately 9.6 million shares of our common stock remained available for repurchase under our stock repurchase program. Our stock repurchase program is not subject to an expiration date.

The funds that we manage have their own resources available for purposes of providing liquidity to meet shareholder redemptions, including securities that can be sold or provided to investors as in-kind redemptions, and lines of credit. While we have no contractual obligation to do so, we may voluntarily elect to provide the funds with direct or indirect financial support based on our business objectives.

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Contractual Obligations and Commercial Commitments

Contractual Obligations and Commitments

The following table summarizes contractual cash obligations and commitments. We believe that we can meet these obligations and commitments through existing liquid assets, continuing cash flows from operations and borrowing capacity under current credit facilities.

(in millions) as of September 30, 2009	Payments Due by Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Non-current debt	$	57.0	$	15.0	$	2.0	$	18.5	$	21.5
Operating leases1		262.1		45.3		78.2		67.6		71.0
Purchase obligations2		150.7		71.7		46.6		26.4		6.0
Total Contractual Obligations		469.8		132.0		126.8		112.5		98.5
Loan origination commitments		186.8		144.2		8.1		0.4		34.1
Capital contribution commitments3		65.8		28.3		32.7		4.6		0.2
Total Contractual Obligations and Commitments4	$	722.4	$	304.5	$	167.6	$	117.5	$	132.8

¹ Operating lease obligations are presented net of future receipts on contractual sublease arrangements totaling $11.3 million.

² Purchase obligations include contractual amounts that will be due to purchase goods and services to be used in our operations and may be cancelled at earlier times than those indicated under certain conditions that may include termination fees.

³ Capital contribution commitments relate to our agreements to fund certain of our sponsored investment products.

⁴ The table excludes future cash payments for unrecognized tax benefits. As of September 30, 2009, our consolidated balance sheet reflects a liability for unrecognized tax benefits of $76.0 million, and approximately $13.6 million of accrued interest (see Note 14 – Taxes on Income in the notes to consolidated financial statements in Item 8 of Part II of this Form 10-K). However, because of the high degree of uncertainty regarding the timing of future cash outflows of liabilities for unrecognized tax benefits, a reasonable estimate of the period of cash payments beyond the next twelve months from the balance sheet date of September 30, 2009, cannot be made. The amount of unrecognized tax benefits and related interest that are expected to be paid in the next twelve months are $4.7 million and $2.0 million.

Contingent Obligations

We are obligated to cover shortfalls for automobile loan securitization trusts that are structured as qualified special entities in amounts due to holders of asset-backed securities up to certain levels. At September 30, 2009, the maximum potential amount of future payments related to these guarantees was $7.4 million and the fair value of the guarantees recognized as banking/finance liabilities in our consolidated balance sheet was not significant. During fiscal year 2009, we increased the amount of cash on deposit by $37.6 million to replace the letters of credit for the securitization trusts. As a result, the maximum potential amounts of future payments related to the guarantees were reduced by the same amount.

At September 30, 2009, the banking/finance segment had issued financial standby letters of credit totaling $6.3 million on which beneficiaries would be able to draw upon in the event of non-performance by our customers, primarily in relation to lease and lien obligations of these banking customers. These standby letters of credit were secured by marketable securities with a fair value of $8.3 million at September 30, 2009.

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Off-Balance Sheet Arrangements

As of September 30, 2009, we held a 49% ownership interest in Lightning Finance Company Limited (“LFL”) and Lightning Asset Finance Limited (“LAFL”) and accounted for the ownership interest in these companies using the equity method of accounting. We recorded these investments at their carrying values as investments in equity method investees. As of September 30, 2009, LFL had approximately $3.5 million in total assets and our exposure to loss related to LFL was limited to the carrying value of our investment totaling approximately $1.7 million. As of September 30, 2009, LAFL had approximately $20.6 million in total assets and our maximum exposure to loss related to LAFL totaled approximately $10.1 million. The maximum exposure to loss related to LAFL is limited to the carrying value of our investment and 49% of the liabilities of LAFL. We recognized pre-tax income of approximately $3.1 million and pre-tax losses of $8.5 million for our share of LFL’s and LAFL’s net income and losses in fiscal years 2009 and 2008. Due to our significant interest in LAFL, we carried on our consolidated balance sheet the DCA generated in the United States and the financing liability for the related future revenue we previously sold to LFL which was subsequently transferred to LAFL. We repurchased the remaining DCA from LAFL in September 2009 and have reflected this transaction as a repayment of the remaining financing obligation. We are in the process of selling our ownership interests in LFL and LAFL to the holder of the 51% ownership interest and expect to complete this divestiture in fiscal year 2010.

Our banking/finance segment periodically enters into automobile loan securitization transactions with qualified special purpose entities, which then issue asset-backed securities to private investors (see Note 9 – Securitization of Loans Held for Sale in the notes to consolidated financial statements in Item 8 of Part II of this Form 10-K). Our main objective in entering into these securitization transactions is to obtain financing for automobile loan activities. Securitized loans held by the securitization trusts totaled $551.4 million and $851.8 million at September 30, 2009 and 2008.

In our role as agent or trustee, we facilitate the settlement of investor share purchase, redemption, and other transactions with affiliated mutual funds. We are appointed by the affiliated mutual funds as agent or trustee to manage, on behalf of the affiliated mutual funds, bank deposit accounts that contain only (i) cash remitted by investors to the affiliated mutual funds for the direct purchase of fund shares, or (ii) cash remitted by the affiliated mutual funds for direct delivery to the investors for either the proceeds of fund shares liquidated at the investors’ direction, or dividends and capital gains earned on fund shares. As of September 30, 2009 and 2008, we held cash of approximately $214.5 million and $185.7 million off-balance sheet in agency or trust for investors and the affiliated mutual funds.

Critical Accounting Policies

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. These estimates, judgments, and assumptions are affected by our application of accounting policies. Below we describe certain critical accounting policies that we believe are important to understanding our results of operations and financial position. For additional information about our accounting policies, please refer to Note 1 – Significant Accounting Policies in the notes to consolidated financial statements in Item 8 of Part II of this Form 10-K.

Fair Value Measurements

We record substantially all of our investments in the financial statements at fair value or amounts that approximate fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the “exit

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price”). We use a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on whether the inputs to those valuation techniques are observable or unobservable.

The three levels of fair value hierarchy are set forth below. Our assessment of the hierarchy level of the assets or liabilities measured at fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2	Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable or corroborated by observable market data. Level 2 quoted prices are obtained from independent third-party brokers or dealers, including prices derived from model-based valuation techniques for which the significant assumptions are observable in the market or corroborated by observable market data.
Level 3	Unobservable inputs that are supported by little or no market activity. These inputs require significant management judgment and reflect our estimation of assumptions that market participants would use in pricing the asset or liability. Level 3 valuations are derived primarily from model-based valuation techniques in which one or more significant inputs are unobservable in the market.

Trading securities, securities available-for-sale, and derivatives are financial instruments recorded at fair value on a recurring basis. We may also measure certain assets or liabilities at fair value on a nonrecurring basis. These fair value measurements generally result from the application of lower of cost or fair value accounting for loans held for sale or write-downs of individual assets.

At September 30, 2009, Level 3 assets represented approximately 2.1% of total assets measured at fair value, and Level 3 liabilities measured at fair value were insignificant. There were immaterial transfers into and out of Level 3 during fiscal year 2009.

The following is a description of the significant assets measured at fair value, the fair value methodologies used, and the fair value hierarchy level.

Investment Securities, Trading consist primarily of securities held by consolidated sponsored investment products, non-consolidated sponsored investment products held for trading purposes, and retained subordinated securities and residual interests from securitization transactions. Changes in the fair value of these securities are recognized as gains and losses in earnings. The fair value of securities held by consolidated sponsored investment products is primarily determined using quoted market prices, or independent third-party broker or dealer price quotes. These securities are primarily classified as Level 1 or Level 2. Consolidated sponsored investment products may also hold securities that are classified as Level 3 because their fair value is determined using unobservable inputs. The fair value of these securities is determined using valuation methods as appropriate for each security type such as model-based valuations or prices of similar securities adjusted for illiquidity and credit risk factors.

The fair value of non-consolidated sponsored investment products held for trading purposes is determined based on the published net asset values of the sponsored investment products, and they are classified as Level 1.

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The fair value of retained subordinated securities from securitization transactions is determined using independent third-party broker or dealer price quotes, and these securities are classified as Level 2. The broker or dealer price quotes are evaluated for reasonableness based upon the performance of the underlying loans and comparable transaction pricing in the securitization market. The fair value of residual interests currently is determined using unobservable inputs and classified as Level 3. The residual interests consist of interest-only strips receivable and cash on deposit, and are backed by prime, non-prime and sub-prime automobile loans issued from March 1999 to April 2008. The fair value is estimated using discounted cash flow analyses. Key inputs to the analysis include the excess cash flow discount rate, the cumulative life loss rate, expected weighted-average life and prepayment speed assumption. We develop our key inputs using our actual portfolio experience and recent market activity for similar transactions. At least one of the significant inputs used in the fair valuation is not observable because recent economic events have significantly reduced the number of comparable securitization transactions. During fiscal year 2009, we recognized $46.0 million of write-downs to the residual interests primarily due to an increase in the cumulative life loss rate, partially offset by a decrease in the excess cash flow discount rate. We increased the cumulative life loss rate assumption from a range of 2.1% to 5.7% at September 30, 2008 to a range of 2.4% to 11.4% at September 30, 2009 to reflect increases in experienced and expected losses. This resulted in an increase in the weighted-average assumption for the cumulative life loss rate from 4.2% at September 30, 2008 to 7.4% at September 30, 2009. The excess cash flow discount rate decreased from 19.8% at September 30, 2008 to 14.4% at September 30, 2009 as a result of the changing liquidity premium in the securitization market. The key assumptions and the sensitivity of the fair value of the residual interests to an immediate adverse change in those assumptions are shown in Note 9 – Securitization of Loans Held for Sale in the notes to consolidated financial statements in Item 8 of Part II of this Form 10-K.

Investment Securities, Available-for-Sale consist primarily of non-consolidated sponsored investment products and debt securities including U.S. government-sponsored enterprise obligations, securities of U.S. states and political subdivisions, securities of the U.S. Treasury and federal agencies, and corporate debt securities. Realized gains and losses are included in investment income using either the average cost method or specific identification method. Unrealized gains and losses are recorded net of tax as part of accumulated other comprehensive income until realized. The fair value of non-consolidated sponsored investment products is determined based on the published net asset values of the sponsored investment products, and they are classified as Level 1. The fair value of the debt securities is determined using quoted market prices or independent third-party broker or dealer price quotes, which are evaluated for reasonableness, and they are generally classified as Level 2, except for certain U.S. Treasury securities which are classified as Level 1.

Loans Held for Sale consist of retail installment loan sale contracts held for sale in securitization transactions. The contracts are secured by new and used automobiles purchased from motor vehicle dealers. The fair value of loans held for sale generally is estimated based on the whole loan market price that would be received if the loans were sold in their current condition, which may include adjustments based on the composition of the loan portfolio and liquidity factors. As a result of recent economic conditions, observable whole loan prices for comparable portfolios of automobile loans sold have not been readily available. Therefore, the fair value currently is determined by using discounted cash flow analyses with estimated discount rates for loans with similar terms and collateral. Accordingly, loans held for sale currently are classified as Level 3.

While we believe the valuation methodologies described above are appropriate, the use of different methodologies or assumptions to determine the fair value could result in a different estimate of fair value at the reporting date.

Investments are evaluated for other-than-temporary impairment on a quarterly basis when the cost of an investment exceeds its fair value. For available-for-sale equity securities, we consider many factors, including the severity and duration of the decline in the fair value below cost, our intent and ability to hold

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the security for a period of time sufficient for an anticipated recovery in fair value, and the financial condition and specific events related to the issuer. When an impairment of an available-for-sale equity security is determined to be other-than-temporary, we recognize the impairment in earnings. For available-for-sale debt securities, if we intend to sell or it is more likely than not that we will be required to sell a security before recovery of its amortized cost, we record the entire impairment in earnings. If we do not intend to sell or it is not more likely than not that we will be required to sell the security before anticipated recovery of its amortized cost, we separate the impairment into the amount of the total impairment related to the credit loss and the amount of the total impairment related to all other factors. The credit loss component is the difference between the security’s amortized cost and the present value of the expected cash flows. The credit loss component is recognized in earnings and the losses related to all other factors are recognized in accumulated other comprehensive income. While we believe that we have accurately estimated the amount of other-than-temporary impairment in our portfolio, different assumptions could result in changes to the recorded amounts in our consolidated financial statements.

Goodwill and Other Intangible Assets

Goodwill represents the excess cost of a business acquisition over the fair value of the net assets acquired. Intangible assets consist primarily of mutual fund management contracts and customer base assets resulting from business acquisitions. We amortize intangible assets over their estimated useful lives, which range from seven to 15 years, using the straight-line method, unless the asset is determined to have an indefinite useful life. Indefinite-lived intangible assets primarily represent contracts to manage mutual fund assets for which there is no foreseeable limit on the contract period.

We make significant estimates and assumptions when valuing goodwill and other intangible assets in connection with the initial purchase price allocation of an acquired entity, as well as when evaluating impairment of goodwill and other intangible assets on an ongoing basis.

Goodwill is tested for impairment annually and when an event occurs or circumstances change that more likely than not reduce the fair value of a reporting unit below its carrying value. Historically, we completed our annual goodwill impairment test as of October 1 of each fiscal year. During fiscal year 2009, we changed our annual impairment test date from October 1 to August 1 of each year. We believe the August 1 date better aligns our annual goodwill impairment test with the budget data developed in connection with the budgeting process that takes place in July and August. In addition, the annual impairment test will be completed during our fourth fiscal quarter using the most recent financial information such that the results will better reflect the fiscal year being reported. This change to the date of our annual goodwill impairment test constitutes a change in the method of applying an accounting principle. We believe that this change in accounting principle is preferable and we filed a letter of preferability from our independent registered public accounting firm regarding this change in accounting principle as an exhibit to our Form 10-Q for the quarter ended March 31, 2009.

Our goodwill impairment test involves a two-step process. The first step requires the identification of the reporting units, and comparison of the fair value of each of these reporting units to the respective carrying value. If the carrying value is less than the fair value, no impairment exists and the second step is not performed. If the carrying value is higher than the fair value, there is an indication that impairment may exist and the second step is performed to compute the amount of the impairment. In the second step, the impairment is computed by comparing the implied fair value of reporting unit goodwill with the carrying value of that goodwill. We have two reporting units, investment management and related services and banking/finance, which are the same as our operating segments. All goodwill has been assigned to the investment management and related services reporting unit.

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Indefinite-lived intangible assets are tested for impairment annually and when events or changes in circumstances indicate the assets might be impaired. Impairment is indicated when the carrying value of the intangible asset exceeds its fair value.

In estimating the fair value of the reporting unit and indefinite-lived intangible assets, we use valuation techniques based on an income approach where future cash flows are discounted. Our future cash flow estimates include assumptions about revenue and assets under management growth rates, pre-tax profit margin, the average effective fee rate, the effective tax rate, and the discount rate, which is based on our weighted average cost of capital. The most relevant of these assumptions to the determination of estimated fair value are the assets under management growth rate and the discount rate.

We performed our annual impairment tests for goodwill and indefinite-lived intangible assets as of August 1, 2009. We estimated the discounted future cash flows using a 6.0% compounded annual growth rate of assets under management and a discount rate of 13.4%. The fair value of the investment management and related services reporting unit exceeded its carrying value by more than 100%. The fair values of our indefinite-lived intangible assets exceeded their respective carrying values by more than 100%.

The assumptions used in our annual impairment tests for goodwill and indefinite-lived intangible assets were developed taking into account the ongoing market conditions with an expectation that the recovery in the level of assets under management may take longer than has been historically experienced in years following a severe market downturn. Therefore, the growth rate assumption used as of August 1, 2009 was lower than the historical compounded growth rates. We did not recognize any impairment because our estimates of the fair values of our reporting unit and our indefinite-lived assets exceeded their respective carrying values. A hypothetical 500 basis point decline in the assets under management growth rate or a 500 basis point increase in the discount rate would not cause either the investment management and related services reporting unit or the management contracts to fail step one of the impairment tests for goodwill or indefinite-lived intangible assets.

We subsequently monitor the market conditions and their potential impact on the assumptions used in the annual calculations of fair value to determine whether circumstances have changed that would more likely than not reduce the fair value of our reporting unit below its carrying value, or indicate that our indefinite-lived intangible assets might be impaired. We consider, among other things, changes in our assets under management and pre-tax profit margin amounts, which affect our revenue growth rate assumptions, by assessing whether these changes would impact the reasonableness of the assumptions used in our impairment test as of August 1, 2009. We also monitor fluctuations of our common stock per share price to evaluate our market capitalization relative to the reporting unit as a whole. Subsequent to August 1, 2009, there were no impairments to goodwill or indefinite-lived intangible assets as we determined no events occurred or circumstances changed that would more likely than not reduce the fair value of the reporting unit below its carrying value, or indicate that our indefinite-lived intangible assets might be impaired.

We test definite-lived intangible assets for impairment quarterly. Impairment is indicated when the carrying value of the asset is not recoverable and exceeds its fair value. In evaluating the recoverability of definite-lived intangible assets, we estimate the undiscounted future cash flows to be derived from these assets. Our future undiscounted cash flow projections include assumptions about revenue and assets under management growth rates, effective fee rates, investor redemptions, pre-tax profit margin, and expected useful lives. The most relevant of these assumptions to determine future cash flows is the change in the amount of assets under management. The assumptions used in our impairment tests are developed taking into consideration the ongoing market conditions. If the carrying value of the asset is not recoverable through the related undiscounted cash flows, we measure the impairment loss based on the amount by which the carrying value of the asset exceeds its fair value. Fair value of the asset is determined by discounted cash flows or other methods as appropriate for the asset type.

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As of September 30, 2009, approximately 58% of our definite-lived intangible assets related to investment management contracts of Fiduciary Trust Company International (“FTCI”) high net-worth accounts. We estimated the future undiscounted cash flows for the contracts using assets under management growth rates ranging from 0.3% to 0.5% and the future discounted cash flows using a discount rate of 13.9%. We did not recognize an impairment loss because the fair value of the contracts exceeded their carrying value. As of September 30, 2009, a decline in our assets under management of approximately 40% could cause our FTCI high net-worth management contracts to be impaired.

The undiscounted future cash flow projections for the remaining 42% of our definite-lived intangible assets exceeded their respective carrying values by more than 30%. We estimated the undiscounted future cash flows using assets under management growth rates ranging from (6.2)% to 6.0%, depending on the type of management contracts. As of September 30, 2009, a decline in our assets under management of approximately 40% could cause us to evaluate whether the fair value of our other definite-lived intangible assets is below the asset carrying value.

While we believe that our impairment tests and the assumptions used to estimate fair value are reasonable and appropriate, if the assumptions used in our estimates of fair value change in the future, we may be required to record impairment charges or otherwise accelerate amortization expense.

Revenues

We recognize investment management fees, shareholder servicing fees and distribution fees as earned over the period in which services are rendered, except for performance-based investment management fees, which are recognized when earned. We recognize underwriting commissions related to the sale of shares of our sponsored investment products on the trade date. Investment management fees are generally determined based on a percentage of assets under management, except for performance-based investment management fees, which are based on performance targets established in the related investment management contracts. Generally, shareholder servicing fees are calculated based on the number and type of accounts serviced, while distribution fees are generally based on a percentage of assets under management.

Assets under management is calculated for our sponsored investment products using fair value methods derived primarily from unadjusted quoted market prices, unadjusted independent third-party broker or dealer price quotes in active markets, or adjusted market prices or price quotes. The fair values of securities for which market prices are not readily available are internally valued using various methodologies as appropriate for each security type. Securities for which market prices are not readily available generally represent a de minimus amount of our total assets under management. The pricing of the securities held by our sponsored investment products is governed by a global valuation and pricing policy, which defines valuation and pricing conventions for each security type, including practices for responding to unexpected or unusual market events. While recent economic conditions and financial market declines have increased market price volatility, the fair value of the majority of the securities held by the sponsored investment products continues to be derived from readily available market price quotations.

Income Taxes

We record deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities, and the reported amounts in the consolidated financial statements using the statutory tax rates in effect for the year when the reported amount of the asset or liability is recovered or settled, respectively. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying values of deferred tax assets to the amount that is more likely than not to be realized. For each tax position taken or expected to be taken in a tax return, we determine whether it is more likely than not that

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the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is measured to determine the amount of benefit to recognize. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. We recognize the accrual of interest on uncertain tax positions in interest expense and penalties in other operating expenses.

As a multinational corporation, we operate in various locations outside the United States and generate earnings from our non-U.S. subsidiaries. We indefinitely reinvest the undistributed earnings of our non-U.S. subsidiaries, except for Subpart F income taxed in the U.S., subject to regulatory or contractual repatriation restrictions or contractual repatriation requirements, and the excess net earnings after debt service payments and regulatory capital requirements of our Canadian and U.K. consolidated subsidiaries. As a result, we have not recognized a provision for U.S. income taxes and a deferred income tax liability on $3.4 billion of cumulative undistributed foreign earnings that are indefinitely reinvested at September 30, 2009. Changes to our policy of reinvestment or repatriation of non-U.S. earnings may have a significant effect on our financial condition and results of operations.

Loss Contingencies

We are involved in various lawsuits and claims encountered in the normal course of business. When such a matter arises and periodically thereafter, we consult with our legal counsel and evaluate the merits of the claims based on the facts available at that time. In management’s opinion, an adequate accrual has been made as of September 30, 2009 to provide for probable losses that may arise from these matters for which we could reasonably estimate an amount. See also Note 15 – Commitments and Contingencies in the notes to consolidated financial statements in Item 8 of Part II of this Form 10-K.

Consolidation of Variable Interest Entities

We consolidate any variable interest entity (“VIE”) for which we are considered the primary beneficiary. A VIE is an entity in which the equity investment holders have not contributed sufficient capital to finance its activities or the equity investment holders do not have defined rights and obligations normally associated with an equity investment. The entity that has the majority of the risks and rewards of ownership, referred to as the primary beneficiary, is required to consolidate the VIE.

We invest in various entities in the normal course of business and evaluate whether each entity is a VIE. For the entities determined to be VIEs, we assess whether we qualify as the primary beneficiary of the VIEs. Our VIEs primarily include certain sponsored investment products and certain other investment products in which we hold an equity ownership interest. Other VIEs include limited liability partnerships, limited liability companies, and joint ventures. The form of variable interests that we have in VIEs generally includes our equity ownership interest and investment management and related service fees earned from sponsored investment products. Our evaluation of whether we qualify as the primary beneficiary of VIEs is highly complex and involves significant judgments, estimates and assumptions. We generally utilize expected cash flow scenarios to determine our interest in the expected losses or residual returns of VIEs from our investment management and related service fees or equity ownership interests held.

The key estimates and assumptions used in our analyses include the amount of assets under management, investment management and related service fee rates, the life of the investment product, and the discount rate. These estimates and assumptions are subject to variability. For example, assets under management are impacted by market volatility and the level of sales, redemptions, contributions, withdrawals and dividend reinvestments of mutual fund shares that occur daily. Also, investment management fees may be fixed or tiered based on the amount of assets under management, the life of a

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sponsored investment product may be finite or indefinite, and the discount rate could be affected by credit, liquidity or other risks factors. In addition, third-party purchases and redemptions, which are outside of our control, need to be evaluated to determine whether they cause a reconsideration event.

Based on our evaluation, we believe we were not the primary beneficiary of VIEs and, as a result, did not consolidate these entities as of and for fiscal year 2009. While we believe that our evaluation was appropriate, future changes in estimates, judgments, and assumptions may affect whether certain related entities require consolidation in our financial statements.

Banking/Finance Segment Interest Income and Margin Analysis

The following table presents the banking/finance operating segment’s net interest income and margin:

(in millions)

	2009						2008						2007
as of and for the fiscal years ended September 30,	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
Federal funds sold and securities purchased under agreements to resell	$	16.9	$	0.1	0.59	%	$	147.2	$	5.3	3.60	%	$	230.2	$	12.3	5.34	%
Investment securities, trading		92.9		6.4	6.89	%		63.1		4.7	7.45	%		—		—	—
Investment securities, available-for-sale1		414.2		13.2	3.19	%		261.3		13.1	5.01	%		146.6		9.4	6.41	%
Loans to banking clients2		357.6		19.5	5.45	%		629.2		40.4	6.42	%		455.5		37.3	8.19	%
Total earning assets	$	881.6	$	39.2	4.45	%	$	1,100.8	$	63.5	5.77	%	$	832.3	$	59.0	7.09	%
Interest-bearing deposits	$	516.1	$	6.2	1.20	%	$	389.5	$	9.0	2.31	%	$	371.5	$	14.2	3.82	%
Federal funds purchased and securities sold under agreements to repurchase		1.4		—	2.08	%		4.5		0.1	2.22	%		2.7		0.1	3.70	%
Variable funding notes		4.3		0.3	6.98	%		251.4		10.5	4.18	%		149.6		9.6	6.42	%
FHLB advances		93.5		2.3	2.46	%		48.0		1.3	2.71	%		—		—	—
Total interest-bearing liabilities	$	615.3	$	8.8	1.43	%	$	693.4	$	20.9	3.01	%	$	523.8	$	23.9	4.56	%
Net interest income and margin			$	30.4	3.45	%			$	42.6	3.87	%			$	35.1	4.22	%

¹ Average rates on investment securities, available-for-sale are calculated using the cost basis of the investment.

² Non-accrual loans are included in the average loans receivable balance.

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Selected Quarterly Financial Data (Unaudited)

(in thousands except per share data)

Quarter ended	December 31			March 31			June 30		September 30
Fiscal year 2009
Operating revenues	$	969,330		$	912,272		$	1,073,558	$	1,238,927
Operating income		268,364			223,322			326,186		384,722
Net income		120,900	1		110,806	2		297,716		367,356
Earnings per share
Basic	$	0.52		$	0.48		$	1.30	$	1.61
Diluted	$	0.52		$	0.48		$	1.29	$	1.60
Dividend per share	$	0.21		$	0.21		$	0.21	$	0.21
Common stock price per share
High	$	95.49		$	70.82		$	77.62	$	104.00
Low	$	45.52		$	37.19		$	52.93	$	65.48
Fiscal year 2008
Operating revenues	$	1,685,591		$	1,503,692		$	1,521,649	$	1,321,454
Operating income		635,729			519,087			532,215		411,971
Net income		518,316			366,096			403,312		300,489	3
Earnings per share
Basic	$	2.15		$	1.55		$	1.72	$	1.29
Diluted	$	2.12		$	1.54		$	1.71	$	1.28
Dividend per share	$	0.20		$	0.20		$	0.20	$	0.20
Common stock price per share
High	$	143.08		$	114.49		$	108.00	$	113.70
Low	$	108.46		$	86.06		$	91.21	$	81.39
Fiscal year 2007
Operating revenues	$	1,427,815		$	1,509,006		$	1,639,811	$	1,629,137
Operating income		508,070			499,083			519,006		541,388
Net income		426,800			440,866			468,364		436,908
Earnings per share
Basic	$	1.69		$	1.75		$	1.89	$	1.78
Diluted	$	1.67		$	1.73		$	1.86	$	1.76
Dividend per share	$	0.15		$	0.15		$	0.15	$	0.15
Common stock price per share
High	$	114.98		$	126.71		$	139.32	$	145.59
Low	$	103.50		$	111.31		$	118.80	$	113.08

¹ Includes $33.8 million of other-than-temporary impairments of investment securities, available-for-sale and a $30.1 million decline in fair value of retained interests in securitized assets.

² Includes a $47.1 million decline in fair value of retained interests in securitized assets and $23.9 million of other-than-temporary impairments of investment securities, available-for-sale.

³ Includes a $19.7 million income tax charge related to repatriated earnings from foreign subsidiaries.

Risk Factors

For a description of certain risk factors and other important factors that may affect us, our subsidiaries and our business, please see the description of the risk factors set forth under Item 1A of Part I of this Form 10-K, which is incorporated herein by reference.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

In the normal course of business, our financial position is subject to market risk, including, but not limited to, potential loss due to changes in the value of financial instruments including those resulting from adverse changes in interest rates, foreign currency exchange rates and market valuation. Financial instruments include, but are not limited to, investment securities, loans, deposits and debt obligations. Management is responsible for managing market risk. Our Enterprise Risk Management Committee is responsible for providing a framework to assist management to identify, assess and manage market and other risks.

Global markets have continued to experience unprecedented volatility, and challenging and volatile market conditions might continue to be present in the foreseeable future. Market conditions have resulted in a significant reduction in our assets under management, which directly impacts our revenues and net income. A continued economic downturn and volatility in the global financial markets could also significantly affect the estimates, judgments, and assumptions used in the valuation of our financial instruments.

We are exposed to changes in interest rates, primarily through our loans, investment in debt securities, deposit liabilities and other outstanding debt. We minimize the impact of changes in interest rates related to our investments in debt securities by managing the maturities of these securities, and through diversification. We minimize the impact of changes in interest rates related to our outstanding debt by entering into financing transactions that ensure an appropriate mix of debt at fixed and variable interest rates. In addition, our banking/finance segment monitors the net interest rate margin and the average maturity of interest earning assets, as well as funding sources and, from time to time, we may enter into interest-rate swap agreements to mitigate interest rate exposure arising from the loans receivable portfolio.

At September 30, 2009, we have considered the potential impact of a 2% movement in market interest rates on interest earning assets, net of interest-bearing liabilities of our banking/finance segment, total debt outstanding and our portfolio of debt securities. Based on our analysis, we do not expect that this change would have a material impact on our operating revenues or results of operations in the next twelve months, for each of these categories or in the aggregate.

We are subject to foreign currency exchange risk through our international operations. While we operate primarily in the United States, we also provide services and earn revenues in The Bahamas, Asia-Pacific, Canada, Europe, Latin America and Africa. Our exposure to foreign currency exchange risk is minimized in relation to our results of operations since a significant portion of these revenues are denominated in U.S. dollars. This situation may change in the future as our business continues to grow outside the United States and expenses incurred denominated in foreign currencies increase. Our exposure to foreign currency exchange risk in relation to our consolidated balance sheet mostly relates to cash and cash equivalents and investments that are denominated in foreign currencies, primarily in Euro, Pound Sterling, Indian Rupee, Canadian Dollar, Korean Won, and Brazilian Real. These assets accounted for approximately 13% of the total cash and cash equivalents and investments at September 30, 2009. We do not use derivative financial instruments to manage foreign currency exchange risk exposure. As a result, both positive and negative currency fluctuations against the U.S. dollar may affect our results of operations and accumulated other comprehensive income.

We are exposed to market valuation risks related to securities we hold that are carried at fair value and securities held by sponsored investment products that we consolidate, which are also carried at fair value.

61

The following is a summary of the effect of a 10% increase or decrease in the carrying values of our financial instruments subject to market valuation risks at September 30, 2009.

(in thousands)	Carrying Value		Carrying Value Assuming a 10% Increase		Carrying Value Assuming a 10% Decrease
Current
Investment securities, trading	$	502,609	$	552,870	$	452,348
Investment securities, available-for-sale		1,027,287		1,130,016		924,558
Total Current	$	1,529,896	$	1,682,886	$	1,376,906
Banking/Finance
Investment securities, trading	$	110,600	$	121,660	$	99,540
Investment securities, available-for-sale		472,055		519,261		424,850
Total Banking/Finance	$	582,655	$	640,921	$	524,390
Non-Current
Investment securities, available-for-sale	$	108,838	$	119,721	$	97,954
Total	$	2,221,389	$	2,443,528	$	1,999,250

To mitigate the market valuation risks, we maintain a diversified investment portfolio and, from time to time, we may enter into derivative agreements. Our exposure to these risks is also minimized as we sponsor a broad range of investment products in various global jurisdictions, which allows us to mitigate the impact of changes in any particular market(s) or region(s).

Our cash, cash equivalents and investments portfolio by investment objective at September 30, 2009 was as follows:

(dollar amounts in thousands)	Total Portfolio		Percent of Total Portfolio		Trading Securities Included in Portfolio		Percent of Total Trading Securities
Cash and Cash Equivalents	$	3,104,451	54	%	$	—	—
Investment Securities
Equity
Domestic (U.S.)		88,054	2	%		43,084	7	%
Global/international		374,658	6	%		198,018	32	%
Total equity		462,712	8	%		241,102	39	%
Hybrid		64,786	1	%		32,567	5	%
Fixed-Income
Tax-free		99,889	2	%		—	—
Taxable
Domestic (U.S.)		1,133,859	19	%		218,009	36	%
Global/international		460,143	8	%		121,531	20	%
Total fixed-income		1,693,891	29	%		339,540	56	%
Total Investment Securities		2,221,389	38	%		613,209	100	%
Other1		450,945	8	%		—	—
Total Cash and Cash Equivalents and Investments	$	5,776,785	100	%	$	613,209	100	%

¹ Includes investments in equity method investees and other investments.

62

Investments categorized as investment securities, trading in our consolidated balance sheets include securities held by consolidated sponsored investment products. These securities, which amounted to $277.6 million at September 30, 2009, are generally assigned a classification in the table presented above based on the investment objective of the consolidated sponsored investment products holding the trading securities. Investment securities, trading also include securities held by our banking/finance operating segment, which amounted to $110.6 million at September 30, 2009.

63

Item 8. Financial Statements and Supplementary Data.

Index of Consolidated Financial Statements for the fiscal years ended September 30, 2009, 2008 and 2007.

CONTENTS	Page
Management’s Report on Internal Control Over Financial Reporting	65
Report of Independent Registered Public Accounting Firm	66
Consolidated Financial Statements of Franklin Resources, Inc. and its consolidated subsidiaries:
Consolidated Statements of Income for the fiscal years ended September 30, 2009, 2008 and 2007	67
Consolidated Balance Sheets as of September 30, 2009 and 2008	68
Consolidated Statements of Stockholders’ Equity and Comprehensive Income as of and for the fiscal years ended September 30, 2009, 2008 and 2007	70
Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2009, 2008 and 2007	71
Notes to Consolidated Financial Statements	73

All schedules have been omitted as the information is provided in the financial statements or in related notes thereto or is not required to be filed, as the information is not applicable.

Certain required quarterly information is included in Item 7 of Part II of this Form 10-K report under the heading “Selected Quarterly Financial Data (Unaudited)” and incorporated herein by reference.

64

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Franklin Resources, Inc. and its consolidated subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2009, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework. Based on that assessment, management concluded that, as of September 30, 2009, the Company’s internal control over financial reporting was effective.

The effectiveness of the Company’s internal control over financial reporting as of September 30, 2009 has been audited by PricewaterhouseCoopers LLP, the independent registered public accounting firm that audits the Company’s consolidated financial statements, as stated in their report immediately following this report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of September 30, 2009.

65

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

and Stockholders of Franklin Resources, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, stockholders’ equity and comprehensive income and cash flows present fairly, in all material respects, the financial position of Franklin Resources, Inc. and its subsidiaries at September 30, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2009 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

November 24, 2009

66

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

for the fiscal years ended September 30,	2009			2008			2007
Operating Revenues
Investment management fees	$	2,503,188		$	3,683,390		$	3,573,845
Underwriting and distribution fees		1,408,162			2,002,031			2,277,698
Shareholder servicing fees		267,350			289,370			277,059
Consolidated sponsored investment products income, net		8,195			10,923			7,804
Other, net		7,192			46,672			69,363
Total operating revenues		4,194,087			6,032,386			6,205,769
Operating Expenses
Underwriting and distribution		1,352,022			1,937,113			2,160,631
Compensation and benefits		958,511			1,120,657			1,080,634
Information systems, technology and occupancy		274,198			320,986			317,938
Advertising and promotion		116,129			184,309			189,382
Amortization of deferred sales commissions		142,978			178,004			158,114
Other		147,655			192,315			231,523
Total operating expenses		2,991,493			3,933,384			4,138,222
Operating Income		1,202,594			2,099,002			2,067,547
Other Income (Expenses)
Consolidated sponsored investment products gains (losses), net		21,706			(71,553	)		57,670
Investment and other income, net		60,563			224,898			363,304
Interest expense		(3,771	)		(15,758	)		(23,220	)
Other income, net		78,498			137,587			397,754
Income before taxes		1,281,092			2,236,589			2,465,301
Taxes on income		384,314			648,376			692,363
Net Income	$	896,778		$	1,588,213		$	1,772,938
Earnings per Share
Basic	$	3.89		$	6.72		$	7.11
Diluted	$	3.87		$	6.67		$	7.03
Dividends per Share	$	0.84		$	0.80		$	0.60

See Notes to Consolidated Financial Statements.

67

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

as of September 30,	2009		2008
Assets
Current Assets
Cash and cash equivalents	$	2,982,539	$	2,314,818
Receivables		581,810		690,351
Investment securities, trading		502,609		356,408
Investment securities, available-for-sale		1,027,287		600,146
Other investments		51,950		836,657
Deferred taxes		67,773		17,308
Prepaid expenses and other		30,452		33,944
Total current assets		5,244,420		4,849,632
Banking/Finance Assets
Cash and cash equivalents		121,912		212,734
Investment securities, trading		110,600		111,607
Investment securities, available-for-sale		472,055		320,910
Loans held for sale		15,711		32,582
Loans receivable, net		310,504		371,647
Other		8,383		11,899
Total banking/finance assets		1,039,165		1,061,379
Non-Current Assets
Investment securities, available-for-sale		108,838		155,295
Investments in equity method investees and other		398,995		328,247
Deferred sales commissions		103,993		187,807
Property and equipment, net		535,459		554,706
Goodwill		1,436,626		1,438,093
Other intangible assets, net		567,974		579,572
Other		32,993		21,789
Total non-current assets		3,184,878		3,265,509
Total Assets	$	9,468,463	$	9,176,520

[Table continued on next page]

See Notes to Consolidated Financial Statements.

68

CONSOLIDATED BALANCE SHEETS

[Table continued from previous page]

(dollars in thousands)

as of September 30,	2009		2008
Liabilities and Stockholders’ Equity
Current Liabilities
Compensation and benefits	$	210,789	$	307,223
Commercial paper		64,156		13,287
Accounts payable and accrued expenses		174,525		289,985
Commissions		219,356		230,028
Income taxes		28,363		66,032
Other		28,351		29,335
Total current liabilities		725,540		935,890
Banking/Finance Liabilities
Deposits		664,580		570,279
Variable funding notes		—		28,551
Federal Home Loan Bank advances		57,000		109,000
Other		24,653		44,743
Total banking/finance liabilities		746,233		752,573
Non-Current Liabilities
Long-term debt		—		118,433
Deferred taxes		218,845		146,489
Other		78,284		71,609
Total non-current liabilities		297,129		336,531
Total liabilities		1,768,902		2,024,994
Commitments and Contingencies (Note 15)
Minority Interest		67,388		77,162
Stockholders’ Equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none issued		—		—
Common stock, $0.10 par value, 1,000,000,000 shares authorized; 229,324,345 and 232,777,979 shares issued and outstanding, at September 30, 2009 and 2008		22,932		23,278
Capital in excess of par value		—		—
Retained earnings		7,505,890		7,044,732
Accumulated other comprehensive income		103,351		6,354
Total stockholders’ equity		7,632,173		7,074,364
Total Liabilities and Stockholders’ Equity	$	9,468,463	$	9,176,520

See Notes to Consolidated Financial Statements.

69

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(in thousands) as of and for the fiscal years ended September 30, 2009, 2008 and 2007	Common Stock					Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Total Comprehensive Income (Loss)
	Shares		Amount
Balance at October 1, 2006	253,249		$	25,325		$	185,583		$	6,333,843		$	139,977		$	6,684,728
Net income										1,772,938						1,772,938		$	1,772,938
Other comprehensive income
Net unrealized losses on investments, net of tax													(468	)		(468	)		(468	)
Currency translation adjustments													117,585			117,585			117,585
Minimum pension liability adjustment							(1,391	)					1,831			440			1,831
Total comprehensive income																		$	1,891,886
Repurchase of common stock	(10,142	)		(1,014	)		(387,571	)		(900,072	)					(1,288,657	)
Cash dividends on common stock										(149,136	)					(149,136	)
Issuance of common stock under stock incentive plans and employee stock investment plans	1,077			108			95,412									95,520
Issuance of common stock on exercise of stock options, net of forfeitures	1,286			128			65,493									65,621
Tax benefit from employee stock plans							38,608									38,608
Stock-based compensation							3,866									3,866
Adjustment to initially record the funded status of defined benefit plans, net of tax													(614	)		(614	)
Disproportional dividends on equity investment										(8,156	)					(8,156	)
Balance at September 30, 2007	245,470		$	24,547		$	—		$	7,049,417		$	258,311		$	7,332,275
Net income										1,588,213						1,588,213		$	1,588,213
Other comprehensive income
Net unrealized losses on investments, net of tax													(107,875	)		(107,875	)		(107,875	)
Currency translation adjustments													(143,800	)		(143,800	)		(143,800	)
Net unrealized losses on defined benefit plans, net of tax													(282	)		(282	)		(282	)
Total comprehensive income																		$	1,336,256
Repurchase of common stock	(14,241	)		(1,424	)		(158,201	)		(1,383,686	)					(1,543,311	)
Cash dividends on common stock										(188,813	)					(188,813	)
Issuance of common stock under stock incentive plans and employee stock investment plans	1,242			124			100,144									100,268
Issuance of common stock on exercise of stock options, net of forfeitures	307			31			12,985									13,016
Tax benefit from employee stock plans							33,613									33,613
Stock-based compensation							11,459									11,459
Adjustment to initially record unrecognized tax benefits										(20,759	)					(20,759	)
Disproportional dividends on equity investment										360						360
Balance at September 30, 2008	232,778		$	23,278		$	—		$	7,044,732		$	6,354		$	7,074,364
Net income										896,778						896,778		$	896,778
Other comprehensive income
Net unrealized gains on investments, net of tax													106,897			106,897			106,897
Currency translation adjustments													(8,288	)		(8,288	)		(8,288	)
Net unrealized losses on defined benefit plans, net of tax													(1,612	)		(1,612	)		(1,612	)
Total comprehensive income																		$	993,775
Repurchase of common stock	(5,475	)		(548	)		(134,687	)		(241,672	)					(376,907	)
Cash dividends on common stock										(194,438	)					(194,438	)
Issuance of common stock under stock incentive plans and employee stock investment plans	1,512			151			109,292									109,443
Issuance of common stock on exercise of stock options, net of forfeitures	509			51			22,184									22,235
Tax benefit from employee stock plans							7,349									7,349
Stock-based compensation							(4,138	)								(4,138	)
Disproportional dividends on equity investment										490						490
Balance at September 30, 2009	229,324		$	22,932		$	—		$	7,505,890		$	103,351		$	7,632,173

See Notes to Consolidated Financial Statements.

70

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

for the fiscal years ended September 30,	2009			2008			2007
Net Income	$	896,778		$	1,588,213		$	1,772,938
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		181,272			215,222			198,619
Stock-based compensation		84,443			80,705			90,145
Excess tax benefit from stock-based compensation arrangements		(4,923	)		(27,905	)		(33,517	)
Net losses (gains) on sale of assets		1,665			(36,418	)		(96,805	)
Equity in net income of affiliated companies		(17,727	)		(28,353	)		(63,566	)
Provision for loan losses		5,789			13,407			2,877
Other-than-temporary impairment of investments		63,068			13,845			863
Deferred income taxes		13,182			10,742			51,120
Changes in operating assets and liabilities:
(Increase) decrease in receivables, prepaid expenses and other		(34,280	)		88,463			(231,238	)
Principal collected on (originations of) loans held for sale, net		17,959			(184,185	)		(635,482	)
Proceeds from securitization of loans held for sale		—			394,299			684,173
Increase in trading securities, net		(397,508	)		(687,246	)		(217,122	)
Advances of deferred sales commissions		(98,140	)		(121,885	)		(159,551	)
(Decrease) increase in income taxes payable		(25,258	)		(990	)		70,891
(Decrease) increase in commissions payable		(10,672	)		(44,669	)		63,701
Increase in other liabilities		40,775			117,192			115,663
(Decrease) increase in accrued compensation and benefits		(75,021	)		18,804			59,924
Net cash provided by operating activities		641,402			1,409,241			1,673,633
Purchase of investments		(1,869,562	)		(1,887,971	)		(1,018,145	)
Liquidation of investments		2,296,850			1,184,579			877,364
Purchase of banking/finance investments		(208,920	)		(213,400	)		(49,083	)
Liquidation of banking/finance investments		65,001			46,886			62,091
Decrease (increase) in loans receivable		51,220			(162,718	)		8,056
Additions of property and equipment, net		(45,183	)		(70,215	)		(94,144	)
Acquisitions of subsidiaries, net of cash acquired		533			6,717			(92,307	)
Net cash provided by (used in) investing activities		289,939			(1,096,122	)		(306,168	)
Increase (decrease) in bank deposits, net		94,301			128,268			(106,896	)
Exercise of common stock options		24,356			13,317			66,131
Dividends paid on common stock		(192,784	)		(179,033	)		(142,747	)
Purchase of common stock		(376,907	)		(1,543,311	)		(1,288,657	)
Excess tax benefits from stock-based compensation arrangements		4,923			27,905			33,517
Proceeds from issuance of debt		569,395			1,251,851			537,206
Payments on debt		(649,231	)		(1,764,387	)		(677,310	)
Minority interest		185,339			765,415			129,509
Net cash used in financing activities		(340,608	)		(1,299,975	)		(1,449,247	)
Effect of exchange rate changes on cash and cash equivalents		(13,834	)		(69,775	)		52,830
Increase (decrease) in cash and cash equivalents		576,899			(1,056,631	)		(28,952	)
Cash and cash equivalents, beginning of year		2,527,552			3,584,183			3,613,135
Cash and Cash Equivalents, End of Year	$	3,104,451		$	2,527,552		$	3,584,183

[Table continued on next page]

See Notes to Consolidated Financial Statements.

71

CONSOLIDATED STATEMENTS OF CASH FLOWS

[Table continued from previous page]

(in thousands)

for the fiscal years ended September 30,	2009			2008			2007
Components of Cash and Cash Equivalents
Cash and cash equivalents, beginning of year:
Current assets	$	2,314,818		$	3,304,495		$	3,310,545
Banking/finance assets		212,734			279,688			302,590
Total	$	2,527,552		$	3,584,183		$	3,613,135
Cash and cash equivalents, end of year:
Current assets	$	2,982,539		$	2,314,818		$	3,304,495
Banking/finance assets		121,912			212,734			279,688
Total	$	3,104,451		$	2,527,552		$	3,584,183
Supplemental Disclosure of Non-Cash Information
Change in assets related to the net deconsolidation of certain sponsored investment products	$	(379,022	)	$	(863,200	)	$	(208,047	)
Change in liabilities related to the net deconsolidation of certain sponsored investment products		(176,891	)		(118,780	)		(38,239	)
Assets held for sale reclassified from investing to operating activities		—			—			9,535
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	$	395,551		$	614,021		$	586,587
Cash paid for interest		9,382			42,812			39,487

See Notes to Consolidated Financial Statements.

72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Significant Accounting Policies

Business. Franklin Resources, Inc. (“Franklin”) is a holding company that, together with its various subsidiaries (collectively, the “Company”) is referred to as Franklin Templeton Investments. The Company derives substantially all of its operating revenues and net income from providing investment management, fund administration, shareholder services, transfer agency, underwriting, distribution, custodial, trustee and other fiduciary services (collectively, “investment management and related services”) to funds and institutional, high net-worth and separately-managed accounts (collectively, the “sponsored investment products”). The Company also offers select retail banking, private banking and consumer lending services through its banking/finance segment. Services to the sponsored investment products are provided under contracts that set forth the level and nature of the fees to be charged for these services. The majority of the Company’s revenues relate to mutual fund products that are subject to contracts that are periodically reviewed and approved by each mutual fund’s board of directors/trustees and/or its shareholders.

Basis of Presentation. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Management believes that the accounting estimates are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates, actual amounts may differ from these estimates. Certain comparative amounts for prior fiscal years have been reclassified to conform to the financial statement presentation as of and for the fiscal year ended September 30, 2009 (“fiscal year 2009”). The Company has evaluated subsequent events through November 24, 2009, which is the date that this Annual Report on Form 10-K is filed with the U.S. Securities and Exchange Commission (the “SEC”).

Consolidation. The consolidated financial statements include the accounts of Franklin and its subsidiaries in which it has a controlling financial interest. An entity generally is considered to have a controlling financial interest when it owns a majority of the voting interest in an entity. The Company also consolidates any variable interest entity (“VIE”) for which it is considered the primary beneficiary. All material intercompany accounts and transactions have been eliminated.

A VIE is an entity in which the equity investment holders have not contributed sufficient capital to finance its activities or the equity investment holders do not have defined rights and obligations normally associated with an equity investment. An entity that has the majority of the risks and rewards of ownership of a VIE, referred to as the primary beneficiary, is required to consolidate the VIE.

The Company evaluates whether entities are VIEs and determines if it qualifies as the primary beneficiary of the VIEs. The Company’s VIEs primarily include certain sponsored investment products and certain other investment products in which the Company holds an equity ownership interest. Other VIEs include limited liability partnerships, limited liability companies, and joint ventures. The form of variable interests that the Company has in VIEs generally includes equity ownership interest and investment management and related service fees earned from the sponsored investment products. The evaluation of whether the Company qualifies as the primary beneficiary of VIEs is highly complex and involves significant judgments, estimates and assumptions. The Company generally utilizes expected cash flow scenarios to determine its interest in the expected losses or residual returns of the VIEs from the investment management and related service fees or equity ownership interests held. The key estimates and assumptions used in the analyses include the amount of assets under management, investment management and related service fee rates, the life of the investment product, and the discount rate.

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Fair Value Measurements. The Company records substantially all of its investments in its financial statements at fair value or amounts that approximate fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the “exit price”). The Company uses a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on whether the inputs to those valuation techniques are observable or unobservable.

The three levels of fair value hierarchy are set forth below. The Company’s assessment of the hierarchy level of the assets or liabilities measured at fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2	Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable or corroborated by observable market data. Level 2 quoted prices are obtained from independent third-party brokers or dealers, including prices derived from model-based valuation techniques for which the significant assumptions are observable in the market or corroborated by observable market data.
Level 3	Unobservable inputs that are supported by little or no market activity. These inputs require significant management judgment and reflect the Company’s estimation of assumptions that market participants would use in pricing the asset or liability. Level 3 valuations are derived primarily from model-based valuation techniques in which one or more significant inputs are unobservable in the market.

Trading securities, securities available-for-sale, and derivatives are financial instruments recorded at fair value on a recurring basis. The Company may also measure certain assets or liabilities at fair value on a nonrecurring basis. These fair value measurements generally result from the application of lower of cost or fair value accounting for loans held for sale or write-downs of individual assets.

Cash and Cash Equivalents include cash on hand, non-interest-bearing and interest-bearing deposits with financial institutions, federal funds sold, time deposits, securities of the U.S. Treasury and federal agencies, debt instruments with original maturities of three months or less at the purchase date, and other highly liquid investments, including money market funds, which are readily convertible into cash. Cash and cash equivalents are carried at cost. Due to the short-term nature and liquidity of these financial instruments, the carrying values of these assets approximate fair value.

Investment Securities, Trading consist primarily of securities held by consolidated sponsored investment products, non-consolidated sponsored investment products held for trading purposes, and retained subordinated securities and residual interests from securitization transactions. Changes in the fair value of these securities are recognized as gains and losses in earnings. The fair value of securities held by consolidated sponsored investment products is primarily determined using quoted market prices, or independent third-party broker or dealer price quotes. These securities are primarily classified as Level 1 or Level 2. Consolidated sponsored investment products may also hold securities that are classified as Level 3 because their fair value is determined using unobservable inputs. The fair value of these securities is determined using valuation methods as appropriate for each security type such as model-based valuations or prices of similar securities adjusted for illiquidity and credit risk factors. The fair value of non-consolidated sponsored investment products is determined based on the published net asset values of the sponsored investment products, and they are classified as Level 1. The fair value of retained subordinated securities

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from securitization transactions is determined using independent third-party broker or dealer price quotes, and these securities are classified as Level 2. The broker or dealer price quotes are evaluated for reasonableness based upon the performance of the underlying loans and comparable transaction pricing in the securitization market. The fair value of residual interests currently is estimated using discounted cash flow analyses using unobservable inputs because recent economic conditions have significantly reduced the number of comparable securitization transactions. The residual interests are currently classified as Level 3.

Investment Securities, Available-for-Sale consist primarily of non-consolidated sponsored investment products and debt securities including U.S. government-sponsored enterprise obligations, securities of U.S. states and political subdivisions, securities of the U.S. Treasury and federal agencies, and corporate debt securities. Realized gains and losses are included in investment income using either the average cost method or specific identification method. Unrealized gains and losses are recorded net of tax as part of accumulated other comprehensive income until realized. The fair value of non-consolidated sponsored investment products is determined based on the published net asset values of the sponsored investment products, and they are classified as Level 1. The fair value of debt securities is determined using quoted market prices or independent third-party broker or dealer price quotes, which are evaluated for reasonableness, and they are generally classified as Level 2, except for certain U.S. Treasury securities which are classified as Level 1.

Other Investments are carried at cost. They consist of time deposits with financial institutions having maturities greater than three months but less than one year from the date of purchase. Due to the short-term nature and liquidity of these financial instruments, the carrying values of these assets approximate fair value.

Investments in Equity Method Investees consist of equity investments in entities over which the Company is able to exercise significant influence, but not control. Significant influence is generally considered to exist when an ownership interest in the voting stock of the investee is between 20% and 50%, although other factors, such as representation on the investee’s board of directors and the impact of commercial arrangements, also are considered in determining whether the equity method of accounting is appropriate. Investments in limited partnerships and limited liability companies are accounted for using the equity method of accounting when the Company’s investment is considered to be more than minor. Equity investments are accounted for under the cost method if the Company is not able to exercise significant influence over the investee and the securities are not marketable.

Impairment of Investments. The Company evaluates investments for other-than-temporary impairment on a quarterly basis when the cost of an investment exceeds its fair value. For available-for-sale equity securities, the Company considers many factors, including the severity and duration of the decline in the fair value below cost, the Company’s intent and ability to hold the security for a period of time sufficient for an anticipated recovery in fair value, and the financial condition and specific events related to the issuer. When an impairment of an available-for-sale equity security is determined to be other-than-temporary, the Company recognizes the impairment in earnings. For available-for-sale debt securities, if the Company intends to sell or it is more likely than not that it will be required to sell a security before recovery of its amortized cost, the Company records the entire impairment in earnings. If the Company does not intend to sell or it is not more likely than not that it will be required to sell the security before anticipated recovery of its amortized cost, the Company separates the impairment into the amount of the total impairment related to the credit loss and the amount of the total impairment related to all other factors. The credit loss component is the difference between the security’s amortized cost and the present value of the expected cash flows. The credit loss component is recognized in earnings and the losses related to all other factors are recognized in accumulated other comprehensive income.

Derivatives. The Company enters into interest-rate swap agreements to mitigate interest rate exposure related to loans receivable, deposits, and debt of the banking/finance segment. At September 30, 2009, the

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Company held interest-rate swap agreements to reduce the fixed interest-rate exposure of certain loans receivable of the banking/finance segment. These instruments are economic hedges with changes in their fair value recognized in earnings in other, net revenue.

The Company may also enter into equity swap agreements to mitigate market valuation risks related to securities the Company holds that are carried at fair value and investments held by majority-owned sponsored investment products that the Company consolidates. These instruments are economic hedges with changes in their fair value recognized in earnings in other income, net.

Loans Held for Sale consist of retail installment loan sale contracts held for sale in securitization transactions. The contracts are secured by new and used automobiles purchased from motor vehicle dealers. The loans held for sale are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses are recognized through a valuation allowance included in other, net revenue. The fair value of automobile loans held for sale generally is estimated based on the whole loan market price that would be received if the loans were sold in their current condition, which may include adjustments based on the composition of the loan portfolio and liquidity factors. As a result of recent economic conditions, observable whole loan prices for comparable portfolios of automobile loans sold have not been readily available. Therefore, the fair value currently is determined by using discounted cash flow analyses with estimated discount rates for loans with similar terms and collateral. Accordingly, automobile loans held for sale currently are classified as Level 3.

Loans Receivable, Net. The banking/finance group offers retail banking, private banking and consumer lending services. The Company accrues interest on loans using the effective interest method. The majority of retail and private banking loans carry variable interest rates, which are adjusted periodically. The consumer lending loans carry fixed interest rates. Loans receivable are carried at cost, net of the allowance for loan losses. For disclosure purposes, the fair value of loans receivable is estimated using discounted cash flow models with interest rates that consider the current credit and interest rate risks inherent in the loans and the current economic and lending conditions. For certain loans with no significant credit concerns and frequent repricing, estimated fair values are generally based on the carrying value.

Allowance for Loan Losses. An allowance for loan losses on the Company’s retail banking, private banking and consumer lending portfolios (collectively, “loan portfolios”) is maintained at a level sufficient to absorb probable losses inherent in the loan portfolios. Probable losses are estimated for the loan portfolios based on contractual delinquency status and historical loss experience. The allowance on the loan portfolios is based on aggregated portfolio segment evaluations, generally by loan type, and reflects the Company’s judgment of portfolio risk factors such as economic conditions, bankruptcy trends, product mix, geographic concentrations and other similar items. A loan is charged to the allowance for loan losses when it is deemed probable to be uncollectible, taking into consideration the value of the collateral, the financial condition of the borrower and other factors. Recoveries on loans previously charged-off as uncollectible are credited to the allowance for loan losses.

Loans past due 90 days or more are reviewed individually to determine whether they are collectible. If warranted, after considering collateral level and other factors, loans 90 days past due are placed on non-accrual status. Interest collections on non-accrual loans for which the ultimate collectibility of principal is uncertain are applied as principal reductions; otherwise, such collections are credited to income when received.

The Company has not recorded an allowance for loan losses on its private banking loans. These loans generally are payable on demand and are fully secured by assets under its control or subject to rights of offset. Consistent with past experience, no losses are anticipated on these loans.

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Deferred Sales Commissions. Sales commissions paid to broker/dealers and other investment advisers in connection with the sale of shares of the Company’s funds sold without a front-end sales charge are capitalized as deferred sales commission assets (“DCA”). The DCA is amortized over the estimated period in which it will be recovered from distribution plan fees or from contingent deferred sales charges, generally over 12 months to eight years, depending on share class.

The Company evaluates DCA for recoverability on a periodic basis using undiscounted cash flows expected to be generated from the related distribution plan fees and contingent deferred sales charges. These evaluations involve the use of estimates and assumptions, including expected future market levels, average assets under management and shareholder redemption rates.

Property and Equipment are recorded at cost and are depreciated using the straight-line method over their estimated useful lives which range from three to 35 years. Expenditures for repairs and maintenance are charged to expense when incurred. The Company amortizes leasehold improvements using the straight-line method over their estimated useful lives or the lease term, whichever is shorter.

Internal and external costs incurred in connection with developing or obtaining software for internal use are capitalized and amortized over the estimated useful life of the software of three years beginning when the software project is complete and the application is put into production.

The Company tests property and equipment for impairment when there is an indication that the carrying amount of the asset may not be recoverable. Carrying values are not recoverable when the undiscounted cash flows estimated to be generated by those assets are less than their carrying value. If assets are determined to not be recoverable, impairment losses are measured based on the excess, if any, of the carrying value of these assets over their respective fair value. Fair value is determined by discounted future cash flows models, appraisals or other applicable methods.

Goodwill and Other Intangible Assets. Goodwill represents the excess cost of a business acquisition over the fair value of the net assets acquired. Intangible assets consist primarily of mutual fund management contracts and customer base assets resulting from business acquisitions. The Company amortizes intangible assets over their estimated useful lives which range from seven to 15 years using the straight-line method, unless the asset is determined to have an indefinite useful life. Indefinite-lived intangible assets primarily represent contracts to manage mutual fund assets for which there is no foreseeable limit on the contract period.

Goodwill is tested for impairment annually and when an event occurs or circumstances change that more likely than not reduce the fair value of a reporting unit below its carrying amount. Historically, the Company completed the annual goodwill impairment test as of October 1 of each fiscal year. During fiscal year 2009, the Company changed the annual impairment test date from October 1 to August 1 of each year. The Company believes the August 1 date better aligns the annual goodwill impairment test with the budget data developed in connection with the budgeting process that takes place in July and August. In addition, the annual impairment test will be completed during the fourth fiscal quarter using the most recent financial information such that the results will better reflect the fiscal year being reported. This change to the date of the annual goodwill impairment test constitutes a change in the method of applying an accounting principle. The Company believes that this change in accounting principle is preferable and filed a letter of preferability from its independent registered public accounting firm regarding this change in accounting principle as an exhibit to the Form 10-Q for the quarter ended March 31, 2009.

The goodwill impairment test involves a two-step process. The first step requires the identification of the reporting units, and comparison of the fair value of each of these reporting units to the respective carrying value. If the carrying value is less than the fair value, no impairment exists and the second step is

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not performed. If the carrying value is higher than the fair value, there is an indication that impairment may exist and the second step is performed to compute the amount of the impairment. In the second step, the impairment is computed by comparing the implied fair value of reporting unit goodwill with the carrying value of that goodwill. The Company has two reporting units, investment management and related services and banking/finance, which are the same as the Company’s operating segments. All goodwill has been assigned to the investment management and related services reporting unit.

Indefinite-lived intangible assets are tested for impairment annually, and when events or changes in circumstances indicate the assets might be impaired. Impairment is indicated when the carrying value of the intangible asset exceeds its fair value.

In estimating the fair value of the reporting unit and indefinite-lived intangible assets, the Company uses valuation techniques based on an income approach under which future cash flows are discounted. The future cash flow estimates include assumptions about revenue and assets under management growth rates, the pre-tax profit margin, the average effective fee rate, the effective tax rate, and the discount rate, which is based on the Company’s weighted average cost of capital.

The Company tests definite-lived intangible assets for impairment quarterly. Impairment is indicated when the carrying value of the asset is not recoverable and exceeds its fair value. In evaluating the recoverability of definite-lived intangible assets, the Company estimates the undiscounted future cash flows to be derived from these assets. The future undiscounted cash flow projections include assumptions about revenue and assets under management growth rates, effective fee rates, investor redemptions, the pre-tax profit margin, and expected useful lives. If the carrying value of the asset is not recoverable through the related undiscounted cash flows, the Company measures the impairment loss based on the amount by which the carrying value of the asset exceeds its fair value. The fair value of the asset is determined by discounted cash flows or other methods as appropriate for the asset type.

Commercial Paper is carried at amortized cost. Due to the short-term nature and liquidity of these financial instruments, the carrying values of these liabilities approximate fair value. At September 30, 2009 and 2008, commercial paper had maturity dates of three months or less.

Deposits are carried at the aggregate amount of deposits held and include interest-bearing and non-interest-bearing demand deposits, savings and time deposits. The fair value of deposits with no stated maturities is considered to approximate their carrying value because they are payable on demand. For disclosure purposes, the fair value of deposits with stated maturities is estimated based on discounted cash flow models using interest rates offered by comparable institutions on deposits with similar remaining maturities.

Variable Funding Notes are carried at the aggregate amount of outstanding borrowings to be repaid. The carrying amount of variable funding notes approximates fair value as the interest rates are adjusted periodically.

Federal Home Loan Bank Advances are carried at the aggregate amount of outstanding advances. For disclosure purposes, the fair value is estimated using discounted cash flow models using rates available to the Company for Federal Home Loan Bank (“FHLB”) advances with similar terms and remaining maturities.

Minority Interest included $65.1 million and $74.7 million related to sponsored investment products that were consolidated in the Company’s financial statements as of September 30, 2009 and 2008. Sales and redemptions of shares of consolidated sponsored investment products are a component of the change in minority interest included in financing activities in the consolidated statements of cash flows.

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Revenues. The Company recognizes fees from providing investment management and fund administration services (“investment management fees”), shareholder servicing fees and distribution fees as earned, over the period in which services are rendered, except for performance-based investment management fees, which are recognized when earned. The Company recognizes underwriting commissions related to the sale of shares of its sponsored investment products on trade date. Investment management fees are generally determined based on a percentage of assets under management, except for performance-based investment management fees, which are based on performance targets established in the related investment management contracts. Generally, shareholder servicing fees are calculated based on the number and type of accounts serviced while distribution fees are generally based on a percentage of assets under management.

Assets under management is calculated for the sponsored investment products using fair value methods derived primarily from unadjusted quoted market prices, unadjusted independent third-party broker or dealer price quotes in active markets, or adjusted market prices or price quotes. The fair values of securities for which market prices are not readily available are internally valued using various methodologies as appropriate for each security type. Securities for which market prices are not readily available generally represent a de minimus amount of the total assets under management. The pricing of the securities held by the sponsored investment products is governed by a global valuation and pricing policy, which defines valuation and pricing conventions for each security type, including practices for responding to unexpected or unusual market events.

Advertising and Promotion. The Company expenses costs of advertising and promotion as incurred.

Income Taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and the reported amounts in the consolidated financial statements using the statutory tax rates in effect for the year when the reported amount of the asset or liability is recovered or settled, respectively. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying values of deferred tax assets to the amount that is more likely than not to be realized. For each tax position taken or expected to be taken in a tax return, the Company determines whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is measured to determine the amount of benefit to recognize. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. The Company recognizes the accrual of interest on uncertain tax positions in interest expense and penalties in other operating expenses.

As a multinational corporation, the Company operates in various locations outside the United States and generates earnings from its non-U.S. subsidiaries. The Company indefinitely reinvests the undistributed earnings of its non-U.S. subsidiaries, except for Subpart F income taxed in the U.S., subject to regulatory or contractual repatriation restrictions, and the excess net earnings after debt service payments and regulatory capital requirements of its Canadian and United Kingdom (“U.K.”) consolidated subsidiaries.

Foreign Currency Translation. Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated at current exchange rates as of the end of the accounting period. The related revenues and expenses are translated at average exchange rates in effect during the period. Net exchange gains and losses resulting from translation are excluded from income and are recorded as part of accumulated other comprehensive income. Foreign currency transaction gains and losses are reflected in investment and other income, net in the consolidated statements of income.

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Accumulated Other Comprehensive Income is reported in the consolidated statements of stockholders’ equity and comprehensive income and includes unrealized gains (losses) on investment securities available-for-sale, net of income taxes, currency translation adjustments and unrealized gains (losses) on defined benefit plans, net of income taxes.

Note 2 – New Accounting Standards

Accounting Standards Adopted During Fiscal Year 2009

In the fourth quarter, the Company adopted the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (the “Codification”), which is now the single source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All other accounting literature not included in the Codification became nonauthoritative. As the Codification does not change U.S. GAAP, the adoption of the Codification had no impact on the Company’s consolidated financial statements.

In the third quarter, the Company adopted a new FASB standard that requires disclosures about fair value of financial instruments for interim reporting periods and requires entities to disclose the methods and significant assumptions used to estimate the fair value of financial instruments and describe changes in methods and significant assumptions, in both interim and annual financial statements. The adoption of the standard had no financial impact on the Company’s consolidated financial statements. The Company has applied the disclosure requirements of the standard on a prospective basis.

In the first quarter, the Company adopted a new FASB standard that requires enhanced disclosures about transfers of financial assets and interests in VIEs, and provides users of the financial statements with greater transparency about a transferor’s continuing involvement with transferred financial assets and an enterprise’s involvement with VIEs. The adoption of the standard had no financial impact on the Company’s consolidated financial statements. The Company has applied the disclosure requirements of the standard on a prospective basis.

New Accounting Standards Not Yet Adopted

In September 2009, the FASB issued a new standard that permits a reporting entity to measure the fair value of certain alternative investments that do not have a readily determinable fair value on the basis of the investments’ net asset value per share or its equivalent. The standard also requires expanded disclosures. The standard is effective for interim and annual periods ending after December 15, 2009. The Company is currently evaluating the impact that the adoption of the standard as of October 1, 2009 will have on its consolidated financial statements.

In June 2009, the FASB issued a new standard that requires an enterprise to perform a qualitative analysis to determine whether its variable interests give it a controlling financial interest in a VIE. Under the standard, an enterprise has a controlling financial interest when it has (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. An enterprise that holds a controlling financial interest is deemed to be the primary beneficiary of the VIE and is required to consolidate the VIE. The standard also requires an ongoing reassessment of whether an enterprise is the primary beneficiary of a variable interest entity, and additional disclosures about an enterprise’s involvement in VIEs and any significant changes in risk exposure due to that involvement. The standard is effective for fiscal years beginning after November 15, 2009. In November 2009, the FASB issued a proposed standard update which indefinitely defers the requirements of this new standard for assets

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managers’ interests in entities that apply the specialized accounting guidance for investment companies or that have the attributes of investment companies. The proposed standard update, once finalized, is expected to be effective for fiscal years beginning after November 15, 2009. The Company is currently evaluating the impact that the adoption of the standard as of October 1, 2010 will have on its consolidated financial statements.

In June 2009, the FASB issued a new standard that eliminates the concept of a qualifying special-purpose entity (“QSPE”), changes the requirements for derecognizing financial assets, and requires additional disclosures to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. The standard also clarifies the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. The standard is effective for fiscal years beginning after November 15, 2009. The Company is currently evaluating the impact that the adoption of the standard as of October 1, 2010 will have on its consolidated financial statements.

Note 3 – Earnings per Share

Basic earnings per share is computed on the basis of the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. The components of basic and diluted earnings per share were as follows:

(in thousands except per share data)

for the fiscal years ended September 30,	2009		2008		2007
Net income as reported	$	896,778	$	1,588,213	$	1,772,938
Adjustments, net of taxes		—		—		(269	)
Net Income Available to Common Stockholders	$	896,778	$	1,588,213	$	1,772,669
Weighted-average shares outstanding–basic		230,334		236,396		249,197
Common stock options, nonvested stock awards and nonvested stock unit awards		1,120		1,885		2,921
Weighted-Average Shares Outstanding–Diluted		231,454		238,281		252,118
Earnings per Share
Basic	$	3.89	$	6.72	$	7.11
Diluted	$	3.87	$	6.67	$	7.03

In computing diluted earnings per share for fiscal year 2007, the Company adjusted net income for the effect of an accelerated stock repurchase agreement entered into in March 2007.

For fiscal years 2009, 2008 and 2007, the Company excluded approximately 945.6 thousand, 867.4 thousand and 6.7 thousand nonvested shares related to grants of stock awards and stock unit awards from the computation of diluted earnings per share because their effect would have been anti-dilutive.

Note 4 – Acquisitions

On April 3, 2007, the Company acquired the remaining 25% interests in each of its joint ventures in India, Franklin Templeton Asset Management (India) Private Limited and Franklin Templeton Trustee Services Private Limited, from an unrelated third party for approximately $89.7 million in cash. The

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acquisition cost was allocated to the net assets acquired based on their estimated fair values as follows: $24.4 million to tangible net assets and $44.7 million to indefinite-lived intangible assets. The excess cost over the fair value of the net assets acquired of $20.6 million was recognized as goodwill. The indefinite-lived intangible assets relate to management contracts and are not amortized.

The Company has not presented pro forma combined results of operations for this acquisition because the results of operations as reported in the accompanying consolidated statements of income would not have been materially different.

Note 5 – Cash and Cash Equivalents

The Company discloses cash and cash equivalents as separate components of current assets and banking/finance assets in its consolidated balance sheets. Cash and cash equivalents consisted of the following:

(in thousands)

as of September 30,	2009		2008
Cash on hand and non-interest-bearing deposits with financial institutions	$	134,508	$	96,774
Interest-bearing deposits with financial institutions		350,483		482,587
Federal funds sold		5,242		134,759
Sponsored money market funds		1,407,801		1,076,966
Time deposits, securities of the U.S. Treasury and federal agencies and other		1,206,417		736,466
Total	$	3,104,451	$	2,527,552

Federal Reserve Board regulations require certain of the Company’s banking subsidiaries to maintain reserve and clearance balances on deposits with the Federal Reserve Banks. The required reserve balances were $7.0 million at September 30, 2009 and $6.4 million at September 30, 2008. The required clearing balance was $1.2 million at September 30, 2009 and 2008.

The Company maintains cash and cash equivalents with financial institutions in various countries, limits the amount of credit exposure with any given financial institution and conducts ongoing evaluations of the credit worthiness of the financial institutions with which it does business.

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Note 6 – Investments

Investments consisted of the following:

(in thousands)

as of September 30,	2009		2008
Current
Investment securities, trading	$	502,609	$	356,408
Investment securities, available-for-sale
Sponsored investment products		943,824		591,562
Securities of U.S. states and political subdivisions		15,118		5,104
Securities of the U.S. Treasury and federal agencies		55,816		2,799
Other equity securities		12,529		681
Total investment securities, available-for-sale		1,027,287		600,146
Other investments1		51,950		836,657
Total Current	$	1,581,846	$	1,793,211
Banking/Finance
Investment securities, trading	$	110,600	$	111,607
Investment securities, available-for-sale
U.S. government-sponsored enterprise obligations2		365,655		315,683
Securities of U.S. states and political subdivisions		852		1,125
Securities of the U.S. Treasury and federal agencies		3,566		3,760
Corporate debt securities3		101,774		—
Other equity securities		208		342
Total investment securities, available-for-sale		472,055		320,910
Total Banking/Finance	$	582,655	$	432,517
Non-Current
Investment securities, available-for-sale
Sponsored investment products	$	23,947	$	28,089
Securities of U.S. states and political subdivisions		83,838		119,031
Securities of the U.S. Treasury and federal agencies		—		625
Other equity securities		1,053		7,550
Total investment securities, available-for-sale		108,838		155,295
Investments in equity method investees and other		398,995		328,247
Total Non-Current	$	507,833	$	483,542

¹ Other investments consist of time deposits with financial institutions having original maturities greater than three months but not exceeding one year from the date of purchase.

² At September 30, 2009, U.S. government-sponsored enterprise obligations consisted of $313.0 million of residential mortgage-backed securities and $52.7 million of debentures.

³ Corporate debt securities are insured by the Federal Deposit Insurance Corporation or non-U.S. government agencies.

At September 30, 2009 and 2008, current investment securities, trading included $277.6 million and $294.6 million of investments held by sponsored investment products that were consolidated in the Company’s consolidated financial statements.

At September 30, 2009 and 2008, banking/finance segment investment securities with aggregate carrying amounts of $245.9 million and $180.7 million were pledged as collateral for the ability to borrow from the Federal Reserve Bank, $99.6 million and $111.0 million were pledged as collateral for outstanding

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FHLB borrowings and amounts available in secured FHLB short-term borrowing capacity, and $1.9 million and $2.4 million were pledged as collateral as required by federal and state regulators (see Note 13 – Debt). In addition, investment management and related services segment securities with aggregate carrying amounts of $5.0 million and $8.3 million were pledged as collateral at September 30, 2009 and 2008.

A summary of the gross unrealized gains and losses relating to investment securities, available-for-sale is as follows:

(in thousands)

			Gross Unrealized
as of September 30, 2009	Cost Basis		Gains		Losses			Fair Value
Sponsored investment products	$	890,745	$	94,829	$	(17,803	)	$	967,771
U.S. government-sponsored enterprise obligations		361,340		6,566		(2,251	)		365,655
Securities of U.S. states and political subdivisions		96,647		3,265		(104	)		99,808
Securities of the U.S. Treasury and federal agencies		59,428		20		(66	)		59,382
Corporate debt securities		100,272		1,502		—			101,774
Other equity securities		11,136		2,786		(132	)		13,790
Total	$	1,519,568	$	108,968	$	(20,356	)	$	1,608,180

(in thousands)

			Gross Unrealized
as of September 30, 2008	Cost Basis		Gains		Losses			Fair Value
Sponsored investment products	$	650,873	$	12,465	$	(43,687	)	$	619,651
U.S. government-sponsored enterprise obligations		315,969		2,705		(2,991	)		315,683
Securities of U.S. states and political subdivisions		126,583		401		(1,724	)		125,260
Securities of the U.S. Treasury and federal agencies		7,092		109		(17	)		7,184
Other equity securities		7,882		906		(215	)		8,573
Total	$	1,108,399	$	16,586	$	(48,634	)	$	1,076,351

The changes in net holding gains (losses) on investment securities, available-for-sale included in accumulated other comprehensive income were $53.6 million, $(101.7) million and $107.0 million during fiscal years 2009, 2008 and 2007. The tax effects of the net change in unrealized gains (losses) included in accumulated other comprehensive income were $(13.8) million, $11.2 million and $0.5 million during fiscal years 2009, 2008 and 2007.

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The following tables show the gross unrealized losses and fair values of investment securities, available-for-sale with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

(in thousands)	Less Than 12 Months					12 Months or Greater					Total
as of September 30, 2009	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Current
Investment securities, available-for-sale
Sponsored investment products	$	89,676	$	(15,082	)	$	49,733	$	(594	)	$	139,409	$	(15,676	)
Other equity securities		782		(118	)		28		(5	)		810		(123	)
Total Current	$	90,458	$	(15,200	)	$	49,761	$	(599	)	$	140,219	$	(15,799	)
Banking/Finance
Investment securities, available-for-sale
U.S. government-sponsored enterprise obligations	$	53,717	$	(333	)	$	161,236	$	(1,918	)	$	214,953	$	(2,251	)
Securities of the U.S. Treasury and federal agencies		2,129		(36	)		1,437		(30	)		3,566		(66	)
Total Banking/Finance	$	55,846	$	(369	)	$	162,673	$	(1,948	)	$	218,519	$	(2,317	)
Non-Current
Investment securities, available-for-sale
Sponsored investment products	$	15,460	$	(2,038	)	$	37,653	$	(89	)	$	53,113	$	(2,127	)
Securities of U.S. states and political subdivisions		—		—			8,618		(104	)		8,618		(104	)
Other equity securities		—		—			165		(9	)		165		(9	)
Total Non-Current	$	15,460	$	(2,038	)	$	46,436	$	(202	)	$	61,896	$	(2,240	)

(in thousands)	Less Than 12 Months					12 Months or Greater					Total
as of September 30, 2008	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Current
Investment securities, available-for-sale
Sponsored investment products	$	368,820	$	(39,761	)	$	37,257	$	(2,331	)	$	406,077	$	(42,092	)
Other equity securities		32		(3	)		30		(12	)		62		(15	)
Total Current	$	368,852	$	(39,764	)	$	37,287	$	(2,343	)	$	406,139	$	(42,107	)
Banking/Finance
Investment securities, available-for-sale
U.S. government-sponsored enterprise obligations	$	192,264	$	(2,802	)	$	19,715	$	(189	)	$	211,979	$	(2,991	)
Securities of the U.S. Treasury and federal agencies		2,242		(17	)		—		—			2,242		(17	)
Total Banking/Finance	$	194,506	$	(2,819	)	$	19,715	$	(189	)	$	214,221	$	(3,008	)
Non-Current
Investment securities, available-for-sale
Sponsored investment products	$	4,808	$	(1,240	)	$	3,144	$	(355	)	$	7,952	$	(1,595	)
Securities of U.S. states and political subdivisions		28,976		(1,284	)		39,502		(440	)		68,478		(1,724	)
Other equity securities		2,720		(200	)		—		—			2,720		(200	)
Total Non-Current	$	36,504	$	(2,724	)	$	42,646	$	(795	)	$	79,150	$	(3,519	)

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The Company recognized other-than-temporary impairment of available-for-sale investments, primarily related to sponsored investment products, in the amounts of $63.1 million, $13.8 million and $0.9 million during fiscal years 2009, 2008 and 2007. The Company did not recognize any other-than-temporary impairment of available-for-sale debt securities during fiscal year 2009.

The unrealized losses associated with U.S. government-sponsored enterprise obligations, securities of the U.S. Treasury and federal agencies, and securities of U.S. states and political subdivisions for fiscal year 2009 were primarily driven by changes in interest rates and were not due to the credit quality of the securities. As a result, the Company concluded that these securities were not other-than-temporarily impaired at September 30, 2009.

At September 30, 2009, maturities of available-for-sale debt securities were as follows:

(in thousands)	Cost Basis		Fair Value
U.S. government-sponsored enterprise obligations
Due after one year through five years	$	49,644	$	52,648
Due after five years through ten years		15,671		16,474
Due after ten years		296,025		296,533
Total	$	361,340	$	365,655
Securities of U.S. states and political subdivisions
Due in one year or less	$	14,967	$	15,118
Due after one year through five years		54,713		57,171
Due after five years through ten years		23,655		24,260
Due after ten years		3,312		3,259
Total	$	96,647	$	99,808
Securities of the U.S. Treasury and federal agencies
Due in one year or less	$	55,796	$	55,816
Due after ten years		3,632		3,566
Total	$	59,428	$	59,382
Corporate debt securities
Due after one year through five years	$	100,272	$	101,774
Total	$	100,272	$	101,774

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Note 7 – Fair Value Measurements

The Company records substantially all of its investments at fair value or amounts that approximate fair value. Trading securities, securities available-for-sale, and derivatives are financial instruments recorded at fair value on a recurring basis.

The table below presents the balances of assets measured at fair value on a recurring basis.

(in thousands)

as of September 30, 2009	Level 1		Level 2		Level 3		Total
Current Assets
Investment securities, trading	$	394,754	$	105,802	$	2,053	$	502,609
Investment securities, available-for-sale
Sponsored investment products		943,824		—		—		943,824
Securities of U.S. states and political subdivisions		—		15,118		—		15,118
Securities of the U.S. Treasury and federal agencies		—		55,816		—		55,816
Other equity securities		8,403		—		4,126		12,529
Banking/Finance Assets
Investment securities, trading		—		81,886		28,714		110,600
Investment securities, available-for-sale
U.S. government-sponsored enterprise obligations		—		365,655		—		365,655
Securities of U.S. states and political subdivisions		—		852		—		852
Securities of the U.S. Treasury and federal agencies		—		3,566		—		3,566
Corporate debt securities		—		101,774		—		101,774
Other equity securities		—		—		208		208
Non-Current Assets
Investment securities, available-for-sale
Sponsored investment products		19,837		—		4,110		23,947
Securities of U.S. states and political subdivisions		—		83,838		—		83,838
Other equity securities		321		—		732		1,053
Life settlement contracts		—		—		6,162		6,162
Total Assets Measured at Fair Value	$	1,367,139	$	814,307	$	46,105	$	2,227,551

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The changes in Level 3 assets measured at fair value on a recurring basis were as follows.

(in thousands)	Securities Held by Consolidated Sponsored Investment Products			Residual Interests from Securitization Transactions			Other1			Total
Balance at October 1, 2008	$	4,089		$	29,782		$	12,112		$	45,983
Total realized and unrealized gains (losses):
Included in other, net revenue		—			(45,955	)		—			(45,955	)
Included in consolidated sponsored investment products gains (losses), net		(423	)		—			—			(423	)
Included in investments and other income, net		—			—			(1,847	)		(1,847	)
Included in accumulated other comprehensive income		—			—			476			476
Purchases, sales, and settlements, net		(580	)		44,887			2,593			46,900
Transfers (out of)/into Level 3		(1,033	)		—			2,004			971
Balance at September 30, 2009	$	2,053		$	28,714		$	15,338		$	46,105
Change in unrealized losses included in net income relating to assets still held at September 30, 2009	$	(565	)2	$	(45,955	)3	$	—		$	(46,520	)

¹ Other primarily consists of equity securities and life settlement contracts.

² Included in consolidated sponsored investment products gains (losses), net.

³ Included in other, net revenue.

The Company may also be required to measure certain assets or liabilities at fair value on a nonrecurring basis. These fair value measurements generally result from the application of lower of cost or fair value accounting for automobile loans held for sale or write-downs of individual assets. Automobile loans held for sale currently are classified as Level 3. The fair value of these loans was $16.6 million at September 30, 2009, and the adjustments to the fair value of these loans recorded as a loss during fiscal year 2009 were de minimus.

The following financial instruments were not measured at fair value, but required disclosure of the estimated fair value:

(in thousands)	2009				2008
as of September 30,	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets
Cash and cash equivalents	$	3,104,451	$	3,104,451	$	2,527,552	$	2,527,552
Other investments		51,950		51,950		836,657		836,657
Loans held for sale		15,711		16,621		32,582		32,582
Loans receivable, net		310,504		323,672		371,647		370,871
Financial Liabilities
Commercial paper	$	64,156	$	64,156	$	13,287	$	13,287
Deposits		664,580		667,793		570,279		564,997
FHLB advances		57,000		57,026		109,000		110,008

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Note 8 – Loans and Allowance for Loan Losses

The following table summarizes the banking/finance operating segment loans receivable by major category:

(in thousands)

as of September 30,	2009			2008
Commercial loans	$	33,511		$	70,256
Real estate mortgage loans		36,303			33,029
Installment loans to individuals		221,765			244,513
Other		25,951			30,140
Loans receivable		317,530			377,938
Less: allowance for loan losses		(7,026	)		(6,291	)
Loans Receivable, Net	$	310,504		$	371,647

Installment loans to individuals include secured private banking loans to Fiduciary Trust clients and automobile receivables. Other loans include credit card receivables and overdraft receivables. No loan loss allowance is recognized on private banking loans as described in Note 1 – Significant Accounting Policies, Allowance for Loan Losses. At September 30, 2009 and 2008, loans receivable with aggregate carrying values of $30.6 million and $22.3 million were pledged as collateral for the ability to obtain FHLB advances.

Maturities of loans receivable at September 30, 2009 were as follows:

(in thousands)	One Year or Less		After One Through Five Years		After Five Years		Total
Commercial loans	$	28,364	$	3,954	$	1,193	$	33,511
Real estate mortgage loans		120		9,699		26,484		36,303
Installment loans to individuals		94,111		72,114		55,540		221,765
Other		25,100		339		512		25,951
Total	$	147,695	$	86,106	$	83,729	$	317,530

The following table summarizes contractual maturities of loans receivable due after one year by repricing characteristic at September 30, 2009:

(in thousands)	Carrying Value
Loans at predetermined interest rates	$	108,774
Loans at floating or adjustable interest rates		61,061
Total	$	169,835

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Changes in the allowance for loan losses were as follows:

(in thousands)

for the fiscal years ended September 30,	2009			2008
Balance, beginning of year	$	6,291		$	2,772
Provision for loan losses		5,789			13,407
Charge-offs		(7,875	)		(13,039	)
Recoveries		2,821			3,151
Balance, End of Year	$	7,026		$	6,291
Total net loan charge-offs as a percentage of simple monthly average loans receivable		1.49	%		3.13	%
Allowance for loan losses as a percentage of loans receivable		2.21	%		1.66	%

The following is a summary of loan delinquency information:

(in thousands)

as of September 30,	2009		2008		2007
Installment loans, 90 days or more delinquent	$	642	$	1,054	$	1,145
Other loans, 90 days or more delinquent		—		36		9
Non-accrual loans		965		507		271

The Company originates automobile loans to individuals for sale in securitization transactions as described in Note 9 – Securitization of Loans Held for Sale. As of September 30, 2009 and 2008, loans held for sale were $15.7 million and $32.6 million.

Note 9 – Securitization of Loans Held for Sale

From time to time, the Company enters into automobile loan securitization transactions with securitization trusts structured as qualified special purpose entities (the “securitization trusts”), which then issue asset-backed securities to private investors. The Company records these transactions as sales. The securitization transactions are comprised of prime, non-prime and sub-prime contracts for retail installment sales that are secured by new and used automobiles purchased from motor vehicle dealers. The Company purchases the sale contracts in the ordinary course of business.

When the Company sells automobile loans in a securitization transaction, it retains certain interests. Residual interests, which include interest-only strips receivable and cash on deposit, represent the Company’s contractual right to receive excess interest and cash from the pool of securitized loans after the payment of required amounts to holders of the asset-backed securities and certain other costs associated with the securitization. The residual interests are generally fully realizable and subject to limited recourse provisions. Credit enhancements for the securitization trusts require the Company to maintain a certain amount of cash on deposit, which provides protection for the holders of the asset-backed securities against delays in payment and certain losses on the securitized loans. At September 30, 2009 and 2008, the amounts of cash on deposit were $46.9 million and $23.2 million. Discounted values of the cash on deposit were recognized as part of the residual interests. The Company may also retain subordinated securities from securitization transactions, which are senior to the residual interests. The retained interests in securitized assets, including the residual interests and the retained subordinated securities, were recognized as banking/finance trading securities in the consolidated balance sheets. Changes in the fair value of the retained interests were recognized in earnings.

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The Company did not enter into any automobile loan securitization transactions during fiscal year 2009. During fiscal year 2008, the Company sold automobile loans with an aggregate carrying value of $381.4 million for net sale proceeds of $381.9 million in a securitization transaction and recognized a pre-tax gain of $0.5 million. During fiscal year 2007, the Company sold automobile loans with an aggregate carrying value of $676.9 million for net sale proceeds of $682.1 million in a securitization transaction and recognized a pre-tax gain of $5.2 million. The securitization transactions in which the Company entered into through September 30, 2008 were consistent in all material respects. As a result of a securitization transaction that the Company entered into in June 2008, it retained the subordinated securities in addition to the residual interests. These retained subordinated securities had credit ratings from Standard & Poor’s ranging from AA to BBB- at September 30, 2009.

The fair value of the retained interests in securitized assets is generally estimated based on the present value of future expected cash flows. The key assumptions used in the present value calculations at the date of securitization were as follows:

for the fiscal years ended September 30,	2009	2008	2007
Excess cash flow discount rate (annual rate)1	N/A	6.1% – 13.4%	12.0%
Cumulative life loss rate	N/A	3.7%	3.9% – 4.1%
Expected weighted-average life (years)	N/A	3.6	4.0
Pre-payment speed assumption (average monthly rate)	N/A	1.6%	1.6%

¹ The excess cash flow discount rate assumption for fiscal year 2008 includes retained subordinated securities.

The Company determines the fair value of the retained interests in securitized assets at the date of securitization and at the end of each period (see Note 1 – Significant Accounting Policies, Fair Value Measurements for a description of fair value methodologies used).

The following table shows the sensitivity of the retained interests to hypothetical adverse changes in the key economic assumptions used to measure fair value:

(dollar amounts in thousands)

for the fiscal years ended September 30,	2009			2008
Fair value of retained interests
Retained subordinated securities	$	81,886		$	81,825
Residual interests		28,714			29,782
Total	$	110,600		$	111,607
Excess cash flow discount rate (annual rate)		12.2% – 14.4	%		9.6% – 19.8	%
Impact on fair value of 10% adverse change	$	(4,133	)	$	(3,865	)
Impact on fair value of 20% adverse change		(8,225	)		(7,713	)
Cumulative life loss rate		7.4	%		4.2	%
Impact on fair value of 10% adverse change	$	(2,376	)	$	(1,754	)
Impact on fair value of 20% adverse change		(4,763	)		(3,215	)
Expected weighted-average life (years)		2.2			2.7
Prepayment speed (average monthly rate)		1.2	%		1.5	%
Impact on fair value of 10% adverse change	$	(2,737	)	$	(1,645	)
Impact on fair value of 20% adverse change		(5,241	)		(3,054	)

Actual future market conditions may differ materially. Accordingly, this sensitivity analysis should not be considered the Company’s projection of future events or losses. Subsequent to September 30, 2009, the

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Company sold retained subordinated securities with an aggregate face value of $51.0 million for $52.5 million in net cash proceeds.

The Company retains servicing responsibilities for automobile loan securitizations and receives annual servicing fees ranging from 1% to 2% of the loans securitized for services that it provides to the securitization trusts. The servicing fees are recognized in other, net revenue in the consolidated statements of income. The Company does not recognize a servicing asset or liability, because the benefits of servicing are just adequate to compensate for its servicing responsibilities as the servicing fees are consistent with current market rates that would be charged to compensate a substitute servicer for providing these services.

The following table provides a summary of cash flows received from and paid to securitization trusts:

(in thousands)

for the fiscal years ended September 30	2009			2008			2007
Servicing fees received	$	13,348		$	13,389		$	15,197
Cash flows received in relation to retained subordinated securities		6,791			1,830			N/A
Cash flows received in relation to residual interests		1,554			10,441			18,076
Cash paid in relation to residual interests		(40,058	)		—			—
Purchase of loans from the securitization trusts		—			(42,608	)		(39,346	)

Amounts payable to the trustee related to loan principal and interest collected on behalf of the securitization trusts of $24.1 million at September 30, 2009 and $35.6 million at September 30, 2008 were included in other banking/finance liabilities in the consolidated balance sheets.

The Company provides guarantees to cover shortfalls for the securitization trusts in amounts due to the holders of the asset-backed securities if the shortfall exceeds cash on deposit. At September 30, 2009 and 2008, the maximum potential amounts of future payments related to these guarantees were $7.4 million and $49.0 million. The fair value of the guarantees was recognized as banking/finance liabilities in the consolidated balance sheets and was not significant. During fiscal year 2009, the Company increased the amount of cash on deposit to replace the letters of credit for the securitization trusts. As a result, the maximum potential amounts of future payments related to the guarantees were reduced by the same amount.

During fiscal years 2009 and 2008, the Company did not provide any financial or other support to the securitization trusts or the holders of the asset-backed securities, other than described above.

The original amount of loans serviced for the securitization trusts that were still in existence at September 30, 2009 and 2008 totaled $1.8 billion. At September 30, 2009 and 2008, the securitization trusts had 44,221 and 58,322 loans outstanding, and their weighted-average annualized interest rate was 10.5% as of the end of each period. Net charge-offs on the securitized loans held by the securitization trusts and the loans that were managed together with them were $44.8 million in fiscal year 2009, $31.7 million in fiscal year 2008 and $16.2 million in fiscal year 2007.

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The following table shows further details of the loans serviced by the Company that were held by the securitization trusts and the loans that were managed together with them:

(dollar amounts in thousands)

as of September 30,	2009			2008
Principal amount of loans
Securitized loans	$	551,369		$	851,810
Loans held for sale		16,274			32,582
Loans receivable		85,520			94,593
Total	$	653,163		$	978,985
Principal amount of loans 30 days or more past due1	$	29,238		$	38,241
Credit quality as a percentage of aggregate outstanding principal balance
Prime		47.4	%		48.2	%
Non-prime		49.4	%		49.4	%
Sub-prime		3.2	%		2.4	%

¹ The majority of the balances were related to securitized loans.

Note 10 – Property and Equipment, Net

The following is a summary of property and equipment:

(in thousands)

as of September 30,	2009			2008			Useful Lives In Years
Furniture, software and equipment	$	552,990		$	547,520		3 – 10
Premises and leasehold improvements		486,508			478,818		5 – 35
Land		72,220			72,337		N/A
		1,111,718			1,098,675
Less: Accumulated depreciation and amortization		(576,259	)		(543,969	)
Property and Equipment, Net	$	535,459		$	554,706

Depreciation and amortization expense related to property and equipment was $61.5 million, $58.2 million and $53.1 million in fiscal years 2009, 2008 and 2007. No impairment loss in value of property and equipment was recognized during fiscal years 2009, 2008 and 2007 as the Company determined there was no indicator of impairment.

Note 11 – Goodwill and Other Intangible Assets

Goodwill and other intangible assets have been assigned to one reporting unit, the investment management and related services segment. The changes in the carrying values of goodwill and gross intangible assets were as follows:

(in thousands)	Goodwill			Amortized Intangible Assets			Non-amortized Intangible Assets
Balance at October 1, 2008	$	1,438,093		$	200,983		$	508,909
Foreign currency movements		(1,467	)		(31	)		(1,172	)
Balance at September 30, 2009	$	1,436,626		$	200,952		$	507,737

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Certain of the goodwill and intangible assets are denominated in currencies other than the U.S. dollar; therefore, their gross and net carrying values are subject to foreign currency movements.

Intangible assets were as follows:

(in thousands)

as of September 30, 2009	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
Amortized intangible assets
Customer base	$	165,915	$	(109,059	)	$	56,856
Other		35,037		(31,656	)		3,381
		200,952		(140,715	)		60,237
Non-amortized intangible assets
Management contracts		507,737		—			507,737
Total	$	708,689	$	(140,715	)	$	567,974

(in thousands)

as of September 30, 2008	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
Amortized intangible assets
Customer base	$	165,953	$	(100,301	)	$	65,652
Other		35,030		(30,019	)		5,011
		200,983		(130,320	)		70,663
Non-amortized intangible assets
Management contracts		508,909		—			508,909
Total	$	709,892	$	(130,320	)	$	579,572

The Company completed its most recent annual impairment tests of goodwill and indefinite-lived intangible assets during the quarter ended September 30, 2009 and determined that there was no impairment in the value of these assets as of August 1, 2009. Additionally, no impairment loss in the value of goodwill and indefinite-lived intangible assets was recognized during fiscal years 2008 and 2007. No impairment loss in the value of intangible assets subject to amortization was recognized during fiscal years 2009, 2008 and 2007 as the estimates of the undiscounted expected cash flows from these assets or their fair values exceeded the asset carrying values.

Amortization expense related to definite-lived intangible assets was $10.4 million, $10.6 million and $11.5 million in fiscal years 2009, 2008 and 2007. The estimated remaining amortization expense related to definite-lived intangible assets was as follows as of September 30, 2009:

(in thousands)

for the fiscal years ending September 30,	Amount
2010	$	10,411
2011		10,389
2012		8,925
2013		8,781
2014		8,781
Thereafter		12,950
Total	$	60,237

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Note 12 – Deposits

The Company does not hold deposits in its international offices. Deposits held in the Company’s U.S. offices were as follows:

(in thousands)

as of September 30,	2009		2008
Non-interest-bearing demand deposits	$	97,646	$	118,137
Interest-bearing demand deposits		16,546		19,696
Savings deposits		415,767		341,150
Time deposits		134,621		91,296
Total	$	664,580	$	570,279

Maturities of time certificates in amounts of $100,000 or more were as follows:

(in thousands)

as of September 30, 2009	Amount
3 months or less	$	2,939
Over 3 months through 6 months		1,033
Over 6 months through 12 months		404
Over 12 months		6,142
Total	$	10,518

Note 13 – Debt

Outstanding debt consisted of the following:

(dollars in thousands)

as of September 30,	2009		2009 Weighted Average Rate		2008		2008 Weighted Average Rate
Current
Commercial paper	$	64,156	0.27	%	$	13,287	2.50	%
Banking/Finance
Variable funding notes		—	—			28,551	3.22	%
FHLB advances		57,000	2.94	%		109,000	3.56	%
		57,000				137,551
Non-Current
Long-term debt		—	—			118,433	1.97	%
Total Debt	$	121,156			$	269,271

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At September 30, 2009, maturities of FHLB advances were as follows:

(in thousands) for the fiscal years ending September 30,	Carrying Value
2010	$	15,000
2011		2,000
2012		—
2013		18,500
2014		—
Thereafter		21,500
Total	$	57,000

At September 30, 2009, current debt consisted of commercial paper with a total face value of $64.2 million maturing during the quarter ending December 31, 2009.

The banking/finance segment has financed its automobile lending business primarily through FHLB advances, securitizations and the issuance of variable funding notes under one-year revolving variable funding note warehouse credit facilities. The Company terminated the warehouse credit facilities in November 2008 and did not replace them. The variable funding notes issued under these facilities were secured by cash and a pool of automobile loans that met certain eligibility requirements (see Note 9 – Securitization of Loans Held for Sale).

Long-term debt primarily related to deferred commission liabilities recognized in relation to DCA generated in the United States that were originally financed through a sale of related future revenue to Lightning Finance Company Limited (“LFL”), a company in which the Company holds a 49% ownership interest, and subsequently transferred in December 2005 to Lightning Asset Finance Limited (“LAFL”), an Irish special purpose vehicle, in which the Company also holds a 49% ownership interest. Due to its significant interest in LAFL, the Company carried on its consolidated balance sheets the DCA and the financing liability for the related future revenue originally sold to LFL. The Company repurchased the remaining DCA from LAFL in September 2009 and reflected this as a repayment of the remaining financing obligation. The Company is in the process of selling its ownership interests in LFL and LAFL to the holder of the 51% ownership interest and expects to complete this divestiture in the fiscal year ending September 30, 2010 (“fiscal year 2010”).

At September 30, 2009, the Company had $355.8 million in short-term revolving credit available under a $420 million five-year credit facility with certain banks and financial institutions expiring on June 9, 2010. This credit facility supports an uncommitted $500.0 million commercial paper program under which $435.8 million remained available for issuance via private placement at September 30, 2009. The Company also had $14.0 million available in uncommitted short-term bank lines of credit. The revolving credit facility is subject to various financial covenants, including, but not limited to, minimum requirements related to its interest coverage ratio and maintenance of working capital as well as limitations on its capitalization ratio, indebtedness, investments and liens. Interest rates on loans under the revolving credit facility are determined at the time of issuance and depend on the type of loan issued. As of September 30, 2009, there were no amounts outstanding under the revolving credit facility and the Company was in compliance with the financial covenants related to this facility.

In addition, at September 30, 2009, the banking/finance segment had $295.0 million available in uncommitted short-term bank lines of credit under the Federal Reserve system, $235.1 million available in

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secured Federal Reserve Bank short-term discount window and $63.8 million available in secured FHLB short-term borrowing capacity (see Note 6 – Investments).

Note 14 – Taxes on Income

Taxes on income were as follows:

(in thousands)

for the fiscal years ended September 30,	2009		2008		2007
Current expense
Federal	$	223,600	$	409,433	$	422,770
State		42,855		61,860		48,635
Foreign		96,901		169,856		169,838
Deferred expense		20,958		7,227		51,120
Total Provision for Income Taxes	$	384,314	$	648,376	$	692,363

Included in income before taxes was $594.9 million, $1,197.9 million and $1,298.1 million of pre-tax foreign income for fiscal years 2009, 2008 and 2007. The provision for U.S. income taxes in fiscal years 2009, 2008 and 2007 included benefits of $1.1 million, $4.5 million and $5.5 million related to the utilization of net operating loss carry-forwards. In fiscal years 2009, 2008 and 2007, the Company’s income taxes payable for federal, state and foreign purposes have been reduced by tax benefits of $7.3 million, $33.6 million and $38.6 million associated with its stock-based compensation plans. The benefits were recorded as an increase in capital in excess of par value.

The significant components of deferred tax assets and deferred tax liabilities were as follows:

(in thousands)

as of September 30,	2009			2008
Deferred Tax Assets
State taxes	$	8,688		$	13,491
Allowance for loan losses		3,028			3,097
Deferred compensation and employee benefits		42,376			38,940
Stock-based compensation		24,809			25,140
Net operating loss carry-forwards		21,167			18,259
Tax benefit for uncertain tax positions		28,849			25,352
Residual interests from securitization transactions		13,012			12,009
Unrealized losses on investments		2,474			9,704
Other		13,247			959
Total deferred tax assets		157,650			146,951
Valuation allowance for net operating loss carry-forwards		(14,143	)		(10,812	)
Deferred tax assets, net of valuation allowance		143,507			136,139
Deferred Tax Liabilities
Depreciation on fixed assets		18,054			16,817
Goodwill and other purchased intangibles		204,915			191,570
Deferred commissions		39,685			23,175
Employee compensation		12,162			24,366
Other		18,579			8,781
Total deferred tax liabilities		293,395			264,709
Net Deferred Tax Liability	$	149,888		$	128,570

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The components of the net deferred tax liability were classified in the consolidated balance sheets as follows:

(in thousands)

as of September 30,	2009		2008
Deferred Tax Assets
Current deferred taxes	$	67,773	$	17,308
Other non-current assets		1,643		721
Deferred Tax Liabilities
Other current liabilities		459		110
Non-current deferred taxes		218,845		146,489
Net Deferred Tax Liability	$	149,888	$	128,570

At September 30, 2009, there were approximately $37.5 million of foreign net operating loss carry-forwards, approximately $19.7 million of which expire between 2010 and 2019 with the remaining carry-forwards having an indefinite life. In addition, there were approximately $253.7 million in state net operating loss carry-forwards that expire between 2010 and 2029. A partial valuation allowance has been provided to offset the related deferred tax assets due to the uncertainty of realizing the benefit of the net operating loss carry-forwards. The valuation allowance increased by $3.3 million and $1.1 million in fiscal years 2009 and 2008.

During September 2008, the Company amended its repatriation plan for undistributed foreign earnings to include repatriation to the U.S. of the excess net earnings after debt service payments and regulatory capital requirements of its U.K. consolidated subsidiaries (see Note 1 – Significant Accounting Policies, Income Taxes for the Company’s reinvestment and repatriation plan for foreign earnings). As a result of the amendment, the Company recognized a provision for U.S. income taxes of $19.7 million and a net deferred income tax liability of $3.4 million in relation to $294.8 million of accumulated and current earnings from the United Kingdom, of which $210.9 million was repatriated as of September 30, 2008.

The Company has made no provision for U.S. income taxes on $3.4 billion of cumulative undistributed foreign earnings that are indefinitely reinvested at September 30, 2009. Determination of the potential amount of unrecognized deferred U.S. income tax liability related to such reinvested foreign earnings is not practicable because of the numerous assumptions associated with this hypothetical calculation. However, foreign tax credits would be available to reduce some portion of this amount. Changes to the Company’s policy of reinvestment or repatriation of non-U.S. earnings may have a significant effect on its financial condition and results of operations.

The following reconciles the amount of tax expense at the federal statutory rate and taxes on income as reflected in the consolidated statements of income:

(dollar amounts in thousands)

for the fiscal years ended September 30,	2009			2008			2007
Federal statutory rate		35.00	%		35.00	%		35.00	%
Federal taxes at statutory rate	$	448,382		$	782,806		$	862,855
State taxes, net of federal tax effect		30,718			41,241			50,522
Effect of foreign operations		(93,390	)		(185,530	)		(223,437	)
Change in valuation allowance		—			—			(9,458	)
Other		(1,396	)		9,859			11,881
Actual Tax Provision	$	384,314		$	648,376		$	692,363
Effective tax rate		30.00	%		28.99	%		28.08	%

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A reconciliation of the beginning and ending balances of gross unrecognized tax benefits is as follows:

(in thousands)

for the fiscal year ended September 30,	2009
Balance, beginning of year	$	67,913
Additions for tax positions of prior years		9,788
Reductions for tax positions of prior years		(2,614	)
Additions for tax positions related to the current year		9,579
Settlements with taxing authorities		(755	)
Expirations of statute of limitations		(7,913	)
Balance, End of Year	$	75,998

If recognized, substantially all of this amount, net of any deferred tax benefits, would favorably affect the Company’s effective income tax rate in future periods.

Accrued interest on uncertain tax positions at September 30, 2009 and 2008 was approximately $13.6 million and $10.4 million, and is not presented in the unrecognized tax benefits table above. Interest expense of $3.5 million and $4.2 million was recognized in the consolidated statements of income during fiscal years 2009 and 2008. Accrued penalties at September 30, 2009 and 2008 were insignificant.

The Company files a consolidated U.S. federal income tax return, multiple U.S. state and local income tax returns, and income tax returns in multiple foreign jurisdictions. The Company is subject to examination by the taxing authorities in these jurisdictions. The Company’s major tax jurisdictions and the tax years for which the statutes of limitations have not expired are as follows: India 1995 to 2009; the City of New York 2000 to 2009; Singapore 2001 to 2009; Hong Kong 2003 to 2009; Canada 2003 to 2009; the States of California and Florida 2005 to 2009; U.S. federal and the State of New York 2006 to 2009; and the United Kingdom 2007 to 2009.

The Company has on-going examinations in various stages of completion in the City of New York, States of Florida and Illinois, Canada and India. Examination outcomes and the timing of settlements are subject to significant uncertainty. Such settlements may involve some or all of the following: the payment of additional taxes, the adjustment of deferred taxes and/or the recognition of unrecognized tax benefits. The Company has recognized a tax benefit only for those positions that meet the more-likely-than-not recognition threshold. It is reasonably possible that the total unrecognized tax benefit as of September 30, 2009 could decrease by an estimated $20.6 million within the next twelve months as a result of the expiration of statutes of limitations in the U.S. federal and certain U.S. state and local and foreign tax jurisdictions, and potential settlements with U.S. states and foreign taxing authorities. The unrecognized tax benefits described above are included in the Company’s contractual obligations table to the extent the Company is able to make reliable estimates of the timing of cash settlements with the respective taxing authorities. At this time, the Company cannot make a reliable estimate as to the timing of cash settlements beyond the next twelve months. However, the total amount of unrecognized tax benefits is disclosed in a footnote to the contractual obligations and commitments table in Item 7 of Part II of this Form 10-K. The amount of unrecognized tax benefits and related interest that are expected to be paid in the next twelve months are $4.7 million and $2.0 million.

Note 15 – Commitments and Contingencies

Guarantees

The Company is obligated to cover shortfalls for the automobile securitization trusts in amounts due to the holders of asset-backed securities up to certain levels (see Note 9 – Securitization of Loans Held for Sale).

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At September 30, 2009, the banking/finance segment had issued financial standby letters of credit totaling $6.3 million which beneficiaries would be able to draw upon in the event of non-performance by its customers, primarily in relation to lease and lien obligations of these banking customers. These standby letters of credit were secured by marketable securities with a fair value of $8.3 million as of September 30, 2009.

Legal Proceedings

As previously reported, between 2003 and 2006, following industry-wide market timing and late trading investigations by U.S. and Canadian regulators, and U.S. state government offices, Franklin and certain related parties were named in civil lawsuits in the U.S. and one of Franklin’s adviser subsidiaries was named in civil lawsuits in Canada.

In the U.S., the lawsuits were filed against Franklin and certain of its adviser and distributor affiliates, individual Franklin officers and directors, a former Franklin employee, and trustees of certain Franklin Templeton Investments mutual funds (the “Funds”). In 2004, the lawsuits were consolidated for coordinated proceedings with similar lawsuits against numerous other mutual fund complexes in a multi-district litigation titled “In re Mutual Funds Investment Litigation,” pending in the U.S. District Court for the District of Maryland, Case No. 04-md-15862 (the “MDL”). Plaintiffs filed consolidated amended complaints in the MDL on September 29, 2004. The three consolidated lawsuits involving the Company include a class action (Sharkey IRO/IRA v. Franklin Resources, Inc., et al., Case No. 04-cv-01310), a derivative action on behalf of the Funds (McAlvey v. Franklin Resources, Inc., et al., Case No. 04-cv-01274), and a derivative action on behalf of Franklin (Hertz v. Burns, et al., Case No. 04-cv-01624) and seek, among other forms of relief, one or more of: unspecified monetary damages; punitive damages; removal of Fund trustees, directors, advisers, administrators, and distributors; rescission of management contracts and distribution plans under Rule 12b-1 promulgated under the Investment Company Act of 1940; and attorneys’ fees and costs.

On February 25, 2005, the Company-related parties filed motions to dismiss the consolidated amended class action and Fund derivative action complaints. On June 26, 2008, the court issued its order granting in part and denying in part the Company’s motion to dismiss the consolidated amended class action complaint. In its order, the court dismissed certain claims, while allowing others under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and under Sections 36(b) and 48(a) of the Investment Company Act of 1940 to remain, and dismissed all class action claims against the named Funds. Pursuant to stipulation, the court also dismissed all claims against certain individual defendants, including the independent trustees to the named Funds, and a former Franklin executive. On September 4, 2009, the court entered as its order the parties’ stipulation to dismiss without prejudice the remaining Fund trustee defendants named in the consolidated amended class action complaint. On October 22, 2009, the court granted in part and denied in part lead plaintiff’s motion for leave to amend the consolidated amended class action complaint, granting lead plaintiff’s request to amend the complaint to reflect the court’s June 2008 order, referenced above (dismissing certain claims and defendants), and to add certain detail to existing allegations, while denying lead plaintiff’s request to introduce a new theory of liability. The Company’s motion to dismiss the consolidated fund derivative action remains under submission with the court. In addition, pursuant to stipulation, the derivative action brought on behalf of Franklin has been stayed since 2004.

In Canada, Franklin Templeton Investments Corp. (“FTIC”), a Franklin subsidiary and the manager of Franklin Templeton Investments’ Canadian mutual funds, is named (along with several other non-Franklin affiliated manager defendants) in two market timing lawsuits that are styled as class actions (Huneault v. AGF Funds, Inc., et al., Case No. 500-06-00256-046, filed in the Superior Court for the Province of Quebec, District of Montreal on October 25, 2004, and Fischer v. IG Investment Management Ltd., et al., Case No. 06-CV-307599CP, filed in the Ontario Superior Court of Justice on March 9, 2006). The lawsuits

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seek, among other forms of relief, one or more of: unspecified monetary damages, punitive damages, an order barring any increase in management fees for a period of two years following judgment, and attorneys’ fees and costs. Oral argument on petitioners’ motion for authorization to institute a class action in the Huneault lawsuit concluded on May 5, 2009, and the matter is now under submission with the court. Oral argument on plaintiffs’ motion for class certification in the Fischer lawsuit is currently scheduled to begin in early December 2009.

In addition, Franklin/Templeton Distributors, Inc. (one of Franklin’s subsidiaries and the principal underwriter to the Funds), as well as the individual trustees to the Franklin Custodian Funds (the “Trust”), have been named in a lawsuit brought derivatively on behalf of the Trust, concerning payment of asset-based compensation between July 22, 2005 and the present to broker-dealers that hold Fund shares in brokerage accounts and that are not registered as investment advisers. The lawsuit is captioned Smith v. Franklin/Templeton Distributors, Inc., et al., Case No. CV 09-4775, and was filed in the U.S. District Court for the Northern District of California on October 6, 2009. Specifically, plaintiff is attempting to allege claims under Section 47(b) of the Investment Company Act of 1940, and for breach of fiduciary duty, breach of contract, and waste of Trust assets, and is seeking unspecified monetary damages, declaratory and injunctive relief enjoining further asset-based compensation to such broker-dealers, and attorneys’ fees and costs.

Management strongly believes that the claims made in each of the lawsuits identified above are without merit and intends to defend against them vigorously. The Company cannot predict with certainty, however, the eventual outcome of those lawsuits, nor whether they will have a material negative impact on the Company.

The Company is from time to time involved in litigation relating to claims arising in the normal course of business. Management is of the opinion that the ultimate resolution of such claims will not materially affect the Company’s business, financial position or results of operations. In management’s opinion, an adequate accrual has been made as of September 30, 2009, to provide for any probable losses that may arise from these matters for which the Company could reasonably estimate an amount.

Variable Interest Entities

The Company’s VIEs primarily include certain sponsored investment products and certain other investment products (collectively, “investment products”). The Company’s variable interests generally include its equity ownership interest in the investment products and its investment management and related services fees earned from sponsored investment products. Based on its evaluations, the Company believes it was not the primary beneficiary of its VIEs and, as a result, did not consolidate these entities as of and for the years ended September 30, 2009 and 2008.

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Total assets under management of investment products in which the Company held a variable interest, but was not the primary beneficiary, were approximately $35.8 billion at September 30, 2009. The carrying values of the Company’s equity ownership interest in and investment management and related service fees receivable from these investment products as recorded in the Company’s consolidated balance sheet at September 30, 2009 are set forth below. These amounts represent the Company’s maximum exposure to loss and do not reflect an estimate of the actual losses.

(in thousands)	Amount
Current Assets
Receivables	$	50,088
Investment securities, available-for-sale		112,853
Total Current		162,941
Non-Current Assets
Investment securities, available-for-sale		20,208
Investments in equity method investees and other		305,024
Total Non-Current		325,232
Total	$	488,173

While the Company has no contractual obligation to do so, it routinely makes cash investments in the course of launching sponsored investment products. The Company also may voluntarily elect to provide its sponsored investment products with additional direct or indirect financial support based on its business objectives. In October and November 2008, the Company invested $140.0 million in shares of one of its funds in India in response to unprecedented levels of fund redemptions. By December 2008, the fund’s liquidity position had improved and the Company redeemed $50.0 million of its investment. In March 2009, the Company redeemed the balance of this investment.

The Company’s other VIEs include limited liability partnerships, limited liability companies, and joint ventures. The Company’s variable interest generally comprises its equity ownership interest. These investments are recognized as investments in equity method investees because the Company is not the primary beneficiary. The investment carrying values in the Company’s consolidated balance sheet related to these VIEs was $14.9 million at September 30, 2009. This amount represents the Company’s maximum exposure to loss. The Company did not provide financial or other support to its other VIEs during fiscal year 2009.

The joint venture VIEs include LFL and LAFL, in which the Company held a 49% ownership interest at September 30, 2009. At September 30, 2009, LFL had approximately $3.5 million in total assets and the Company’s maximum exposure to loss related to LFL was limited to the carrying value of its investment totaling approximately $1.7 million. At September 30, 2009, LAFL had approximately $20.6 million in total assets and the Company’s maximum exposure to loss related to LAFL totaled approximately $10.1 million. The maximum exposure to loss related to LAFL was limited to the carrying value of the Company’s investment and 49% of the liabilities of LAFL. The majority of LFL’s and LAFL’s assets were held in the form of cash as of September 30, 2009. During fiscal year 2009, the Company recognized total pre-tax income of approximately $3.1 million for its share of LFL’s and LAFL’s net income.

Other Commitments and Contingencies

The Company leases office space and equipment under operating leases expiring at various dates through fiscal year 2021. Lease expense aggregated $58.7 million, $57.8 million and $51.5 million and

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sublease income totaled $4.2 million, $5.2 million and $7.1 million for fiscal years 2009, 2008 and 2007. Future minimum lease payments under long-term non-cancelable operating leases were as follows as of September 30, 2009:

(in thousands)

for fiscal years ending September 30,	Amount
2010	$	47,935
2011		42,056
2012		38,654
2013		36,090
2014		34,200
Thereafter		74,480
Total Minimum Lease Payments	$	273,415

Future minimum rentals to be received under non-cancellable subleases totaled approximately $11.3 million at September 30, 2009.

At September 30, 2009, the banking/finance segment had commitments to extend credit aggregating $186.8 million, primarily under credit card lines.

The Company, in its role as agent or trustee, facilitates the settlement of investor share purchase, redemption, and other transactions with affiliated mutual funds. The Company is appointed by the affiliated mutual funds as agent or trustee to manage, on behalf of the affiliated mutual funds, bank deposit accounts that contain only (i) cash remitted by investors to the affiliated mutual funds for the direct purchase of fund shares, or (ii) cash remitted by the affiliated mutual funds for direct delivery to the investors for either the proceeds of fund shares liquidated at the investors’ direction, or dividends and capital gains earned on fund shares. As of September 30, 2009 and 2008, the Company held cash of approximately $214.5 million and $185.7 million off-balance sheet in agency or trust for investors and the affiliated mutual funds.

Note 16 – Stock-Based Compensation

The Company’s stock-based compensation plans include the Amended and Restated Annual Incentive Plan (the “AIP”) and the 2002 Universal Stock Incentive Plan, as amended and restated (the “USIP”). Under the terms of the AIP, eligible employees may receive cash, equity awards and/or cash-settled equity awards generally based on the performance of the Company, its funds, and the individual employee. The USIP provides for the issuance of up to 30.0 million shares of the Company’s common stock for various stock-related awards to officers, directors and employees. At September 30, 2009, approximately 4.2 million shares were available for grant under the USIP. In addition to stock awards and stock unit awards, the Company may award options and other forms of stock-based compensation to officers, directors, and employees under the USIP. The Compensation Committee of the Board of Directors determines the terms and conditions of awards under the AIP and USIP.

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Stock Options

The following table summarizes stock option activity:

(in thousands, except weighted-average exercise price)	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at September 30, 2008	3,381		$	37.84
Exercised	(607	)		37.86
Cancelled	(37	)		36.32
Outstanding and Exercisable at September 30, 2009	2,737		$	37.86	2.7	$	171,684

Stock option awards outstanding under the USIP generally have been granted at prices that are either equal to or above the market value of the underlying shares of the Company’s common stock on the date of grant, generally vest over three years and expire no later than ten years after the grant date. No stock option awards have been granted under the USIP since November 2004. All stock options were fully vested and all related compensation cost was recognized prior to fiscal year 2008. The total intrinsic values of share options exercised during fiscal years 2009, 2008 and 2007 were $20.1 million, $24.2 million and $120.1 million.

Cash received from stock option exercises for fiscal years 2009, 2008 and 2007 was $24.4 million, $13.3 million and $66.1 million. Income tax benefits from stock option exercises for fiscal years 2009, 2008 and 2007 were $8.0 million, $18.0 million and $28.5 million.

Stock Awards and Stock Unit Awards

The fair value of stock awards and stock unit awards granted under the USIP is estimated on the date of grant based on the market price of the underlying shares of the Company’s common stock and is amortized to compensation expense on a straight-line basis over the related vesting period, which is generally three to four years. The total number of stock awards and stock unit awards expected to vest is adjusted for estimated forfeitures.

Total unrecognized compensation cost related to nonvested stock awards and stock unit awards, net of estimated forfeitures, was $69.3 million at September 30, 2009. This cost is expected to be recognized over a remaining weighted-average vesting period of 1.6 years. The total fair value of stock awards and stock unit awards vested during fiscal years 2009, 2008 and 2007 was $81.4 million, $56.5 million and $83.8 million. The weighted-average grant-date fair values of stock awards and stock unit awards granted during fiscal years 2009, 2008 and 2007 were $68.40, $120.90 and $110.33 per share.

The following table summarizes nonvested stock award and stock unit award activity:

(shares in thousands)	Shares		Weighted-Average Grant-Date Fair Value
Nonvested balance at September 30, 2008	919		$	116.12
Granted	1,013			68.40
Vested	(875	)		97.02
Forfeited/cancelled	(103	)		95.38
Nonvested Balance at September 30, 2009	954		$	85.21

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The stock awards generally entitle holders to the right to sell the underlying shares of the Company’s common stock once the awards vest. Stock unit awards generally entitle holders to receive the underlying shares of common stock once the awards vest. In addition, certain performance-based stock awards have been granted to the Chief Executive Officer. The total number of shares ultimately received by the Chief Executive Officer depends on the Company’s performance against specified performance goals and is subject to vesting provisions. At September 30, 2009, the balance of nonvested shares granted to the Chief Executive Officer and subject to vesting upon the achievement of performance goals, set or determined in prior years, was 12.3 thousand and had a weighted-average grant-date fair value of $121.76 per share.

Employee Stock Investment Plan

The amended and restated Franklin Resources, Inc. 1998 Employee Stock Investment Plan (the “ESIP”), allows eligible participants to buy shares of the Company’s common stock at a discount of its market value on defined dates. The Compensation Committee of the Board of Directors determines the terms and conditions of awards under the ESIP. A total of 0.5 million shares were issued under the ESIP during fiscal year 2009. At September 30, 2009, approximately 3.1 million shares were reserved for future issuance under this plan.

Effective August 1, 2008, the terms of the ESIP were amended to allow eligible participants to buy shares of the Company’s common stock at 85% of its market value on defined dates and the Company’s discretionary match was discontinued with respect to shares purchased under the plan on or after such date.

All Stock-Based Plan Arrangements

Total stock-based compensation costs of $84.4 million, $80.7 million and $90.1 million were recognized in the consolidated statements of income during fiscal years 2009, 2008 and 2007. During fiscal year 2007, the Company recorded charges to compensation and benefits for the repurchase of stock-based compensation awards that previously had been recognized as a charge to capital in excess of par value.

The Company generally does not repurchase shares upon share option exercise or vesting of stock awards and stock unit awards. However, in order to pay taxes due in connection with the vesting of employee and executive officer stock awards and stock unit awards under the USIP and in connection with the remaining discretionary matches under the ESIP, shares are repurchased using a net stock issuance method.

Note 17 – Defined Benefit Plans

Franklin Templeton Global Investors Limited, an indirect subsidiary of Franklin located in the United Kingdom, sponsors a defined benefit pension plan. In addition, Fiduciary Trust, a wholly-owned subsidiary of Franklin located in the United States, sponsors a defined benefit healthcare plan that provides post-retirement medical benefits to full-time employees who have worked ten years and attained age 55 while in the service of Fiduciary Trust, or have met alternate eligibility criteria. The defined benefit healthcare plan was closed to new entrants in April 2003.

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The following tables summarize information regarding the changes in plan benefit obligations and assets, the funded status and the amounts recognized in the consolidated balance sheets in relation to the defined benefit pension plan and the defined benefit healthcare plan, under other benefits.

(in thousands) as of and for the fiscal years ended September 30,	Pension Benefits						Other Benefits
	2009			2008			2009			2008
Change in Benefit Obligation
Benefit obligation at beginning of year	$	31,870		$	39,558		$	5,249		$	5,779
Service cost		3,636			4,009			14			17
Interest cost		1,770			2,411			400			346
Participant contributions		1,056			1,277			—			—
Benefits paid		(293	)		(403	)		(667	)		(723	)
Actuarial (gains) losses		3,565			(10,051	)		1,375			(170	)
Foreign currency movements		(2,868	)		(4,931	)		—			—
Benefit Obligation at End of Year	$	38,736		$	31,870		$	6,371		$	5,249
Change in Fair Value of Plan Assets
Fair value of plan assets at beginning of year	$	32,542		$	40,080		$	—		$	—
Actual return on assets		4,554			(7,620	)		—			—
Employer contributions		3,906			4,231			667			723
Participant contributions		1,056			1,277			—			—
Benefits paid		(293	)		(403	)		(667	)		(723	)
Foreign currency movements		(2,955	)		(5,023	)		—			—
Fair Value of Plan Assets at End of Year	$	38,810		$	32,542		$	—		$	—
Funded Status	$	74		$	672		$	(6,371	)	$	(5,249	)

(in thousands) as of and for the fiscal years ended September 30,	Pension Benefits						Other Benefits
	2009			2008			2009			2008
Amounts Recognized in the Consolidated Balance Sheets
Prepaid assets	$	74		$	672		$	—		$	—
Current liabilities		—			—			(452	)		(490	)
Other non-current liabilities		—			—			(5,919	)		(4,759	)
Net Prepaid Asset (Liability)	$	74		$	672		$	(6,371	)	$	(5,249	)
Deferred taxes		802			490			282			(311	)
Other comprehensive loss (income), net of tax		2,063			1,261			445			(365	)
Weighted-Average Assumptions
Discount rate		5.60	%		6.50	%		5.75	%		8.00	%
Expected return on plan assets		7.13	%		7.47	%		N/A			N/A
Increase in compensation rate		4.80	%		5.00	%		4.50	%		4.50	%

The following table summarizes the components of net periodic benefit cost for all plans.

(in thousands) for the fiscal years ended September 30,	Pension Benefits									Other Benefits
	2009			2008			2007			2009			2008		2007
Service cost	$	3,636		$	4,009		$	3,269		$	14		$	17	$	19
Interest cost		1,770			2,411			1,646			400			346		355
Expected return on plan assets		(2,234	)		(3,152	)		(2,543	)		—			—		—
Amortization of prior service cost		—			—			—			—			—		193
Amortization of net actuarial gains		—			—			—			(28	)		—		—
Net Periodic Benefit Cost	$	3,172		$	3,268		$	2,372		$	386		$	363	$	567

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The Company’s pension plan assets are predominantly invested in equity securities. The Company has no target allocation set for the pension plan as the plan members control all investment decisions. The healthcare plan is an unfunded benefit plan. The Company expects to contribute $4.5 million to the pension plan and $0.5 million to the healthcare benefit plan in fiscal year 2010. The expected future benefits payments over the next 10 years for the pension plan and for the healthcare plan are $9.7 million and $5.4 million.

Note 18 – Segment Information

The Company bases its operating segment selection process primarily on services offered. The Company derives substantially all of its operating revenues and net income from providing investment management and related services to its sponsored investment products. This is the Company’s primary business activity and operating segment. The Company’s investment management and related services are marketed to the public globally under six distinct brand names: Franklin, Templeton, Mutual Series, Bissett, Fiduciary Trust and Darby.

The Company’s secondary business activity and operating segment is banking/finance. The banking/finance segment offers select retail banking and consumer lending services and private banking services to high net-worth clients. Consumer lending and retail banking activities include automobile lending services related to the purchase, securitization, and servicing of retail installment sales contracts originated by independent automobile dealerships, consumer credit and debit cards, real estate equity lines, and home equity/mortgage lending, and other consumer lending.

Financial information for the Company’s two operating segments is presented in the table below. Inter-segment transactions are immaterial and excluded from segment income (loss) and assets. Operating revenues of the banking/finance segment are reported net of interest expense, the provision for loan losses and changes in fair value of residual interests from securitization transactions.

(in thousands) as of and for the fiscal year ended September 30, 2009	Investment Management and Related Services			Banking/ Finance			Total
Assets	$	8,429,298		$	1,039,165		$	9,468,463
Operating revenues		4,195,592			(1,505	)		4,194,087
Interest expense		(3,771	)		N/A			(3,771	)
Income (loss) before taxes		1,331,428			(50,336	)		1,281,092
as of and for the fiscal year ended September 30, 2008
Assets	$	8,115,141		$	1,061,379		$	9,176,520
Operating revenues		5,995,796			36,590			6,032,386
Interest expense		(15,758	)		N/A			(15,758	)
Income (loss) before taxes		2,238,595			(2,006	)		2,236,589
as of and for the fiscal year ended September 30, 2007
Assets	$	8,884,094		$	1,048,178		$	9,932,272
Operating revenues		6,146,371			59,398			6,205,769
Interest expense		(23,220	)		N/A			(23,220	)
Income before taxes		2,437,868			27,433			2,465,301

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Operating revenues of the banking/finance segment included above were as follows:

(in thousands) for the fiscal years ended September 30,	2009			2008			2007
Interest and fees on loans	$	19,507		$	46,725		$	37,263
Interest and dividends on investment securities		19,707			23,067			21,725
Total interest income		39,214			69,792			58,988
Interest on deposits		(6,153	)		(9,014	)		(14,207	)
Interest on short-term debt		(943	)		(13,347	)		(9,922	)
Interest on long-term debt		(1,682	)		(850	)		—
Total interest expense		(8,778	)		(23,211	)		(24,129	)
Net interest income		30,436			46,581			34,859
Unrealized losses on trading investments, net		(45,955	)		(4,860	)		—
Other income		19,803			8,276			27,416
Provision for loan losses		(5,789	)		(13,407	)		(2,877	)
Total	$	(1,505	)	$	36,590		$	59,398

The investment management and related services segment incurs substantially all of the Company’s depreciation and amortization costs and expenditures on long-lived assets.

Operating revenues are generally allocated to geographic areas based on the location of the office providing services and are summarized below.

(in thousands) for the fiscal years ended September 30,	2009		2008		2007
Operating Revenues
United States	$	2,917,695	$	3,828,741	$	4,038,470
The Bahamas		488,739		844,843		914,486
Asia-Pacific1		356,268		667,863		625,571
Canada		233,093		387,054		367,453
Europe2		198,292		303,885		259,789
Total	$	4,194,087	$	6,032,386	$	6,205,769
Property and Equipment, Net
United States	$	395,198	$	407,755	$	413,545
The Bahamas		18,666		16,926		11,980
Asia-Pacific1		85,709		83,351		84,174
Canada		16,702		21,062		23,898
Europe2		19,184		25,612		25,886
Total	$	535,459	$	554,706	$	559,483

¹ Asia-Pacific geographic area includes Latin America and Australia.

² Europe geographic area includes Middle East and Africa.

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Note 19 – Other Income (Expenses)

Other income (expenses) consisted of the following:

(in thousands) for the fiscal years ended September 30,	2009			2008			2007
Consolidated Sponsored Investment Products Gains (Losses), Net
Realized (losses) gains, net	$	(36,732	)	$	(4,786	)	$	53,886
Unrealized gains (losses), net		65,517			(55,444	)		3,784
Minority interest		(7,079	)		(11,323	)		—
Total		21,706			(71,553	)		57,670
Investment and Other Income, Net
Dividend income		37,886			43,278			72,376
Interest income		31,918			100,428			133,398
Capital gain distributions		14,535			10,083			7,282
Other-than-temporary impairment of investment securities, available-for-sale		(63,068	)		(13,845	)		(858	)
Realized gains on sale of investment securities, available-for-sale		9,750			37,828			88,874
Realized losses on sale of investment securities, available-for-sale		(13,694	)		(6,673	)		(1,002	)
Gains (losses) on trading investment securities, net		6,154			(5,231	)		3,859
Income from investments in equity method investees		17,727			28,353			63,566
Foreign currency exchange gains (losses), net		9,923			15,050			(5,050	)
Other, net		9,432			15,627			859
Total		60,563			224,898			363,304
Interest expense		(3,771	)		(15,758	)		(23,220	)
Other Income, Net	$	78,498		$	137,587		$	397,754

Substantially all of the Company’s dividend income, capital gain distributions, and realized gains and losses on sale of investment securities, available-for-sale were generated by investments in its sponsored investment products. Interest income was primarily generated by investments in debt securities of the U.S. Treasury and federal agencies and cash equivalents. Proceeds from the sale of investment securities, available-for-sale were $706.8 million, $185.1 million and $675.0 million for fiscal years 2009, 2008 and 2007.

The Company recognized net gains (losses) on trading investment securities, including securities held by consolidated sponsored investment products, that were still held at September 30, 2009, 2008 and 2007 in the amounts of $16.9 million, $(74.8) million and $7.6 million.

Note 20 – Banking Regulatory Ratios

Franklin is a bank holding company and a financial holding company subject to various regulatory capital requirements administered by federal banking agencies, including the Federal Reserve Board. Failure to meet minimum capital requirements can result in certain mandatory, and possibly additional, discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. The Company must meet specific capital adequacy guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain a minimum Tier 1 capital and Tier 1 leverage ratio (as defined in the regulations), as well as

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minimum Tier 1 and Total risk-based capital ratios (as defined in the regulations). Based on the Company’s calculations as of September 30, 2009 and 2008, it exceeded the applicable capital adequacy requirements as listed below.

(dollar amounts in thousands) as of September 30,	2009		2008		Capital Adequacy Minimum
Tier 1 capital	$	5,495,995	$	5,108,763	N/A
Total risk-based capital		5,503,022		5,115,055	N/A
Tier 1 leverage ratio		75%		71%	4%
Tier 1 risk-based capital ratio		97%		101%	4%
Total risk-based capital ratio		97%		101%	8%

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A. Controls and Procedures.

The Company’s management evaluated, with the participation of the Company’s principal executive and principal financial officers, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2009. Based on their evaluation, the Company’s principal executive and principal financial officers concluded that the Company’s disclosure controls and procedures as of September 30, 2009 were designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate, to allow timely decisions regarding disclosure.

There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company’s fiscal quarter ended September 30, 2009, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm are set forth in Item 8 of Part II of this Form 10-K, which is incorporated herein by reference.

Item 9B. Other Information.

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item 10 with respect to executive officers of the Company is contained at the end of Part I of this Form 10-K under the heading “Executive Officers of the Registrant”.

Code of Ethics. The Company has adopted a Code of Ethics and Business Conduct (the “Code of Ethics”) that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer, controller, and any persons performing similar functions, as well as all directors, officers and employees of the Company and its subsidiaries and affiliates. The Code of Ethics is posted on the Company’s website at www.franklinresources.com under “Corporate Governance” on the “Our Company” page. A copy of the Code of Ethics is available in print free of charge to any stockholder who requests a copy. Interested parties may address a written request for a printed copy of the Code of Ethics to: Secretary, Franklin Resources, Inc., One Franklin Parkway, San Mateo, California 94403-1906. The Company intends to satisfy the disclosure requirement regarding any amendment to, or a waiver from, a provision of the Code of Ethics for the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on its website.

The other information required by this Item 10 is incorporated by reference from the information provided under the sections entitled “Proposal No.1 Election of Directors–Nominees”, “Proposal No. 1 Election of Directors–Information about the Board and its Committees–The Audit Committees” and “Proposal No. 1 Election of Directors–Section 16(a) Beneficial Ownership Reporting Compliance” from the Company’s definitive proxy statement for its annual meeting of stockholders (“2010 Proxy Statement”) to be filed with the SEC within 120 days after September 30, 2009.

NYSE Annual Certification Disclosure. In March 2009, the annual certification required by Section 303A.12(a) of the NYSE Listed Company Manual was submitted by the Company’s Chief Executive Officer to the NYSE, without any qualifications.

Last fiscal year, the Company filed with the SEC, as exhibits to its Form 10-K for the fiscal year ended September 30, 2008, the certifications of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002. The Company is filing with the SEC, as exhibits to this Form 10-K, the certifications of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

Item 11. Executive Compensation.

The information required by this Item 11 is incorporated by reference from the information provided under the section entitled “Proposal No. 1 Election of Directors–Director Fees” and “Proposal No. 1 Election of Directors–Executive Compensation” of the Company’s 2010 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item 12 with respect to security ownership of certain beneficial owners and management is incorporated by reference from the information provided under the sections entitled “Proposal No. 1 Election of Directors–Security Ownership of Principal Stockholders” and “Proposal No. 1 Election of Directors–Security Ownership of Management” of the Company’s 2010 Proxy Statement.

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Equity Compensation Plan Information.

The following table sets forth certain information as of September 30, 2009 with respect to the shares of the Company’s common stock that may be issued under the Company’s existing compensation plans that have been approved by stockholders and plans that have not been approved by stockholders.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by stockholders1	2,921,838	2	$	37.86	3	7,305,976	4
Equity compensation plans not approved by stockholders	—			—		—
Total	2,921,838		$	37.86		7,305,976

⁽¹⁾ Consists of the 2002 Universal Stock Incentive Plan, as amended and restated (the “USIP”) and the amended and restated 1998 Employee Stock Investment Plan (the “ESIP”). Equity securities granted under the USIP may include awards in connection with the Amended and Restated Annual Incentive Compensation Plan and the 2004 Key Executive Incentive Compensation Plan, as amended and restated.

⁽²⁾ Includes restricted stock unit awards under the USIP that may be settled in shares of the Company’s common stock, but excludes options to purchase shares of the Company’s common stock accruing under the Company’s ESIP. Under the ESIP, each eligible employee is granted a separate option to purchase up to 2,000 shares of common stock each semi-annual accrual period on January 31 and July 31 at a purchase price per share equal to 85% of the fair market value of the common stock on the enrollment date or the exercise date, whichever is lower.

⁽³⁾ Does not take into account restricted stock unit awards under the USIP.

⁽⁴⁾ As of September 30, 2009, 3,103,054 shares of common stock were available for future issuance under the ESIP and 4,202,922 shares of common stock were available for future issuance under the USIP.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item 13 is incorporated by reference from the information provided under the section entitled “Proposal No. 1 Election of Directors–General”, “Proposal No.1 Election of Directors–Corporate Governance–Director Independence Standards” and “Proposal No. 1 Election of Directors–Certain Relationships and Related Transactions” of the Company’s 2010 Proxy Statement.

Item 14. Principal Accounting Fees and Services.

The information required by this Item 14 is incorporated by reference from the information provided under the section entitled “Proposal No. 1 Election of Directors–Fees Paid to Independent Registered Public Accounting Firm” of the Company’s 2010 Proxy Statement.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)(1)	The financial statements filed as part of this report are listed in Item 8 of this Form 10-K.
(a)(2)	No financial statement schedules are required to be filed as part of this report because all such schedules have been omitted. Such omission has been made on the basis that information is provided in the financial statements, or in the related notes thereto, in Item 8 of this Form 10-K or is not required to be filed as the information is not applicable.
(a)(3)	Exhibits.

Exhibit No.	Description
3(i)(a)	Registrant’s Certificate of Incorporation, as filed November 28, 1969, incorporated by reference to Exhibit (3)(i) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 1994 (File No. 001-09318) (the “1994 Annual Report”)
3(i)(b)	Registrant’s Certificate of Amendment of Certificate of Incorporation, as filed March 1, 1985, incorporated by reference to Exhibit 3(ii) to the 1994 Annual Report
3(i)(c)	Registrant’s Certificate of Amendment of Certificate of Incorporation, as filed April 1, 1987, incorporated by reference to Exhibit 3(iii) to the 1994 Annual Report
3(i)(d)	Registrant’s Certificate of Amendment of Certificate of Incorporation, as filed February 2, 1994, incorporated by reference to Exhibit 3(iv) to the 1994 Annual Report
3(i)(e)	Registrant’s Certificate of Amendment of Certificate of Incorporation, as filed on February 4, 2005, incorporated by reference to Exhibit (3)(i)(e) to the Registrant’s Quarterly Report on Form 10-Q for the period ended December 31, 2004 (File No. 001-09318)
3(ii)	Registrant’s Amended and Restated By-laws (as adopted December 12, 2008 and effective March 11, 2009), incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed with the SEC on December 17, 2008 (File No. 001-09318)
4.1	Indenture between Franklin Resources, Inc. and The Bank of New York Trust Company, N.A. (as successor to The Chase Manhattan Bank and Chemical Bank), as trustee, dated as of May 19, 1994, incorporated by reference to Exhibit 4 to the Registrant’s Registration Statement on Form S-3 filed with the SEC on April 14, 1994 (File No. 033-53147)
4.2	Form of First Supplemental Indenture, dated October 9, 1996, between Franklin Resources, Inc. and The Bank of New York Trust Company, N.A. (as successor to The Chase Manhattan Bank and Chemical Bank), as trustee, incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on From S-3 filed with the SEC on October 4, 1996 (File No. 333-1201)
10.1	Representative Form of Investment Management Agreement between Franklin Advisers, Inc. and certain funds (filed herewith)

114

Exhibit No.	Description
10.2	Representative Form of Subadvisory Agreement between Franklin Advisers, Inc. and Templeton Investment Counsel, LLC (filed herewith)
10.3	Representative Form of Distribution Agreement between Franklin/Templeton Distributors, Inc. and certain funds (filed herewith)
10.4	Representative 12b-1 Form of Amended and Restated Class A Distribution Plan between Franklin/Templeton Distributors, Inc. and certain Franklin, Templeton and Mutual Series retail funds, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2009 (File No. 001-09318) (“March 2009 Quarterly Report”)
10.5	Representative 12b-1 Form of Amended and Restated Class B Distribution Plan between Franklin/Templeton Distributors, Inc. and certain Franklin, Templeton and Mutual Series retail funds (filed herewith)
10.6	Representative 12b-1 Form of Amended and Restated Class C Distribution Plan between Franklin/Templeton Distributors, Inc. and certain Franklin, Templeton and Mutual Series retail funds (filed herewith)
10.7	Representative 12b-1 Form of Amended and Restated Class R Distribution Plan between Franklin/Templeton Distributors, Inc. and certain Franklin, Templeton and Mutual Series retail funds (filed herewith)
10.8	Representative 12b-1 Form of Amended and Restated Class 2, 3 and 4 Distribution Plan between Franklin Templeton Variable Insurance Products Trust and Franklin/Templeton Distributors, Inc. (filed herewith)
10.9	Representative Form of Amended and Restated Transfer Agent and Shareholder Services Agreement between Franklin Templeton Investor Services, LLC and certain funds (filed herewith)
10.10	Representative Form of Fund Administration Agreement between Franklin Templeton Services, LLC and certain funds (filed herewith)
10.11	Representative Form of Multiple Class Plan on behalf of certain funds (filed herewith)
10.12	Representative Form of Investment Management Agreement for Separate Account Clients (filed herewith)
10.13	Representative Form of Investment Management with Custody Agreement for High Net-Worth Clients (filed herewith)
10.14	Representative Form of Custody-Only Agreement for High-Net Worth Clients (filed herewith)
10.15	Representative Form of Participation Agreement between Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc. and certain other parties (filed herewith)
10.16	Representative Form of Participation Agreement Addendum between Franklin Templeton Variable Insurance Products Trust and certain other parties (filed herewith)

115

Exhibit No.	Description
10.17	Representative Form of Form of Fund of Funds Subscription Agreement between Franklin Templeton Variable Insurance Products Trust and certain funds (filed herewith)
10.18	Representative Form of Administrative Services Agreement between Franklin Templeton Services, LLC and certain insurance companies (filed herewith)
10.19	Five Year Facility Credit Agreement dated as of June 10, 2005 among Franklin Resources, Inc., the Banks parties thereto, Bank of America, N.A. and The Bank of New York, as Co-Syndication Agents, Citibank, N.A. and BNP Paribas, as Co-Documentation Agents, and JPMorgan Chase Bank, N.A., as Administrative Agent, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 16, 2005 (File No. 001-09318)
10.20	Managed Operations Services Agreement between Franklin Templeton Companies, LLC, and International Business Machines Corporation dated February 6, 2001, incorporated by reference to Exhibit 10.56 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2001 (File No. 001-09318)
10.21	Amendments dated July 2, 2001, June 10, 2002 and February 3, 2003 to the Managed Operations Services Agreement dated February 6, 2001, between Franklin Templeton Companies, LLC and International Business Machines Corporation, incorporated by reference to Exhibit 10.69 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 001-09318)
10.22	Amendments dated July 1, 2003 and September 1, 2003 to the Managed Operations Service Agreement dated February 6, 2001, between Franklin Templeton Companies, LLC and International Business Machines Corporation, incorporated by reference to Exhibit 10.71 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2003 (File No. 001-09318)
10.23	Amendment Number 6 to the Managed Operations Services Agreement, dated March 6, 2006, by and between Franklin Templeton Companies, LLC, and International Business Machines Corporation, incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2006 (File No. 001-09318) (the “March 2006 Quarterly Report”)
10.24	Amendment Number 7 to the Managed Operations Services Agreement, dated December 21, 2007, by and between Franklin Templeton Companies, LLC and International Business Machines Corporation, incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the period ended December 31, 2007 (File No. 001-09318)
10.25	Representative Form of Stock Option Agreement and Notice of Stock Option Grant under the Registrant’s 2002 Universal Stock Incentive Plan, incorporated by reference to Exhibit 10.75 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 12, 2004 (File No. 001-09318)*

116

Exhibit No.	Description
10.26	Representative Form of Notice of Restricted Stock Award and Restricted Stock Award Agreement under the Registrant’s 2002 Universal Stock Incentive Plan for certain executive officers of the Registrant (filed herewith)*
10.27	Representative Form of Notice of Restricted Stock Unit Award and Restricted Stock Unit Award Agreement under the Registrant’s 2002 Universal Stock Incentive Plan for certain executive officers of the Registrant (filed herewith)*
10.28	Franklin Resources, Inc. Deferred Compensation Arrangement for Director’s Fees, amended and restated as of October 18, 2005, by and between the Registrant and Louis E. Woodworth, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 20, 2005 (File No. 001-09318) *
10.29	Representative Form of Amendment to Deferred Compensation Agreement for Director’s Fees, incorporated by reference to Exhibit 10.90 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2005 (File No. 001-09318)*
10.30	Representative Form of Amended and Restated Indemnification Agreement, incorporated by reference to Exhibit 10.5 to the March 2006 Quarterly Report*
10.31	2006 Directors Deferred Compensation Plan, as amended and restated effective December 12, 2008, incorporated by reference to Exhibit 10.4 to the March 2009 Quarterly Report*
10.32	Franklin Resources, Inc. 2002 Universal Stock Incentive Plan (as amended and restated December 16, 2004) incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 27, 2005 (File No. 001-09318)*
10.33	Franklin Resources, Inc. 1998 Employee Stock Investment Plan (as amended and restated October 12, 2009 and effective February 1, 2010) (filed herewith)*
10.34	Franklin Resources, Inc. Amended and Restated Annual Incentive Compensation Plan (as amended and restated December 13, 2006), incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 22, 2006 (File No. 001-09318)*
10.35	Franklin Resources, Inc. 2004 Key Executive Incentive Compensation Plan (as amended and restated October 15, 2007), incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 5, 2008 (File No. 001-09318) (the “March 5, 2008 Form 8-K”)*
10.36	Non-Employee Director Compensation as of September 30, 2009 (filed herewith)*
10.37	Named Executive Officer Compensation as of October 1, 2008, incorporated by reference to Exhibit 10.82 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2008 (File No. 001-09318)*
10.38	Named Executive Officer Performance Incentive Compensation (2008), incorporated by reference to Exhibit 10.3 to the March 5, 2008 Form 8-K*
10.39	Franklin Resources, Inc. 1998 Employee Stock Investment Plan (as amended and restated June 17, 2008), incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2008 (File No. 001-09318)*

117

Exhibit No.	Description
12	Computation of Ratios of Earnings to Fixed Charges (filed herewith)
21	List of Subsidiaries (filed herewith)
23	Consent of Independent Registered Public Accounting Firm (filed herewith)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101	The following materials from the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2009, formatted in Extensible Business Reporting Language (XBRL), include: (i) the Consolidated Statements of Income, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Stockholders’ Equity and Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) related notes, tagged as blocks of text (furnished herewith)

* Management/Employment Contract or Compensatory Plan or Arrangement

118

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		FRANKLIN RESOURCES, INC.
Date:	November 24, 2009	By:	/s/ Kenneth A. Lewis
			Kenneth A. Lewis, Executive Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Date:	November 24, 2009	By:	/s/ Samuel H. Armacost
			Samuel H. Armacost, Director
Date:	November 24, 2009	By:	/s/ Charles Crocker
			Charles Crocker, Director
Date:	November 24, 2009	By:	/s/ Joseph R. Hardiman
			Joseph R. Hardiman, Director
Date:	November 24, 2009	By:	/s/ Robert D. Joffe
			Robert D. Joffe, Director
Date:	November 24, 2009	By:	/s/ Charles B. Johnson
			Charles B. Johnson, Chairman and Director
Date:	November 24, 2009	By:	/s/ Gregory E. Johnson
			Gregory E. Johnson, President and Chief Executive Officer (Principal Executive Officer)
Date:	November 24, 2009	By:	/s/ Rupert H. Johnson, Jr.
			Rupert H. Johnson, Jr., Vice Chairman and Director
Date:	November 24, 2009	By:	/s/ Thomas H. Kean
			Thomas H. Kean, Director
Date:	November 24, 2009	By:	/s/ Kenneth A. Lewis
			Kenneth A. Lewis, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
Date:	November 24, 2009	By:	/s/ Chutta Ratnathicam
			Chutta Ratnathicam, Director
Date:	November 24, 2009	By:	/s/ Peter M. Sacerdote
			Peter M. Sacerdote, Director
Date:	November 24, 2009	By:	/s/ Laura Stein
			Laura Stein, Director
Date:	November 24, 2009	By:	/s/ Anne M. Tatlock
			Anne M. Tatlock, Director

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EXHIBIT INDEX

Exhibit No.	Description
3(i)(a)	Registrant’s Certificate of Incorporation, as filed November 28, 1969, incorporated by reference to Exhibit (3)(i) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 1994 (File No. 001-09318) (the “1994 Annual Report”)
3(i)(b)	Registrant’s Certificate of Amendment of Certificate of Incorporation, as filed March 1, 1985, incorporated by reference to Exhibit 3(ii) to the 1994 Annual Report
3(i)(c)	Registrant’s Certificate of Amendment of Certificate of Incorporation, as filed April 1, 1987, incorporated by reference to Exhibit 3(iii) to the 1994 Annual Report
3(i)(d)	Registrant’s Certificate of Amendment of Certificate of Incorporation, as filed February 2, 1994, incorporated by reference to Exhibit 3(iv) to the 1994 Annual Report
3(i)(e)	Registrant’s Certificate of Amendment of Certificate of Incorporation, as filed on February 4, 2005, incorporated by reference to Exhibit (3)(i)(e) to the Registrant’s Quarterly Report on Form 10-Q for the period ended December 31, 2004 (File No. 001-09318)
3(ii)	Registrant’s Amended and Restated By-laws (as adopted December 12, 2008 and effective March 11, 2009), incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed with the SEC on December 17, 2008 (File No. 001-09318)
4.1	Indenture between Franklin Resources, Inc. and The Bank of New York Trust Company, N.A. (as successor to The Chase Manhattan Bank and Chemical Bank), as trustee, dated as of May 19, 1994, incorporated by reference to Exhibit 4 to the Registrant’s Registration Statement on Form S-3 filed with the SEC on April 14, 1994 (File No. 033-53147)
4.2	Form of First Supplemental Indenture, dated October 9, 1996, between Franklin Resources, Inc. and The Bank of New York Trust Company, N.A. (as successor to The Chase Manhattan Bank and Chemical Bank), as trustee, incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on From S-3 filed with the SEC on October 4, 1996 (File No. 333-1201)
10.1	Representative Form of Investment Management Agreement between Franklin Advisers, Inc. and certain funds (filed herewith)
10.2	Representative Form of Subadvisory Agreement between Franklin Advisers, Inc. and Templeton Investment Counsel, LLC (filed herewith)
10.3	Representative Form of Distribution Agreement between Franklin/Templeton Distributors, Inc. and certain funds (filed herewith)
10.4	Representative 12b-1 Form of Amended and Restated Class A Distribution Plan between Franklin/Templeton Distributors, Inc. and certain Franklin, Templeton and Mutual Series retail funds, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2009 (File No. 001-09318) (“March 2009 Quarterly Report”)
10.5	Representative 12b-1 Form of Amended and Restated Class B Distribution Plan between Franklin/Templeton Distributors, Inc. and certain Franklin, Templeton and Mutual Series retail funds (filed herewith)
10.6	Representative 12b-1 Form of Amended and Restated Class C Distribution Plan between Franklin/Templeton Distributors, Inc. and certain Franklin, Templeton and Mutual Series retail funds (filed herewith)

120

Exhibit No.	Description
10.7	Representative 12b-1 Form of Amended and Restated Class R Distribution Plan between Franklin/Templeton Distributors, Inc. and certain Franklin, Templeton and Mutual Series retail funds (filed herewith)
10.8	Representative 12b-1 Form of Amended and Restated Class 2, 3 and 4 Distribution Plan between Franklin Templeton Variable Insurance Products Trust and Franklin/Templeton Distributors, Inc. (filed herewith)
10.9	Representative Form of Amended and Restated Transfer Agent and Shareholder Services Agreement between Franklin Templeton Investor Services, LLC and certain funds (filed herewith)
10.10	Representative Form of Fund Administration Agreement between Franklin Templeton Services, LLC and certain funds (filed herewith)
10.11	Representative Form of Multiple Class Plan on behalf of certain funds (filed herewith)
10.12	Representative Form of Investment Management Agreement for Separate Account Clients (filed herewith)
10.13	Representative Form of Investment Management with Custody Agreement for High Net-Worth Clients (filed herewith)
10.14	Representative Form of Custody-Only Agreement for High-Net Worth Clients (filed herewith)
10.15	Representative Form of Participation Agreement between Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc. and certain other parties (filed herewith)
10.16	Representative Form of Participation Agreement Addendum between Franklin Templeton Variable Insurance Products Trust and certain other parties (filed herewith)
10.17	Representative Form of Form of Fund of Funds Subscription Agreement between Franklin Templeton Variable Insurance Products Trust and certain funds (filed herewith)
10.18	Representative Form of Administrative Services Agreement between Franklin Templeton Services, LLC and certain insurance companies (filed herewith)
10.19	Five Year Facility Credit Agreement dated as of June 10, 2005 among Franklin Resources, Inc., the Banks parties thereto, Bank of America, N.A. and The Bank of New York, as Co-Syndication Agents, Citibank, N.A. and BNP Paribas, as Co-Documentation Agents, and JPMorgan Chase Bank, N.A., as Administrative Agent, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 16, 2005 (File No. 001-09318)
10.20	Managed Operations Services Agreement between Franklin Templeton Companies, LLC, and International Business Machines Corporation dated February 6, 2001, incorporated by reference to Exhibit 10.56 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2001 (File No. 001-09318)
10.21	Amendments dated July 2, 2001, June 10, 2002 and February 3, 2003 to the Managed Operations Services Agreement dated February 6, 2001, between Franklin Templeton Companies, LLC and International Business Machines Corporation, incorporated by reference to Exhibit 10.69 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 001-09318)

121

Exhibit No.	Description
10.22	Amendments dated July 1, 2003 and September 1, 2003 to the Managed Operations Service Agreement dated February 6, 2001, between Franklin Templeton Companies, LLC and International Business Machines Corporation, incorporated by reference to Exhibit 10.71 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2003 (File No. 001-09318)
10.23	Amendment Number 6 to the Managed Operations Services Agreement, dated March 6, 2006, by and between Franklin Templeton Companies, LLC, and International Business Machines Corporation, incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2006 (File No. 001-09318) (the “March 2006 Quarterly Report”)
10.24	Amendment Number 7 to the Managed Operations Services Agreement, dated December 21, 2007, by and between Franklin Templeton Companies, LLC and International Business Machines Corporation, incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the period ended December 31, 2007 (File No. 001-09318)
10.25	Representative Form of Stock Option Agreement and Notice of Stock Option Grant under the Registrant’s 2002 Universal Stock Incentive Plan, incorporated by reference to Exhibit 10.75 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 12, 2004 (File No. 001-09318)*
10.26	Representative Form of Notice of Restricted Stock Award and Restricted Stock Award Agreement under the Registrant’s 2002 Universal Stock Incentive Plan for certain executive officers of the Registrant (filed herewith)*
10.27	Representative Form of Notice of Restricted Stock Unit Award and Restricted Stock Unit Award Agreement under the Registrant’s 2002 Universal Stock Incentive Plan for certain executive officers of the Registrant (filed herewith)*
10.28	Franklin Resources, Inc. Deferred Compensation Arrangement for Director’s Fees, amended and restated as of October 18, 2005, by and between the Registrant and Louis E. Woodworth, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 20, 2005 (File No. 001-09318)*
10.29	Representative Form of Amendment to Deferred Compensation Agreement for Director’s Fees, incorporated by reference to Exhibit 10.90 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2005 (File No. 001-09318)*
10.30	Representative Form of Amended and Restated Indemnification Agreement, incorporated by reference to Exhibit 10.5 to the March 2006 Quarterly Report*
10.31	2006 Directors Deferred Compensation Plan, as amended and restated effective December 12, 2008, incorporated by reference to Exhibit 10.4 to the March 2009 Quarterly Report*
10.32	Franklin Resources, Inc. 2002 Universal Stock Incentive Plan (as amended and restated December 16, 2004) incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 27, 2005 (File No. 001-09318)*
10.33	Franklin Resources, Inc. 1998 Employee Stock Investment Plan (as amended and restated October 12, 2009 and effective February 1, 2010) (filed herewith)*
10.34	Franklin Resources, Inc. Amended and Restated Annual Incentive Compensation Plan (as amended and restated December 13, 2006), incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 22, 2006 (File No. 001-09318)*

122

Exhibit No.	Description
10.35	Franklin Resources, Inc. 2004 Key Executive Incentive Compensation Plan (as amended and restated October 15, 2007), incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 5, 2008 (File No. 001-09318) (the “March 5, 2008 Form 8-K”)*
10.36	Non-Employee Director Compensation as of September 30, 2009 (filed herewith)*
10.37	Named Executive Officer Compensation as of October 1, 2008, incorporated by reference to Exhibit 10.82 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2008 (File No. 001-09318)*
10.38	Named Executive Officer Performance Incentive Compensation (2008), incorporated by reference to Exhibit 10.3 to the March 5, 2008 Form 8-K*
10.39	Franklin Resources, Inc. 1998 Employee Stock Investment Plan (as amended and restated June 17, 2008), incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2008 (File No. 001-09318)*
12	Computation of Ratios of Earnings to Fixed Charges (filed herewith)
21	List of Subsidiaries (filed herewith)
23	Consent of Independent Registered Public Accounting Firm (filed herewith)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101	The following materials from the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2009, formatted in Extensible Business Reporting Language (XBRL), include: (i) the Consolidated Statements of Income, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Stockholders’ Equity and Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) related notes, tagged as blocks of text (furnished herewith)

* Management/Employment Contract or Compensatory Plan or Arrangement

123

EX-10.1

EXHIBIT 10.1

[FORM]

[NAME OF CORPORATION/TRUST]

on behalf of

[NAME OF FUND]

INVESTMENT MANAGEMENT AGREEMENT

THIS INVESTMENT MANAGEMENT AGREEMENT made between [NAME OF TRUST OR CORPORATION], a [Delaware statutory trust] (the “Trust”), on behalf of [NAME OF FUND] (the “Fund”), a series of the Trust, and FRANKLIN ADVISERS, INC., a California corporation (the “Adviser”).

WHEREAS, the Trust has been organized and intends to operate as an investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”), for the purpose of investing and reinvesting its assets in securities, as set forth in its Agreement and Declaration of Trust, its By-Laws and its Registration Statement under the 1940 Act and the Securities Act of 1933, as amended, all as heretofore and hereafter amended and supplemented; and the Trust desires to avail itself of the services, information, advice, assistance and facilities of an investment manager and to have an investment manager perform various management, statistical, research, investment advisory and other services for the Fund; and,

WHEREAS, the Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, is engaged in the business of rendering management, investment advisory, counseling and supervisory services to investment companies and other investment counseling clients, and desires to provide these services to the Fund.

NOW THEREFORE, in consideration of the terms and conditions hereinafter set forth, it is mutually agreed as follows:

1. Employment of the Adviser. The Trust hereby employs the Adviser to manage the investment and reinvestment of the Fund’s assets and to administer its affairs, subject to the direction of the Board of Trustees and the officers of the Trust, for the period and on the terms hereinafter set forth. The Adviser hereby accepts such employment and agrees during such period to render the services and to assume the obligations herein set forth for the compensation herein provided. The Adviser shall for all purposes herein be deemed to be an independent contractor and shall, except as expressly provided or authorized (whether herein or otherwise), have no authority to act for or represent the Fund or the Trust in any way or otherwise be deemed an agent of the Fund or the Trust.

1

2. Obligations of and Services to be Provided by the Adviser. The Adviser undertakes to provide the services hereinafter set forth and to assume the following obligations:

A. Investment Management Services.

(a) The Adviser shall manage the Fund’s assets subject to and in accordance with the investment objectives and policies of the Fund and any directions which the Trust’s Board of Trustees may issue from time to time. In pursuance of the foregoing, the Adviser shall make all determinations with respect to the investment of the Fund’s assets and the purchase and sale of its investment securities, and shall take such steps as may be necessary to implement the same. Such determinations and services shall include determining the manner in which any voting rights, rights to consent to corporate action and any other rights pertaining to the Fund’s investment securities shall be exercised. The Adviser shall render or cause to be rendered regular reports to the Trust, at regular meetings of its Board of Trustees and at such other times as may be reasonably requested by the Trust’s Board of Trustees, of (i) the decisions made with respect to the investment of the Fund’s assets and the purchase and sale of its investment securities, (ii) the reasons for such decisions and (iii) the extent to which those decisions have been implemented.

(b) The Adviser, subject to and in accordance with any directions which the Trust’s Board of Trustees may issue from time to time, shall place, in the name of the Fund, orders for the execution of the Fund’s securities transactions. When placing such orders, the Adviser shall seek to obtain the best net price and execution for the Fund, but this requirement shall not be deemed to obligate the Adviser to place any order solely on the basis of obtaining the lowest commission rate if the other standards set forth in this section have been satisfied. The parties recognize that there are likely to be many cases in which different brokers are equally able to provide such best price and execution and that, in selecting among such brokers with respect to particular trades, it is desirable to choose those brokers who furnish research, statistical, quotations and other information to the Fund and the Adviser in accordance with the standards set forth below. Moreover, to the extent that it continues to be lawful to do so and so long as the Board of Trustees determines that the Fund will benefit, directly or indirectly, by doing so, the Adviser may place orders with a broker who charges a commission for that transaction which is in excess of the amount of commission that another broker would have charged for effecting that transaction, provided that the excess commission is reasonable in relation to the value of “brokerage and research services” (as defined in Section 28(e)(3) of the Securities Exchange Act of 1934, as amended) provided by that broker.

Accordingly, the Trust and the Adviser agree that the Adviser shall select brokers for the execution of the Fund’s transactions from among:

(i) Those brokers and dealers who provide quotations and other services to the Fund, specifically including the quotations necessary to determine the Fund’s net assets, in such amount of total brokerage as may reasonably be required in light of such services; and

(ii) Those brokers and dealers who supply research, statistical and other data to the Adviser or its affiliates which the Adviser or its affiliates may lawfully and appropriately use in their investment

2

management capacities, which relate directly to securities, actual or potential, of the Fund, or which place the Adviser in a better position to make decisions in connection with the management of the Fund’s assets and securities, whether or not such data may also be useful to the Adviser and its affiliates in managing other portfolios or advising other clients, in such amount of total brokerage as may reasonably be required.

(c) When the Adviser has determined that the Fund should tender securities pursuant to a “tender offer solicitation,” Franklin/Templeton Distributors, Inc. (“Distributors”) shall be designated as the “tendering dealer” so long as it is legally permitted to act in such capacity under the federal securities laws and rules thereunder and the rules of any securities exchange or association of which Distributors may be a member. Neither the Adviser nor Distributors shall be obligated to make any additional commitments of capital, expense or personnel beyond that already committed (other than normal periodic fees or payments necessary to maintain its corporate existence and membership in the National Association of Securities Dealers, Inc.) as of the date of this Agreement. This Agreement shall not obligate the Adviser or Distributors (i) to act pursuant to the foregoing requirement under any circumstances in which they might reasonably believe that liability might be imposed upon them as a result of so acting, or (ii) to institute legal or other proceedings to collect fees which may be considered to be due from others to it as a result of such a tender, unless the Trust on behalf of the Fund shall enter into an agreement with the Adviser and/or Distributors to reimburse them for all such expenses connected with attempting to collect such fees, including legal fees and expenses and that portion of the compensation due to their employees which is attributable to the time involved in attempting to collect such fees.

(d) The Adviser shall render regular reports to the Trust, not more frequently than quarterly, of how much total brokerage business has been placed by the Adviser, on behalf of the Fund, with brokers falling into each of the categories referred to above and the manner in which the allocation has been accomplished.

(e) The Adviser agrees that no investment decision will be made or influenced by a desire to provide brokerage for allocation in accordance with the foregoing, and that the right to make such allocation of brokerage shall not interfere with the Adviser’s paramount duty to obtain the best net price and execution for the Fund.

(f) Decisions on proxy voting shall be made by the Adviser unless the Board of Trustees determines otherwise. Pursuant to its authority, the Adviser shall have the power to vote, either in person or by proxy, all securities in which the Fund may be invested from time to time, and shall not be required to seek or take instructions from the Fund with respect thereto. The Adviser shall not be expected or required to take any action other than the rendering of investment-related advice with respect to lawsuits involving securities presently or formerly held in the Fund, or the issuers thereof, including actions involving bankruptcy. Should the Adviser undertake litigation against an issuer on behalf of the Fund, the Fund agrees to pay its portion of any applicable legal fees associated with the action or to forfeit any claim to any assets the Adviser may recover and, in such case, agrees to hold the Adviser harmless for excluding the Fund from such action. In the case of class action suits involving issuers held in the Fund, the Adviser may include information about the Fund for purposes of participating in any settlements.

3

B. Provision of Information Necessary for Preparation of Securities Registration Statements, Amendments and Other Materials. The Adviser, its officers and employees will make available and provide accounting and statistical information required by the Fund in the preparation of registration statements, reports and other documents required by federal and state securities laws and with such information as the Fund may reasonably request for use in the preparation of such documents or of other materials necessary or helpful for the underwriting and distribution of the Fund’s shares.

C. Other Obligations and Services. The Adviser shall make its officers and employees available to the Board of Trustees and officers of the Trust for consultation and discussions regarding the administration and management of the Fund and its investment activities.

D. Delegation of Services. The Adviser may, at its expense, select and contract with one or more investment advisers registered under the Investment Advisers Act of 1940 (“Sub-Advisers”) to perform some or all of the services for the Fund for which it is responsible under this Agreement. The Adviser will compensate any Sub-Adviser for its services to the Fund. The Adviser may terminate the services of any Sub-Adviser at any time in its sole discretion, and shall at such time assume the responsibilities of such Sub-Adviser unless and until a successor Sub-Adviser is selected and the requisite approval of the Fund’s shareholders is obtained. The Adviser will continue to have responsibility for all advisory services furnished by any Sub-Adviser.

3. Expenses of the Fund. It is understood that the Fund will pay all of its own expenses other than those expressly assumed by the Adviser herein, which expenses payable by the Fund shall include:

A. Fees and expenses paid to the Adviser as provided herein;

B. Expenses of all audits by independent public accountants;

C. Expenses of transfer agent, registrar, custodian, dividend disbursing agent and shareholder record-keeping services, including the expenses of issue, repurchase or redemption of its shares;

D. Expenses of obtaining quotations for calculating the value of the Fund’s net assets;

E. Salaries and other compensations of executive officers of the Trust who are not officers, directors, stockholders or employees of the Adviser or its affiliates;

F. Taxes levied against the Fund;

4

G. Brokerage fees and commissions in connection with the purchase and sale of securities for the Fund;

H. Costs, including the interest expense, of borrowing money;

I. Costs incident to meetings of the Board of Trustees and shareholders of the Fund, reports to the Fund’s shareholders, the filing of reports with regulatory bodies and the maintenance of the Fund’s and the Trust’s legal existence;

J. Legal fees, including the legal fees related to the registration and continued qualification of the Fund’s shares for sale;

K. Trustees’ fees and expenses to trustees who are not directors, officers, employees or stockholders of the Adviser or any of its affiliates;

L. Costs and expense of registering and maintaining the registration of the Fund and its shares under federal and any applicable state laws; including the printing and mailing of prospectuses to its shareholders;

M. Trade association dues;

N. The Fund’s pro rata portion of fidelity bond, errors and omissions, and trustees and officer liability insurance premiums; and

O. The Fund’s portion of the cost of any proxy voting service used on its behalf.

4. Compensation of the Adviser. The Fund shall pay a management fee in cash to the Adviser based upon a percentage of the value of the Fund’s net assets, calculated as set forth below, as compensation for the services rendered and obligations assumed by the Adviser, during the preceding month, on the first business day of the month in each year.

A. For purposes of calculating such fee, the value of the net assets of the Fund shall be determined in the same manner as that Fund uses to compute the value of its net assets in connection with the determination of the net asset value of its shares, all as set forth more fully in the Fund’s current prospectus and statement of additional information. The management fee payable by the Fund shall be calculated daily at the following annual rates:

    % of the value of net assets up to and including $500 million;

    % of the value of net assets over $500 million and not over $1 billion;

    % of the value of net assets over $1 billion and not over $1.5 billion;

    % of the value of net assets over $1.5 billion and not over $6.5 billion;

5

    % of the value of net assets over $6.5 billion and not over $11.5 billion;

    % of the value of net assets over $11.5 billion and not over $16.5 billion;

    % of the value of net assets over $16.5 billion and not over $19 billion;

    % of the value of net assets over $19 billion and not over $21.5 billion; and

    % of the value of net assets over $21.5 billion.

B. The management fee payable by the Fund shall be reduced or eliminated to the extent that Distributors has actually received cash payments of tender offer solicitation fees less certain costs and expenses incurred in connection therewith and to the extent necessary to comply with the limitations on expenses which may be borne by the Fund as set forth in the laws, regulations and administrative interpretations of those states in which the Fund’s shares are registered. The Adviser may waive all or a portion of its fees provided for hereunder and such waiver shall be treated as a reduction in purchase price of its services. The Adviser shall be contractually bound hereunder by the terms of any publicly announced waiver of its fee, or any limitation of the Fund’s expenses, as if such waiver or limitation were fully set forth herein.

C. If this Agreement is terminated prior to the end of any month, the accrued management fee shall be paid to the date of termination.

5. Activities of the Adviser. The services of the Adviser to the Fund hereunder are not to be deemed exclusive, and the Adviser and any of its affiliates shall be free to render similar services to others. Subject to and in accordance with the Agreement and Declaration of Trust and By-Laws of the Trust and Section 10(a) of the 1940 Act, it is understood that trustees, officers, agents and shareholders of the Trust are or may be interested in the Adviser or its affiliates as directors, officers, agents or stockholders; that directors, officers, agents or stockholders of the Adviser or its affiliates are or may be interested in the Trust as trustees, officers, agents, shareholders or otherwise; that the Adviser or its affiliates may be interested in the Fund as shareholders or otherwise; and that the effect of any such interests shall be governed by said Agreement and Declaration of Trust, By-Laws and the 1940 Act.

6. Liabilities of the Adviser.

A. In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of obligations or duties hereunder on the part of the Adviser, the Adviser shall not be subject to liability to the Trust or the Fund or to any shareholder of the Fund for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security by the Fund.

6

B. Notwithstanding the foregoing, the Adviser agrees to reimburse the Trust for any and all costs, expenses, and counsel and trustees’ fees reasonably incurred by the Trust in the preparation, printing and distribution of proxy statements, amendments to its Registration Statement, holdings of meetings of its shareholders or trustees, the conduct of factual investigations, any legal or administrative proceedings (including any applications for exemptions or determinations by the Securities and Exchange Commission) which the Trust incurs as the result of action or inaction of the Adviser or any of its affiliates or any of their officers, directors, employees or stockholders where the action or inaction necessitating such expenditures (i) is directly or indirectly related to any transactions or proposed transaction in the stock or control of the Adviser or its affiliates (or litigation related to any pending or proposed or future transaction in such shares or control) which shall have been undertaken without the prior, express approval of the Trust’s Board of Trustees; or, (ii) is within the control of the Adviser or any of its affiliates or any of their officers, directors, employees or stockholders. The Adviser shall not be obligated pursuant to the provisions of this Subparagraph 6.B., to reimburse the Trust for any expenditures related to the institution of an administrative proceeding or civil litigation by the Trust or a shareholder seeking to recover all or a portion of the proceeds derived by any stockholder of the Adviser or any of its affiliates from the sale of his shares of the Adviser, or similar matters. So long as this Agreement is in effect, the Adviser shall pay to the Trust the amount due for expenses subject to this Subparagraph 6.B. within thirty (30) days after a bill or statement has been received by the Adviser therefore. This provision shall not be deemed to be a waiver of any claim the Trust may have or may assert against the Adviser or others for costs, expenses or damages heretofore incurred by the Trust or for costs, expenses or damages the Trust may hereafter incur which are not reimbursable to it hereunder.

C. No provision of this Agreement shall be construed to protect any trustee or officer of the Trust, or director or officer of the Adviser, from liability in violation of Sections 17(h) and (i) of the 1940 Act.

7. Renewal and Termination.

A. This Agreement shall become effective on the date written below and shall continue in effect for two (2) years thereafter, unless sooner terminated as hereinafter provided and shall continue in effect thereafter for periods not exceeding one (1) year so long as such continuation is approved at least annually (i) by a vote of a majority of the outstanding voting securities of the Fund or by a vote of the Board of Trustees of the Trust, and (ii) by a vote of a majority of the Trustees of the Trust who are not parties to the Agreement (other than as Trustees of the Trust) or “interested persons” of any such party, cast in person at a meeting called for the purpose of voting on the Agreement.

B. This Agreement:

(i) may at any time be terminated without the payment of any penalty either by vote of the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities of the Fund on sixty (60) days’ written notice to the Adviser;

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(ii) shall immediately terminate with respect to the Fund in the event of its assignment; and

(iii) may be terminated by the Adviser on sixty (60) days’ written notice to the Fund.

C. As used in this Paragraph the terms “assignment,” “interested person” and “vote of a majority of the outstanding voting securities” shall have the meanings set forth for such terms in the 1940 Act.

D. Any notice under this Agreement shall be given in writing addressed and delivered, or mailed post-paid, to the other party at any office of such party.

8. Severability. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby.

9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and effective on the      day of             .

[Name of Trust or Corporation]

on behalf of [Name of Fund]

By:

Title:

[FRANKLIN ADVISERS, INC.]

By:

Title:

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EX-10.2

EXHIBIT 10.2

[FORM]

SUBADVISORY AGREEMENT

[NAME OF TRUST]

(on behalf of the Name of Fund)

THIS SUBADVISORY AGREEMENT made as of the                      by and between FRANKLIN ADVISERS, INC., a corporation organized and existing under the laws of the State of California (hereinafter called “FAV”), and TEMPLETON INVESTMENT COUNSEL, LLC, a Delaware limited liability company (hereinafter called “TIC, LLC”).

W I T N E S S E T H

WHEREAS, FAV and TIC, LLC are each registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and engaged in the business of supplying investment advice, and investment management services, as an independent contractor; and

WHEREAS, FAV has been retained to render investment advisory services to [NAME OF FUND] (the “Fund”), a series of [NAME OF TRUST] (the “Trust”), an investment management company registered with the U.S. Securities and Exchange Commission (the “SEC”) pursuant to the Investment Company Act of 1940, as amended (the “1940 Act”); and

WHEREAS, FAV desires to retain TIC, LLC to render investment advisory, research and related services to the Fund pursuant to the terms and provisions of this Agreement, and TIC, LLC is interested in furnishing said services.

NOW, THEREFORE, in consideration of the covenants and the mutual promises hereinafter set forth, the parties hereto, intending to be legally bound hereby, mutually agree as follows:

1. FAV hereby retains TIC, LLC and TIC, LLC hereby accepts such engagement, to furnish certain investment advisory services with respect to the assets of the Fund, as more fully set forth herein.

(a) Subject to the overall policies, control, direction and review of the Trust’s Board of Trustees (the “Board”) and to the instructions and supervision of FAV, TIC, LLC will provide a continuous investment program for the Fund, including allocation of the Fund’s assets among the various securities markets of the world and, investment research and advice with respect to securities and investments and cash equivalents in the Fund. So long as the Board and FAV determine, on no less frequently than an annual basis, to grant the necessary delegated authority to TIC, LLC, and subject to paragraph (b) below, TIC, LLC will determine what securities and other investments will be purchased, retained or sold by the Fund, and will place all purchase and sale orders on behalf of the Fund except that orders regarding U.S. domiciled securities and money market instruments may also be placed on behalf of the Fund by FAV.

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(b) In performing these services, TIC, LLC shall adhere to the Fund’s investment objectives, policies and restrictions as contained in its Prospectus and Statement of Additional Information, and in the Trust’s Declaration of Trust, and to the investment guidelines most recently established by FAV and shall comply with the provisions of the 1940 Act and the rules and regulations of the SEC thereunder in all material respects and with the provisions of the United States Internal Revenue Code of 1986, as amended, which are applicable to regulated investment companies.

(c) Unless otherwise instructed by FAV or the Board, and subject to the provisions of this Agreement and to any guidelines or limitations specified from time to time by FAV or by the Board, TIC, LLC shall report daily all transactions effected by TIC, LLC on behalf of the Fund to FAV and to other entities as reasonably directed by FAV or the Board.

(d) TIC, LLC shall provide the Board at least quarterly, in advance of the regular meetings of the Board, a report of its activities hereunder on behalf of the Fund and its proposed strategy for the next quarter, all in such form and detail as requested by the Board. TIC, LLC shall also make an investment officer available to attend such meetings of the Board as the Board may reasonably request.

(e) In carrying out its duties hereunder, TIC, LLC shall comply with all reasonable instructions of the Fund or FAV in connection therewith. Such instructions may be given by letter, telex, telefax or telephone confirmed by telex, by the Board or by any other person authorized by a resolution of the Board, provided a certified copy of such resolution has been supplied to TIC, LLC.

2. In performing the services described above, TIC, LLC shall use its best efforts to obtain for the Fund the most favorable price and execution available. Subject to prior authorization of appropriate policies and procedures by the Board, TIC, LLC may, to the extent authorized by law and in accordance with the terms of the Fund’s Prospectus and Statement of Additional Information, cause the Fund to pay a broker who provides brokerage and research services an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker would have charged for effecting that transaction, in recognition of the brokerage and research services provided by the broker. To the extent authorized by applicable law, TIC, LLC shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of such action.

3. (a) TIC, LLC shall, unless otherwise expressly provided and authorized, have no authority to act for or represent FAV or the Fund in any way, or in any way be deemed an agent for FAV or the Fund.

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(b) It is understood that the services provided by TIC, LLC are not to be deemed exclusive. FAV acknowledges that TIC, LLC may have investment responsibilities, or render investment advice to, or perform other investment advisory services, for individuals or entities, including other investment companies registered pursuant to the 1940 Act, (“Clients”) which may invest in the same type of securities as the Fund. FAV agrees that TIC, LLC may give advice or exercise investment responsibility and take such other action with respect to such Clients which may differ from advice given or the timing or nature of action taken with respect to the Fund.

4. TIC, LLC agrees to use its best efforts in performing the services to be provided by it pursuant to this Agreement.

5. FAV has furnished or will furnish to TIC, LLC as soon as available copies properly certified or authenticated of each of the following documents:

(a) the Trust’s Declaration of Trust, as filed with the Secretary of State of the state of Delaware on                     , and any other organizational documents and all amendments thereto or restatements thereof;

(b) resolutions of the Trust’s Board of Trustees authorizing the appointment of TIC, LLC and approving this Agreement;

(c) the Trust’s original Notification of Registration on Form N-8A under the 1940 Act as filed with the SEC and all amendments thereto;

(d) the Trust’s current Registration Statement on Form N-1A under the Securities Act of 1933, as amended and under the 1940 Act as filed with the SEC, and all amendments thereto, as it relates to the Fund;

(e) the Fund’s most recent Prospectus and Statement of Additional Information; and

(f) the Investment Management Agreement between the Fund and FAV.

FAV will furnish TIC, LLC with copies of all amendments of or supplements to the foregoing documents.

6. TIC, LLC will treat confidentially and as proprietary information of the Fund all records and other information relative to the Fund and prior, present or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Fund, which approval shall not be unreasonably withheld and may not be withheld where TIC, LLC may be exposed to civil or criminal contempt proceedings for failure to comply when requested to divulge such information by duly constituted authorities, or when so requested by the Fund.

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7. (a) FAV shall pay a monthly fee in cash to TIC, LLC of [insert applicable fee] of the fees FAV receives for providing investment management services to the Fund, which fee shall be payable on the first business day of each month in each year as compensation for the services rendered and obligations assumed by TIC, LLC during the preceding month. The advisory fee under this Agreement shall be payable on the first business day of the first month following the effective date of this Agreement, and shall be reduced by the amount of any advance payments made by FAV relating to the previous month.

(b) FAV and TIC, LLC shall share equally in any voluntary reduction or waiver by FAV of the management fee due FAV under the Investment Management Agreement between FAV and the Fund.

(c) If this Agreement is terminated prior to the end of any month, the monthly fee shall be prorated for the portion of any month in which this Agreement is in effect which is not a complete month according to the proportion which the number of calendar days in the month during which the Agreement is in effect bears to the total number of calendar days in the month, and shall be payable within 10 days after the date of termination.

8. Nothing herein contained shall be deemed to relieve or deprive the Board of its responsibility for and control of the conduct of the affairs of the Fund.

9. (a) In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations or duties hereunder on the part of TIC, LLC, neither TIC, LLC nor any of its directors, officers, employees or affiliates shall be subject to liability to FAV or the Fund or to any shareholder of the Fund for any error of judgment or mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security by the Fund.

(b) Notwithstanding paragraph 9(a), to the extent that FAV is found by a court of competent jurisdiction, or the SEC or any other regulatory agency to be liable to the Fund or any shareholder (a “liability”), for any acts undertaken by TIC, LLC pursuant to authority delegated as described in Paragraph 1(a), TIC, LLC shall indemnify and save FAV and each of its affiliates, officers, directors and employees (each a “Franklin Indemnified Party”) harmless from, against, for and in respect of all losses, damages, costs and expenses incurred by a Franklin Indemnified Party with respect to such liability, together with all legal and other expenses reasonably incurred by any such Franklin Indemnified Party, in connection with such liability.

(c) No provision of this Agreement shall be construed to protect any director or officer of FAV or TIC, LLC, from liability in violation of Sections 17(h) or (i), respectively, of the 1940 Act.

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10. During the term of this Agreement, TIC, LLC will pay all expenses incurred by it in connection with its activities under this Agreement other than the cost of securities (including brokerage commissions, if any) purchased for the Fund. The Fund and FAV will be responsible for all of their respective expenses and liabilities.

11. This Agreement shall be effective as of the date given above, and shall continue in effect for two years. It is renewable annually thereafter for successive periods not to exceed one year each (i) by a vote of the Board or by the vote of a majority of the outstanding voting securities of the Fund, and (ii) by the vote of a majority of the Trustees of the Trust who are not parties to this Agreement or interested persons thereof, cast in person at a meeting called for the purpose of voting on such approval.

12. This Agreement may be terminated at any time, without payment of any penalty, by the Board or by vote of a majority of the outstanding voting securities of the Fund, upon sixty (60) days’ written notice to FAV and TIC, LLC, and by FAV or TIC, LLC upon sixty (60) days’ written notice to the other party.

13. This Agreement shall terminate automatically in the event of any transfer or assignment thereof, as defined in the 1940 Act, and in the event of any act or event that terminates the Investment management Agreement between FAV and the Fund.

14. In compliance with the requirements of Rule 31a-3 under the 1940 Act, TIC, LLC hereby agrees that all records which it maintains for the Fund are the property of the Fund and further agrees to surrender promptly to the Fund, or to any third party at the Fund’s direction, any of such records upon the Fund’s request. TIC, LLC further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.

15. This Agreement may not be materially amended, transferred, assigned, sold or in any manner hypothecated or pledged without the affirmative vote or written consent of the holders of a majority of the outstanding voting securities of the Fund and may not be amended without the written consent of FAV and TIC, LLC.

16. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby.

17. The terms “majority of the outstanding voting securities” of the Fund and “interested persons” shall have the meanings as set forth in the 1940 Act.

18. This Agreement shall be interpreted in accordance with and governed by the laws of the State of California of the United States of America.

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19. TIC, LLC acknowledges that it has received notice of and accepts the limitations of the Trust’s liability as set forth in its Agreement and Declaration of Trust. TIC, LLC agrees that the Trust’s obligations hereunder shall be limited to the assets of the Fund, and that TIC, LLC shall not seek satisfaction of any such obligation from any shareholders of the Fund nor from any trustee, officer, employee or agent of the Trust.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested by their duly authorized officers.

FRANKLIN ADVISERS, INC.

By:

Title:

TEMPLETON INVESTMENT COUNSEL, LLC

By:

Title:

[Name of Fund] hereby acknowledges and agrees to the provisions of paragraphs 9(a) and 10 of this Agreement.

[NAME OF TRUST on behalf of NAME OF FUND]

By:

Title:

6

EX-10.3

EXHIBIT 10.3

[FORM]

[Name Of Fund Or Trust]

One Franklin Parkway

San Mateo, California 94403-1906

Franklin/Templeton Distributors, Inc.

One Franklin Parkway

San Mateo, CA 94403-1906

Re: Distribution Agreement

Gentlemen:

We, [Name of Fund or Trust], (the “Fund”), [comprise of the series listed on Attachment A (each a “Fund”, and collectively, the “Funds”)] are a Delaware statutory trust operating as an open-end management investment company or “mutual fund”, which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and whose shares are registered under the Securities Act of 1933, as amended (the “1933 Act”). We desire to issue one or more series or classes of our authorized but unissued shares of capital stock or beneficial interest (the “Shares”) to authorized persons in accordance with applicable Federal and State securities laws. The Fund’s Shares may be made available in one or more separate series, each of which may have one or more classes.

You have informed us that your company is registered as a broker-dealer under the provisions of the Securities Exchange Act of 1934, as amended and that your company is a member of the Financial Industry Regulatory Authority. You have indicated your desire to act as the exclusive selling agent and distributor for the Shares. We have been authorized to execute and deliver this Distribution Agreement (“Agreement”) to you by a resolution of our Board of Trustees (“Board”) passed at a meeting at which a majority of Board members, including a majority who are not otherwise interested persons of the Fund and who are not interested persons of our investment adviser, its related organizations or with you or your related organizations, were present and voted in favor of the said resolution approving this Agreement.

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1. Appointment of Underwriter. Upon the execution of this Agreement and in consideration of the agreements on your part herein expressed and upon the terms and conditions set forth herein, we hereby appoint you as the exclusive sales agent for our Shares and agree that we will deliver such Shares as you may sell. You agree to use your best efforts to promote the sale of Shares, but are not obligated to sell any specific number of Shares.

However, the Fund and each series retain the right to make direct sales of its Shares without sales charges consistent with the terms of the then current prospectus and statement of additional information and applicable law, and to engage in other legally authorized transactions in its Shares which do not involve the sale of Shares to the general public. Such other transactions may include, without limitation, transactions between the Fund or any series or class and its shareholders only, transactions involving the reorganization of the Fund or any series, and transactions involving the merger or combination of the Fund or any series with another corporation or trust.

2. Independent Contractor. You will undertake and discharge your obligations hereunder as an independent contractor and shall have no authority or power to obligate or bind us by your actions, conduct or contracts except that you are authorized to promote the sale of Shares. You may appoint sub-agents or distribute through dealers or otherwise as you may determine from time to time, but this Agreement shall not be construed as authorizing any dealer or other person to accept orders for sale or repurchase on our behalf or otherwise act as our agent for any purpose.

3. Offering Price. Shares shall be offered for sale at a price equivalent to the net asset value per share of that series and class plus any applicable percentage of the public offering price as sales commission or as otherwise set forth in our then current prospectus. On each business day on which the New York Stock Exchange is open for business, we will furnish you with the net asset value of the Shares of each available series and class which shall be determined in accordance with our then effective prospectus. All Shares will be sold in the manner set forth in our then effective prospectus and statement of additional information, and in compliance with applicable law.

4. Compensation.

A. Sales Commission. You shall be entitled to charge a sales commission on the sale or redemption, as appropriate, of each series and class of each Fund’s Shares in the amount of any initial, deferred or contingent deferred sales charge as set forth in our then effective prospectus. You may allow any sub-agents or dealers such commissions or discounts from and not exceeding the total sales commission as you shall deem advisable, so long as any such commissions or discounts are set forth in our current prospectus to the extent required by the applicable Federal and State securities laws. You may also make payments to sub-agents or dealers from your own resources, subject to the following conditions: (a) any such payments shall not create any obligation for or recourse against the Fund or any series or class, and (b) the terms and conditions of any such payments are consistent with our prospectus and applicable federal and state securities laws and are disclosed in our prospectus or statement of additional information to the extent such laws may require.

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B. Distribution Plans. You shall also be entitled to compensation for your services as provided in any Distribution Plan adopted as to any series and class of any Fund’s Shares pursuant to Rule 12b-1 under the 1940 Act.

The compensation provided in the Class B Distribution Plan applicable to Class B Shares (the “Class B Plan”) is divided into a distribution fee and a service fee, each of which fees is in compensation for different services to be rendered to the Fund. Subject to the termination provisions in the Class B Plan, the distribution fee with respect to the sale of a Class B Share shall be earned when such Class B Share is sold and shall be payable from time to time as provided in the Class B Plan. The distribution fee payable to you as provided in the Class B Plan shall be payable without offset, defense or counterclaim (it being understood by the parties hereto that nothing in this sentence shall be deemed a waiver by the Fund of any claim the Fund may have against you). You may direct the Fund to cause our custodian to pay such distribution fee to Lightning Finance Company Limited (“LFL”) or other persons providing funds to you to cover expenses referred to in Section 2(a) of the Class B Plan and to cause our custodian to pay the service fee to you to cover expenses referred to in Section 2(b) of the Class B Plan.

We understand that you intend to assign your right to receive certain distribution fees with respect to Class B Shares to LFL in exchange for funds that you will use to cover expenses referred to in Section 2(a) of the Class B Plan. In recognition that we will benefit from your arrangement with LFL, we agree that, in addition to the provisions of Section 7(iii) of the Class B Plan, we will not pay to any person or entity, other than LFL, any such assigned distribution fees related to Class B Shares sold by you prior to the termination of either the Agreement or the Class B Plan. We agree that the preceding sentence shall survive termination of the Agreement.

The compensation provided in the Class C Distribution Plan applicable to Class C Shares (the “Class C Plan”) is divided into a distribution fee and a service fee, each of which fees is in compensation for different services to be rendered to the Fund. Subject to the termination provisions in the Class C Plan, the distribution fee with respect to the sale of a Class C Share shall be earned when such Class C Share is sold and shall be payable from time to time as provided in the Class C Plan shall be payable without offset, defense or counterclaim (it being understood by the parties hereto that nothing in this sentence shall be deemed a waiver by the Fund of any claim the Fund may have against you). You may direct the Fund to cause our custodian to pay such distribution fee to Lightning Finance Company Limited (“LFL”) or other persons providing funds to you to cover expenses referred to in Section 2(a) of the Class C Plan and to cause our custodian to pay the service fee to you to cover expenses referred to in Section 2(b) of the Class C Plan.

We understand that you intend to assign your right to receive certain distribution fees with respect to Class C Shares to LFL in exchange for funds that you will use to cover expenses referred to in Section 2(a) of the Class C Plan. In recognition that we will benefit from your arrangement with LFL, we agree that, in addition to the provisions of Section 7(iii) of the Class C Plan, we will not pay to any person or entity, other than LFL, any such assigned distribution fees related to Class C Shares sold by you prior to the termination of either the Agreement or the Class C Plan. We agree that the preceding sentence shall survive termination of the Agreement.

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C. With respect to the sales commission on the redemption of Shares of each series and class of Fund as provided in Subsection 4.A. above, we will cause our shareholder services agent (the “Transfer Agent”) to withhold from redemption proceeds payable to holders of the Shares all contingent deferred sales charges properly payable by such holders in accordance with the terms of our then current prospectuses and statements of additional information (each such sales charge, a “CDSC”). Upon receipt of an order for redemption, the Transfer Agent shall direct our custodian to transfer such redemption proceeds to a general trust account. We shall then cause the Transfer Agent to pay over to you or your assigns from the general trust account such CDSCs properly payable by such holders as promptly as possible after the settlement date for each such redemption of Shares. CDSCs shall be payable without offset, defense or counterclaim (it being understood that nothing in this sentence shall be deemed a waiver by us of any claim we may have against you.) You may direct that the CDSCs payable to you be paid to any other person.

5. Terms and Conditions of Sales. Shares shall be offered for sale only in those jurisdictions where they have been properly registered or are exempt from registration, and only to those groups of people which the Board may from time to time determine to be eligible to purchase such shares.

6. Orders and Payment for Shares. Orders for Shares shall be directed to the Fund’s shareholder services agent, for acceptance on behalf of the Fund. At or prior to the time of delivery of any of our Shares you will pay or cause to be paid to the custodian of the Fund’s assets, for our account, an amount in cash equal to the net asset value of such Shares. Sales of Shares shall be deemed to be made when and where accepted by the Fund’s shareholder services agent. The Fund’s custodian and shareholder services agent shall be identified in its prospectus.

7. Purchases for Your Own Account. You shall not purchase our Shares for your own account for purposes of resale to the public, but you may purchase Shares for your own investment account upon your written assurance that the purchase is for investment purposes and that the Shares will not be resold except through redemption by us.

8. Sale of Shares to Affiliates. You may sell our Shares at net asset value to certain of your and our affiliated persons pursuant to the applicable provisions of the federal securities statutes and rules or regulations thereunder (the “Rules and Regulations”), including Rule 22d-1 under the 1940 Act, as amended from time to time.

9. Allocation of Expenses. We will pay the expenses:

(a) Of the preparation of the audited and certified financial statements of our company to be included in any Post-Effective Amendments (“Amendments”) to our Registration Statement under the 1933 Act or 1940 Act, including the prospectus and statement of additional information included therein;

(b) Of the preparation, including legal fees, and printing of all Amendments or supplements filed with the Securities and Exchange Commission,

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including the copies of the prospectuses included in the Amendments and the first 10 copies of the definitive prospectuses or supplements thereto, other than those necessitated by your (including your “Parent’s”) activities or Rules and Regulations related to your activities where such Amendments or supplements result in expenses which we would not otherwise have incurred;

(c) Of the preparation, printing and distribution of any reports or communications which we send to our existing shareholders; and

(d) Of filing and other fees to Federal and State securities regulatory authorities necessary to continue offering our Shares.

You will pay the expenses:

(a) Of printing the copies of the prospectuses and any supplements thereto and statements of additional information which are necessary to continue to offer our Shares;

(b) Of the preparation, excluding legal fees, and printing of all Amendments and supplements to our prospectuses and statements of additional information if the Amendment or supplement arises from your (including your “Parent’s”) activities or Rules and Regulations related to your activities and those expenses would not otherwise have been incurred by us;

(c) Of printing additional copies, for use by you as sales literature, of reports or other communications which we have prepared for distribution to our existing shareholders; and

(d) Incurred by you in advertising, promoting and selling our Shares.

10. Furnishing of Information. We will furnish to you such information with respect to each series and class of Shares, in such form and signed by such of our officers as you may reasonably request, and we warrant that the statements therein contained, when so signed, will be true and correct. We will also furnish you with such information and will take such action as you may reasonably request in order to qualify our Shares for sale to the public under the Blue Sky Laws of jurisdictions in which you may wish to offer them. We will furnish you with annual audited financial statements of our books and accounts certified by independent public accountants, with semi-annual financial statements prepared by us, with registration statements and, from time to time, with such additional information regarding our financial condition as you may reasonably request.

11. Conduct of Business. Other than our currently effective prospectus, you will not issue any sales material or statements except literature or advertising which conforms to the requirements of Federal and State securities laws and regulations and which have been filed, where necessary, with the appropriate regulatory authorities. You will furnish us with copies of all such materials prior to their use and no such material shall be published if we shall reasonably and promptly object.

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You shall comply with the applicable Federal and State laws and regulations where our Shares are offered for sale and conduct your affairs with us and with dealers, brokers or investors in accordance with the Conduct Rules of the National Association of Securities Dealers, Inc.

12. Redemption or Repurchase Within Seven Days. If Shares are tendered to us for redemption or repurchase by us within seven business days after your acceptance of the original purchase order for such Shares, you will immediately refund to us the full sales commission (net of allowances to dealers or brokers) allowed to you on the original sale, and will promptly, upon receipt thereof, pay to us any refunds from dealers or brokers of the balance of sales commissions reallowed by you. We shall notify you of such tender for redemption within 10 days of the day on which notice of such tender for redemption is received by us.

13. Other Activities. Your services pursuant to this Agreement shall not be deemed to be exclusive, and you may render similar services and act as an underwriter, distributor or dealer for other investment companies in the offering of their shares.

14. Term of Agreement. This Agreement shall become effective on the date of its execution, and shall remain in effect for a period of two (2) years. The Agreement is renewable annually thereafter, with respect to the Fund or, if the Fund has more than one series, with respect to each series, for successive periods not to exceed one year (i) by a vote of (a) a majority of the outstanding voting securities of the Fund or, if the Fund has more than one series, of each series, or (b) by a vote of the Board, and (ii) by a vote of a majority of the members of the Board who are not parties to the Agreement or interested persons of any parties to the Agreement (other than as members of the Board), cast in person at a meeting called for the purpose of voting on the Agreement.

This Agreement may at any time be terminated by the Fund or by any series without the payment of any penalty, (i) either by vote of the Board or by vote of a majority of the outstanding voting securities of the Fund or any series on 90 days’ written notice to you; or (ii) by you on 90 days’ written notice to the Fund; and shall immediately terminate with respect to the Fund and each series in the event of its assignment.

15. Suspension of Sales. We reserve the right at all times to suspend or limit the public offering of Shares upon two days’ written notice to you.

16. Miscellaneous. This Agreement shall be subject to the laws of the State of California and shall be interpreted and construed to further promote the operation of the Fund as an open-end investment company. This Agreement shall supersede all Distribution Agreements and Amendments previously in effect between the parties. As used herein, the terms “net asset value,” “offering price,” “investment company,” “open-end management investment company,” “assignment,” “principal underwriter,” “interested person,” “Parent,” “affiliated person,” and “majority of the outstanding voting securities” shall have the meanings set forth in the 1933 Act or the 1940 Act and the Rules and Regulations thereunder and the term “assignment” shall have the meaning as set forth in the 1940 Act and the Rules and Regulations thereunder.

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Nothing herein shall be deemed to protect you against any liability to us or to our securities holders to which you would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of your duties hereunder, or by reason of your reckless disregard of your obligations and duties hereunder.

If the foregoing meets with your approval, please acknowledge your acceptance by signing each of the enclosed copies, whereupon this will become a binding agreement as of the date set forth below.

Very truly yours,

[NAME OF FUND OR TRUST]

By:

[NAME]

[TITLE]

Accepted:

Franklin/Templeton Distributors, Inc.

By:

[NAME]

[TITLE]

DATED:                     

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EX-10.5

EXHIBIT 10.5

FORM OF AMENDED AND RESTATED CLASS [B/B1] DISTRIBUTION PLAN

I.	Investment Company:	[TRUST]
II.	Fund:	[FUND(S)]
III.	Maximum Per Annum Rule 12b-1 Fees for Class B Shares (as a percentage of average daily net assets of the class)

A.	Distribution Fee:	[0.75% or 0.50%]
B.	Service Fee:	[0.25% or 0.15%]

Preamble to Amended and Restated Class [B/B1] Distribution Plan

The following Amended and Restated Distribution Plan (the “Amended Plan”) has been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the “1940 Act”), by the Investment Company named above (the “Trust”) for the Class [B/B1] shares (the “Class”) of [the/each] Fund named above ([the/each, a] “Fund”), which amends and restates the prior Distribution Plan (which, together with the Amended Plan are referred to as the “Plan”) which took effect on the date shares of the Class were first offered (the “Effective Date of the Plan”). The Plan has been approved by a majority of the Board of Trustees of the Trust (the “Board”), including a majority of the Board members who are not interested persons (as defined in the 1940 Act) of the Trust and who have no direct, or indirect financial interest in the operation of the Plan or in any of the agreements related to the Plan (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on the Plan.

In reviewing the Plan, the Board considered the schedule and nature of payments and terms of the Investment Management Agreement between the Trust, on behalf of [the/each] Fund, and [ADVISER] (the “Manager”) and the terms of the Distribution Agreement between the Trust, on behalf of [the/each] Fund, and Franklin/Templeton Distributors, Inc. (“Distributors”). The Board concluded that the compensation of the Manager, under the Investment Management Agreement, and of Distributors, under the Distribution Agreement, was fair and not excessive. The approval of the Plan included a determination that in the exercise of the Board’s reasonable business judgment and in light of their fiduciary duties, there is a reasonable likelihood that the Plan will benefit [the/each] Fund and the shareholders of the Class.

The Board recognizes that Distributors has entered into an arrangement with a third party in order to finance the distribution activities of the Class pursuant to which Distributors may assign its rights to the fees payable hereunder to such third party. The Board further recognizes that it has an obligation to act in good faith and in the best interests of [the/each] Fund and its shareholders when considering the continuation or termination of the Plan and any payments to be made thereunder.

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Amended and Restated Distribution Plan

1. (a) The Trust, on behalf of [the/each] Fund, shall pay to Distributors a quarterly fee not to exceed the above-stated maximum distribution fee per annum of the Class’ average daily net assets represented by shares of the Class, as may be determined by the Board from time to time.

(b) In addition to the amounts described in (a) above, the Trust, on behalf of [the/each] Fund, shall pay (i) to Distributors for payment to dealers or others, or (ii) directly to others, an amount not to exceed the above-stated maximum service fee per annum of the Class’ average daily net assets represented by shares of the Class, as may be determined by the Trust’s Board from time to time, as a service fee pursuant to servicing agreements which have been approved from time to time by the Board, including the Independent Trustees.

2. (a) The monies paid to Distributors pursuant to Paragraph 1(a) above shall be treated as compensation for Distributors’ distribution-related services including compensation for amounts advanced to securities dealers or their firms or others selling shares of the Class who have executed an agreement with the Trust, Distributors or its affiliates, which form of agreement has been approved from time to time by the Board, including the Independent Trustees, with respect to the sale of Class shares. In addition, such monies may be used to compensate Distributors for other expenses incurred to assist in the distribution and promotion of shares of the Class. Payments made to Distributors under the Plan may be used for, among other things, the printing of prospectuses and reports used for sales purposes, expenses of preparing and distributing sales literature (and any related expenses), advertisements, and other distribution-related expenses; additional distribution fees paid to securities dealers or their firms or others who have executed agreements with the Trust, Distributors or its affiliates; or certain promotional distribution charges paid to broker-dealer firms or others, or for participation in certain distribution channels (otherwise referred to as marketing support), including business planning assistance, advertising, educating dealer personnel about the Fund and shareholder financial planning needs, placement on dealers’ lists of offered funds, access to sales meetings, sales representatives and management representatives of dealers, participation in and/or presentation at conferences or seminars, sales or training programs for invited registered representatives and other employees, client and investor events and other dealer sponsored events, and ticket charges.

(b) The monies to be paid pursuant to paragraph 1(b) above shall be used to pay dealers or others for, among other things, furnishing personal services and maintaining shareholder or beneficial owner accounts, which services include, among other things, assisting in establishing and maintaining customer accounts and records; assisting with purchase and redemption requests; arranging for bank wires; monitoring dividend payments from the Fund on behalf of customers; forwarding certain shareholder communications from the Fund to customers; receiving and answering correspondence; and aiding in maintaining the investment of their respective customers in the Class. Any amounts paid under this paragraph 2(b) shall be paid pursuant to a servicing or other agreement, which form of agreement has been approved from time to time by the Board.

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3. In addition to the payments which the Trust, on behalf of [the/each] Fund, is authorized to make pursuant to paragraphs 1 and 2 hereof, to the extent that the Trust, on behalf of the Fund, the Manager, Distributors or other parties on behalf of the Fund, the Manager or Distributors make payments that are deemed to be payments by the Fund for the financing of any activity primarily intended to result in the sale of Class shares issued by the Fund within the context of Rule 12b-1 under the 1940 Act, then such payments shall be deemed to have been made pursuant to the Plan.

In no event shall the aggregate payments specified in paragraphs 1 and 2, plus any other payments deemed to be made pursuant to the Plan under this paragraph, exceed the amount permitted to be paid pursuant to the Rules of Conduct of the National Association of Securities Dealers, Inc., or any successor thereto.

4. Distributors shall furnish to the Board, for its review, on a quarterly basis, a written report of the monies paid to it and to others under the Plan, including the purposes thereof, and shall furnish the Board with such other information as the Board may reasonably request in connection with the payments made under the Plan in order to enable the Board to make an informed determination of whether the Plan should be continued.

5. (a) Distributors may assign, transfer or pledge (“Transfer”) to one or more designees (each an “Assignee”), its rights to all or a designated portion of the fees to which it is entitled under paragraph 1 of this Plan from time to time (but not Distributors’ duties and obligations pursuant hereto or pursuant to any distribution agreement in effect from time to time, if any, between Distributors and the Fund), free and clear of any offsets or claims the Fund may have against Distributors. Each such Assignee’s ownership interest in a Transfer of a specific designated portion of the fees to which Distributors is entitled is hereafter referred to as an “Assignee’s 12b-1 Portion.” A Transfer pursuant to this Section 5(a) shall not reduce or extinguish any claims of the Fund against Distributors.

(b) Distributors shall promptly notify the Fund in writing of each such Transfer by providing the Fund with the name and address of each such Assignee.

(c) Distributors may direct the Fund to pay any Assignee’s 12b-1 Portion directly to each Assignee. In such event, Distributors shall provide the Fund with a monthly calculation of the amount to which each Assignee is entitled (the “Monthly Calculation”). In such event, the Fund shall, upon receipt of such notice and Monthly Calculation from Distributors, make all payments required directly to the Assignee in accordance with the information provided in such notice and Monthly Calculation upon the same terms and conditions as if such payments were to be paid to Distributors.

(d) Alternatively, in connection with a Transfer, Distributors may direct the Fund to pay all or a portion of the fees to which Distributors is entitled from time to time to a depository or collection agent designated by any Assignee, which depository or collection agent may be delegated the duty of dividing such fees between the Assignee’s 12b-1 Portion and the balance (such balance, when distributed to Distributors by the depository or collection agent, the “Distributors’ 12b-1 Portion”), in which case only Distributors’ 12b-1 Portion may be subject to offsets or claims the Fund may have against Distributors.

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6. The Plan, and any agreements related to the Plan, shall continue in effect for a period of more than one year only so long as such continuance is specifically approved at least annually by a vote of the Board, and of the Independent Trustees, cast in person at a meeting called for the purpose of voting on the Plan and any related agreements. In determining whether there is a reasonable likelihood that the continuation of the Plan will benefit the Fund and the Class’ shareholders, the Board may, but is not obligated to, consider that Distributors has incurred substantial cost and has entered into an arrangement with a third party in order to finance the distribution activities for the Class.

7. The Plan may be terminated with respect to the Class of a Fund at any time by vote of a majority of the Independent Trustees or by vote of a majority of the outstanding voting securities of the Class, as and to the extent required by the 1940 Act and the rules thereunder, including Rule 18f-3(a)(3). Upon termination of the Plan, the obligation of the Trust, on behalf of the Fund, to make payments pursuant to the Plan shall terminate, and the Trust, on behalf of the Fund, shall not be required to make payments hereunder beyond such termination date with respect to expenses incurred in connection with Class shares sold prior to such termination date, provided, in each case that each of the requirements of a Complete Termination of this Plan in respect of such Class, as defined below, are met. For purposes of this Section 7, a “Complete Termination” of this Plan in respect of the Class shall mean a termination of this Plan in respect of such Class, provided that: (i) the Independent Trustees of the Trust shall have acted in good faith and shall have determined that such termination is in the best interest of the Trust and the shareholders of the Fund and the Class; (ii) and the Trust does not alter the terms of the contingent deferred sales charges applicable to Class shares outstanding at the time of such termination; and (iii) unless Distributors at the time of such termination was in material breach under the distribution agreement in respect of the Fund, the Trust, on behalf of the Fund, shall not, in respect of such Fund, pay to any person or entity, other than Distributors or its designee, either the payments described in paragraph 1(a) or 1(b) or in respect of the Class shares sold by Distributors prior to such termination.

8. Any agreement related to this Plan:

(a) may be terminated at any time, without the payment of any penalty, by vote of a majority of the Independent Trustees or by vote of a majority of the outstanding voting securities of the Class on not more than sixty (60) days’ written notice to any other party to the agreement; and

(b) will automatically terminate in the event of its assignment (as defined in the 1940 Act).

9. The Plan may not be amended to increase materially the amount to be spent for distribution pursuant to Paragraph 1 hereof without approval by a majority of the outstanding voting securities of the Class (as and to the extent required by the 1940 Act and the rules thereunder, including Rule 18f-3(a)(3)).

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10. All material amendments to the Plan shall be approved by a vote of the Board, and of the Independent Trustees, cast in person at a meeting called for the purpose of voting on the Plan.

11. So long as the Plan is in effect, the Board shall satisfy the fund governance standards included in Rule 0-1(a)(7) under the 1940 Act, including that the selection and nomination of the Trust’s trustees who are not interested persons of the Trust (as defined in the 1940 Act) shall be committed to the discretion of such incumbent trustees who are not interested persons of the Trust.

This Amended Plan and the terms and provisions thereof are hereby accepted and agreed to by the Trust, on behalf of the Class of [each of] the Fund[s, respectively], and Distributors as evidenced by their execution hereof.

[TRUST]

on behalf of [FUND(S)]

By:

FRANKLIN/TEMPLETON DISTRIBUTORS, INC.

By:

Dated:

5

EX-10.6

EXHIBIT 10.6

FORM OF AMENDED AND RESTATED CLASS C DISTRIBUTION PLAN

I.	Investment Company:	[TRUST]
II.	Fund:	[FUND(S)]
III.	Maximum Per Annum Rule 12b-1 Fees for Class C Shares (as a percentage of average daily net assets of the class)

A.	Distribution Fee:	[0.75% or 0.50%]
B.	Service Fee:	[0.25% or 0.15%]

Preamble to Amended and Restated Class C Distribution Plan

The following Amended and Restated Distribution Plan (the “Amended Plan”) has been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the “1940 Act”), by the Investment Company named above (the “Trust”) for the Class C shares (the “Class”) of [the/each] Fund named above ([the/each, a] “Fund”), which amends and restates the prior Distribution Plan (which, together with the Amended Plan are referred to as the “Plan”) which took effect on the date shares of the Class were first offered (the “Effective Date of the Plan”). The Plan has been approved by a majority of the Board of Trustees of the Trust (the “Board”), including a majority of the Board members who are not interested persons (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related to the Plan (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on the Plan.

In reviewing the Plan, the Board considered the schedule and nature of payments and terms of the Investment Management Agreement between the Trust, on behalf of [the/each] Fund, and [ADVISER] (the “Manager”) and the terms of the Distribution Agreement between the Trust, on behalf of [the/each] Fund, and Franklin/Templeton Distributors, Inc. (“Distributors”). The Board concluded that the compensation of the Manager under the Investment Management Agreement, and of Distributors, under the Distribution Agreement, was fair and not excessive. The approval of the Plan included a determination that in the exercise of their reasonable business judgment and in light of their fiduciary duties, there is a reasonable likelihood that the Plan will benefit [the/each] Fund and the shareholders of the Class.

Amended and Restated Distribution Plan

1. (a) The Trust, on behalf of [the/each] Fund, shall pay to Distributors a quarterly fee not to exceed the above-stated maximum distribution fee per annum of the Class’ average daily net assets represented by shares of the Class, as may be determined by the Board from time to time.

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(b) In addition to the amounts described in (a) above, the Trust, on behalf of [the/each] Fund, shall pay (i) to Distributors for payment to dealers or others, or (ii) directly to others, an amount not to exceed the above-stated maximum service fee per annum of the Class’ average daily net assets represented by shares of the Class, as may be determined by the Trust’s Board from time to time, as a service fee pursuant to servicing agreements which have been approved from time to time by the Board, including the Independent Trustees.

2. (a) The monies paid to Distributors pursuant to Paragraph 1(a) above shall be treated as compensation for Distributors’ distribution-related services including compensation for amounts advanced to securities dealers or their firms or others selling shares of the Class who have executed an agreement with the Trust, Distributors or its affiliates, which form of agreement has been approved from time to time by the Board, including the Independent Trustees, with respect to the sale of Class shares. In addition, Distributors may use such monies paid to it pursuant to Paragraph 1(a) above to assist in the distribution and promotion of shares of the Class. Such payments made to Distributors under the Plan may be used for, among other things, the printing of prospectuses and reports used for sales purposes, expenses of preparing and distributing sales literature (and any related expenses), advertisements, and other distribution-related expenses; additional distribution fees paid to securities dealers or their firms or others who have executed agreements with the Trust, Distributors or its affiliates; or certain promotional distribution charges paid to broker-dealer firms or others, or for participation in certain distribution channels (otherwise referred to as marketing support), including business planning assistance, advertising, educating dealer personnel about the Fund and shareholder financial planning needs, placement on dealers’ lists of offered funds, access to sales meetings, sales representatives and management representatives of dealers, participation in and/or presentation at conferences or seminars, sales or training programs for invited registered representatives and other employees, client and investor events and other dealer sponsored events, and ticket charges.

(b) The monies to be paid pursuant to paragraph 1(b) above shall be used to pay dealers or others for, among other things, furnishing personal services and maintaining shareholder or beneficial owner accounts, which services include, among other things, assisting in establishing and maintaining customer accounts and records; assisting with purchase and redemption requests; arranging for bank wires; monitoring dividend payments from the Fund on behalf of customers; forwarding certain shareholder communications from the Fund to customers; receiving and answering correspondence; and aiding in maintaining the investment of their respective customers in the Class. Any amounts paid under this paragraph 2(b) shall be paid pursuant to a servicing or other agreement, which form of agreement has been approved from time to time by the Board.

3. In addition to the payments which the Trust, on behalf of [the/each] Fund, is authorized to make pursuant to paragraphs 1 and 2 hereof, to the extent that the Trust, on behalf of [the/each] Fund, the Manager, Distributors or other parties on behalf of the Fund, the Manager or Distributors make payments that are deemed to be payments by the Fund for the financing of any activity primarily intended to result in the sale of Class shares issued by the Fund within the context of Rule 12b-1 under the 1940 Act, then such payments shall be deemed to have been made pursuant to the Plan.

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In no event shall the aggregate payments specified in paragraphs 1 and 2, plus any other payments deemed to be made pursuant to the Plan under this paragraph, exceed the amount permitted to be paid pursuant to Rules of the Conduct Rules of the National Association of Securities Dealers, Inc., or any successor thereto.

4. Distributors shall furnish to the Board, for its review, on a quarterly basis, a written report of the monies paid to it and to others under the Plan, including the purposes thereof, and shall furnish the Board with such other information as the Board may reasonably request in connection with the payments made under the Plan in order to enable the Board to make an informed determination of whether the Plan should be continued.

5. The Plan, and any agreements related to the Plan, shall continue in effect for a period of more than one year only so long as such continuance is specifically approved at least annually by a vote of the Board, and of the Independent Trustees, cast in person at a meeting called for the purpose of voting on the Plan and any related agreements.

6. The Plan may be terminated with respect to the Class of a Fund at any time by vote of a majority of the Independent Trustees or by a vote of a majority outstanding voting securities of the Class, as and to the extent required by the 1940 Act and the rules thereunder, including Rule 18f-3(a)(3).

7. Any agreement related to this Plan:

(a) may be terminated at any time, without the payment of any penalty, by vote of a majority of the Independent Trustees or by vote of a majority of the outstanding voting securities of the Class on not more than sixty (60) days’ written notice to any other party to the agreement; and

(b) will automatically terminate in the event of its assignment (as defined in the 1940 Act).

8. The Plan may not be amended to increase materially the amount to be spent for distribution pursuant to Paragraph 1 hereof without approval by a majority of the outstanding voting securities of the Class (as and to the extent required by the 1940 Act and the rules thereunder, including Rule 18f-3(a)(3)).

9. All material amendments to the Plan shall be approved by a vote of the Board, and of the Independent Trustees, cast in person at a meeting called for the purpose of voting on the Plan.

10. So long as the Plan is in effect, the Board shall satisfy the fund governance standards included in Rule 0-1(a)(7) under the 1940 Act, including that the selection and nomination of the Trust’s trustees who are not interested persons of the Trust (as defined in the 1940 Act) shall be committed to the discretion of such incumbent trustees who are not interested persons of the Trust.

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This Amended Plan and the terms and provisions thereof are hereby accepted and agreed to by the Trust, on behalf of the Class of [each of] the Fund[s, respectively], and Distributors as evidenced by their execution hereof.

[TRUST]

on behalf of [FUND(S)]

By:

Title:

FRANKLIN/TEMPLETON DISTRIBUTORS, INC.

By:

Title:

Dated:

4

EX-10.7

EXHIBIT 10.7

FORM OF AMENDED AND RESTATED CLASS R DISTRIBUTION PLAN

I.	Investment Company:	[TRUST]
II.	Fund:	[FUND(S)]
III.	Maximum Per Annum Rule 12b-1 Fees for Class R Shares (as a percentage of average daily net assets of the class): 0.50%

Preamble to Amended and Restated Class R Distribution Plan

The following Amended and Restated Distribution Plan (the “Amended Plan”) has been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the “1940 Act”), by the Investment Company named above (the “Trust”) for the Class R shares (the “Class”) of [the/each] Fund named above ([the/each a] “Fund”), which amends and restates the prior Distribution Plan (which, together with the Amended Plan are referred to as the “Plan”) which took effect on the date shares of the Class were first offered (the “Effective Date of the Plan”). The Plan has been approved by a majority of the Board of Trustees of the Trust (the “Board”), including a majority of the Board members who are not interested persons (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of the Plan or in any of the agreements related to the Plan (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on the Plan.

In reviewing the Plan, the Board considered the schedule and nature of payments and terms of the Investment Management Agreement between the Trust, on behalf of [the/each] Fund, and [ADVISER] (the “Manager”) and the terms of the Distribution Agreement between the Trust, on behalf of [the/each] Fund, and Franklin/Templeton Distributors, Inc. (“Distributors”). The Board concluded that the compensation of the Manager, under the Investment Management Agreement, and of Distributors, under the Distribution Agreement, was fair and not excessive. The approval of the Plan included a determination that in the exercise of their reasonable business judgment and in light of their fiduciary duties, there is a reasonable likelihood that the Plan will benefit [the/each] Fund and the shareholders of the Class.

Amended and Restated Distribution Plan

1. The Trust, on behalf of [the/each] Fund, shall pay to Distributors as compensation for its services or for payment by Distributors to dealers or others, or the Fund shall pay directly to others, a quarterly fee not to exceed the above-stated maximum fee per annum of the Class’ average daily net assets represented by shares of the Class, as may be determined by the Trust’s Board from time to time, as distribution and/or service fees (subject to the maximum set forth in III. above) pursuant to distribution and servicing agreements which have been approved from time to time by the Board, including the Independent Trustees.

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2. (a) The monies paid to Distributors pursuant to Paragraph 1 above may be treated as compensation for Distributors’ distribution-related services including compensation for amounts advanced to securities dealers or their firms or others (including retirement plan recordkeepers) selling shares of the Class who have executed an agreement with the Trust, Distributors or its affiliates, which form of agreement has been approved from time to time by the Board, including the Independent Trustees, with respect to the sale of Class shares. In addition, Distributors may use such monies paid to it pursuant to Paragraph 1 above to assist in the distribution and promotion of shares of the Class. Such payments made to Distributors under the Plan may be used for, among other things, the printing of prospectuses and reports used for sales purposes, expenses of preparing and distributing sales literature (and any related expenses), advertisements, and other distribution-related expenses; additional distribution fees paid to securities dealers or their firms or others (including retirement plan recordkeepers) who have executed agreements with the Trust, Distributors or its affiliates; or certain promotional distribution charges paid to broker-dealer firms or others, or for participation in certain distribution channels (otherwise referred to as marketing support), including business planning assistance, advertising, educating dealer personnel about the Fund and shareholder financial planning needs, placement on dealers’ lists of offered funds, access to sales meetings, sales representatives and management representatives of dealers, participation in and/or presentation at conferences or seminars, sales or training programs for invited registered representatives and other employees, client and investor events and other dealer sponsored events, and ticket charges.

(b) The monies paid to Distributors or others pursuant to paragraph 1 above may also be used to pay Distributors, dealers or others (including retirement plan recordkeepers) for, among other things, furnishing personal services and maintaining shareholder or beneficial owner accounts, which services include, among other things, assisting in establishing and maintaining customer accounts and records; assisting with purchase and redemption requests; arranging for bank wires; monitoring dividend payments from the Fund on behalf of customers; forwarding certain shareholder communications from the Fund to customers; receiving and answering correspondence; and aiding in maintaining the investment of their respective customers in the Class. Any amounts paid under this paragraph 2(b) shall be paid pursuant to a servicing or other agreement, which form of agreement has been approved from time to time by the Board.

3. In addition to the payments which the Trust, on behalf of [the/each] Fund, is authorized to make pursuant to paragraphs 1 and 2 hereof, to the extent that the Trust, on behalf of [the/each] Fund, the Manager, Distributors or other parties on behalf of the Fund, the Manager or Distributors make payments that are deemed to be payments by the Fund for the financing of any activity primarily intended to result in the sale of Class shares issued by the Fund within the context of Rule 12b-1 under the 1940 Act, then such payments shall be deemed to have been made pursuant to the Plan.

In no event shall the aggregate payments specified in paragraphs 1 and 2, plus any other payments deemed to be made pursuant to the Plan under this paragraph, exceed the amount permitted to be paid pursuant to the Conduct Rules of the National Association of Securities Dealers, Inc., or any successor thereto.

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4. Distributors shall furnish to the Board, for its review, on a quarterly basis, a written report of the monies paid to it and to others under the Plan, including the purposes thereof, and shall furnish the Board with such other information as the Board may reasonably request in connection with the payments made under the Plan in order to enable the Board to make an informed determination of whether the Plan should be continued.

5. The Plan, and any agreements related to the Plan, shall continue in effect for a period of more than one year only so long as such continuance is specifically approved at least annually by a vote of the Board, and of the Independent Trustees, cast in person at a meeting called for the purpose of voting on the Plan and any related agreements.

6. The Plan may be terminated with respect to the Class of a Fund at any time by vote of a majority of the Independent Trustees or by vote of a majority of the outstanding voting securities of the Class, as and to the extent required by the 1940 Act and the rules thereunder, including Rule 18f-3(a)(3).

7. Any agreement related to this Plan:

(a) may be terminated at any time, without the payment of any penalty, by vote of a majority of the Independent Trustees or by vote of a majority of the outstanding voting securities of the Class on not more than sixty (60) days’ written notice to any other party to the agreement; and

(b) will automatically terminate in the event of its assignment (as defined in the 1940 Act).

8. The Plan may not be amended to increase materially the amount to be spent for distribution pursuant to Paragraph 1 hereof without approval by a majority of the Fund’s outstanding voting securities of the Class (as and to the extent required by the 1940 Act and the rules thereunder, including Rule 18f-3(a)(3)).

9. All material amendments to the Plan shall be approved by a vote of the Board, and of the Independent Trustees, cast in person at a meeting called for the purpose of voting on the Plan.

10. So long as the Plan is in effect, the Board shall satisfy the fund governance standards included in Rule 0-1(a)(7) under the 1940 Act, including that the selection and nomination of the Trust’s trustees who are not interested persons of the Trust (as defined in the 1940 Act) shall be committed to the discretion of such incumbent trustees who are not interested persons of the Trust.

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This Amended Plan and the terms and provisions thereof are hereby accepted and agreed to by the Trust, on behalf of the Class of [each of] the Fund[s, respectively], and Distributors as evidenced by their execution hereof.

[TRUST]

on behalf of [FUND(S)]

By:

Title:

FRANKLIN/TEMPLETON DISTRIBUTORS, INC.

By:

Title:

Dated:

4

EX-10.8

EXHIBIT 10.8

FORM OF AMENDED AND RESTATED CLASS [2, 3, 4] DISTRIBUTION PLAN

I.	Investment Company:	Franklin Templeton Variable Insurance Products Trust
II.	Funds:	[Name of Fund (s)]

Preamble to Amended and Restated Class [2, 3, 4] Distribution Plan

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (the “Trust”) is an open-end management investment company organized as a Delaware statutory trust, which offers the shares of beneficial interest of its series named above (each, a “Fund”) to certain: (i) life insurance companies (“Insurance Companies”), for allocation to certain of their separate accounts established for the purpose of funding variable annuity contracts and variable life insurance policies (collectively, “Variable Contracts”); and (ii) funds of funds and other permitted investors.

The following Amended and Restated Distribution Plan (the “Amended Plan”) has been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the “1940 Act”), by the Trust for the use of the Class [2, 3, 4] shares of each Fund, which amends and restates the prior Distribution Plan (which, together with the Amended Plan, are referred to as the “Plan”) which took effect as to a Fund on the date the Class [2, 3, 4] shares of such Fund were first offered for sale (the “Effective Date of the Plan”). The Plan has been approved by a majority of the Board of Trustees of the Trust (the “Board”), including a majority of the Board members who are not interested persons (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related to the Plan (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on such Plan.

The Board’s approval included a determination that in the exercise of their reasonable business judgment and in light of their fiduciary duties, there is a reasonable likelihood that the Plan will benefit each Fund and its Class [2, 3, 4] shareholders.

Amended and Restated Distribution Plan

1. The Trust, on behalf of each Fund, shall pay Franklin/Templeton Distributors, Inc. (“Distributors”), the Insurance Companies or others (subject to the limitations described below) for the promotion and distribution of the Class [2, 3, 4] shares or Variable Contracts offering Class [2, 3, 4] shares of the Fund, as well as for shareholder services provided to existing Class [2, 3, 4] shareholders of the Fund or owners of Variable Contracts offering Class [2, 3, 4] shares. Distribution expenses may include, but are not limited to, the printing of prospectuses and reports used for sales purposes; preparing and distributing sales literature (and any related expenses); advertisements; education of Variable Contract owners or dealers and their representatives; payments to certain dealers who participate in the offering of variable insurance products that invest in the Fund, including business planning assistance, advertising, educating dealer personnel about the Fund and shareholder financial planning needs, placement on the dealer’s list of offered funds, and access to sales meetings, sales representatives and management representatives of the dealer; and other distribution-related expenses. Shareholder service expenses may include, but are not limited to, payments made to Insurance Companies, dealers or others that are, among other things, service fees as defined under NASD rules, or for furnishing personal services or such other enhanced services a Fund shareholder or a Variable Contract owner may require, or maintaining customer accounts and records. Agreements for the payment of fees to the Insurance Companies or others shall be in a form that has been approved from time to time by the Board, including the Independent Trustees.

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2. The maximum amount that may be paid by each Fund shall be [0.35]% per annum of the average daily net assets represented by such Fund’s Class [2, 3, 4] shares. These payments shall be made quarterly by each Fund to Distributors, the Insurance Companies or others. Expenses in excess of these maximum annual rates that otherwise qualify for payment shall not be carried forward into successive annual periods.

3. In no event shall the aggregate payments deemed to be made pursuant to the Plan exceed the amount permitted to be paid pursuant to the Rules of Conduct of the National Association of Securities Dealers, Inc., or any successors thereto.

4. Distributors shall furnish to the Board for its review, on a quarterly basis, a written report of the monies paid to it, to the Insurance Companies and to others under the Plan, including the purposes thereof, and shall furnish the Board with such other information as the Board may reasonably request in connection with the payments made under the Plan in order to enable the Board to make an informed determination of whether the Plan should be continued.

5. The Plan, and any agreements related to the Plan, shall continue in effect for a period of more than one year with respect to a Fund only so long as such continuance is specifically approved for the Fund at least annually by a vote of the Board, including the Independent Trustees, cast in person at a meeting called for the purpose of voting on the Plan and any related agreements.

6. The Plan may be terminated with respect to the Class [2, 3, 4] shares of a Fund at any time by vote of a majority of the Independent Trustees or by vote of a majority of the outstanding Class [2, 3, 4] shares of such Fund, as and to the extent required by the 1940 Act and the rules thereunder, including Rule 18f-3(a)(3).

7. Any agreement related to this Plan:

(a) may be terminated with respect to the Class [2, 3, 4] shares of a Fund at any time, without the payment of any penalty, by vote of a majority of the Independent Trustees or by vote of a majority of the outstanding Class [2, 3, 4] shares of such Fund on not more than sixty (60) days’ written notice to any other party to the agreement; and

(b) will automatically terminate in the event of its assignment (as defined in the 1940 Act).

8. The Plan for a Fund may not be amended for such Fund to increase materially the amount to be spent for distribution by the Fund pursuant to Paragraph 2 hereof without approval by a majority of such Fund’s outstanding Class [2, 3, 4] shares (as and to the extent required by the 1940 Act and the rules thereunder, including Rule 18f-3(a)(3)).

9. All material amendments to the Plan for any Fund shall be approved for such Fund by a vote of the Board and of the Independent Trustees, cast in person at a meeting called for the purpose of voting on the Plan.

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10. So long as the Plan is in effect, the Board shall satisfy the fund governance standards included in Rule 0-1(a)(7) under the 1940 Act, including that the selection and nomination of the Trust’s trustees that are not interested persons of the Trust (as defined in the 1940 Act) shall be committed to the discretion of such Trustees who are not interested persons of the Trust.

The Plan and the terms and provisions thereof are hereby accepted and agreed to by the Trust, on behalf of each of the Funds, respectively, and Distributors as evidenced by their execution hereof.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

By:
	[                                                                                    ]
Title:	[                                                                                    ]
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
	[                                                                                    ]
Title:	[                                                                                    ]
Date:

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EX-10.9

EXHIBIT 10.9

FRANKLIN TEMPLETON INVESTOR SERVICES, LLC

AMENDED AND RESTATED

TRANSFER AGENT AND SHAREHOLDER SERVICES AGREEMENT

Investment Company:             [NAME OF TRUST OR CORPORATION]

Date:

The parties to this Agreement are the Investment Company named above (“Investment Company”), an open-end investment company registered as such under the Investment Company Act of 1940 (“1940 Act”), on behalf of each class of shares of each series of the Investment Company which now exists or may hereafter be created (individually, a “Fund” and collectively, the “Funds”) and FRANKLIN TEMPLETON INVESTOR SERVICES, LLC (“FTIS”), a registered transfer agent formerly known as Franklin Administrative Services, Inc. This Agreement supersedes prior Shareholder Services Agreements between the parties, as stated below in section 16(d).

WITNESSETH:

That, for and in consideration of the mutual promises hereinafter set forth, the Investment Company and FTIS agree as follows:

1. Definitions. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:

(a) “Articles” shall mean the Articles of Incorporation, Declaration of Trust or Agreement of Limited Partnership, as appropriate, of the Investment Company as the same may be amended from time to time;

(b) “Authorized Person” shall be deemed to include any person, whether or not such person is an officer or employee of the Investment Company, duly authorized to give Oral Instructions or Written Instructions on behalf of the Investment Company, as indicated in a resolution of the Investment Company’s Board which was valid at the time of this Agreement, or as indicated in a certificate furnished to FTIS pursuant to Section 4(c) hereof;

(c) “Board” shall mean the Investment Company’s Board of Directors, Board of Trustees or Managing General Partners, as appropriate;

(d) “Custodian” shall mean a custodian and any sub-custodian of securities and other property which the Investment Company may from time to time deposit, or cause to be deposited or held under the name or account of such custodian pursuant to the Custody Agreement;

(e) “Oral Instructions” shall mean instructions (including without limitation instructions received by telephone, facsimile, electronic mail or other electronic mail), other than written instructions, actually received by FTIS from a person reasonably believed by FTIS to be an Authorized Person;

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(f) “Shares” shall mean shares of each class of capital stock, beneficial interest or limited partnership interest, as appropriate, of each series of the Investment Company; and

(g) “Written Instructions” shall mean a written communication signed by a person reasonably believed by FTIS to be an Authorized Person and actually received by FTIS.

2. Appointment of FTIS. The Investment Company hereby appoints FTIS as transfer agent for Shares of the Investment Company, as service agent in connection with dividend and distribution functions, and as shareholder servicing agent for the Investment Company, and FTIS accepts such appointment and agrees to perform the following duties.

3. Compensation.

(a) Payment to FTIS:

(i) Compensation for Servicing: The Investment Company will compensate FTIS for the performance of its services in accordance with the fees set forth in the written schedule of fees annexed hereto as Schedule A and incorporated herein. FTIS will bill the Investment Company as soon as practicable after the end of each calendar month, in accordance with Schedule A. The Investment Company will promptly pay to FTIS the amount of such billing.

(ii) Reimbursement for Out-of-Pocket Expenses: The Investment Company will reimburse FTIS for out-of-pocket disbursements paid to third parties by FTIS in the performance of its obligations hereunder including, but not limited to, the items specified in the written schedule of out-of-pocket expenses paid to third parties annexed hereto as Schedule B and incorporated herein. Unspecified out-of-pocket expenses shall be limited to those out-of-pocket expenses reasonably incurred by FTIS in the performance of its obligations hereunder, subject to approval by the Board. Reimbursement by the Investment Company for out-of-pocket disbursements paid by FTIS in any month shall be made as soon as practicable after the receipt of an itemized bill from FTIS.

(b) Beneficial Owner Servicing Fees to Third Parties: Subject to the limitation set forth in paragraph (d) below, the Investment Company will reimburse FTIS for servicing fee payments (“Beneficial Owner Servicing Fees”) made by FTIS on the Investment Company’s behalf to institutions that purchase and hold the Investment Company’s shares in the institution’s name, or in the name of an affiliate, nominee or other designated entity, through a master fund level account (“Omnibus Account”) on behalf of numerous “Beneficial Owners”. For purposes of this Agreement, (i) “Beneficial Owner” means each person with an indirect interest in fund shares issued and recorded in an Omnibus Account; and (ii) a person will be deemed to have an “indirect interest” in a fund’s shares if the value of the person’s interest changes directly in relation to changes in the net asset value of the fund’s shares.

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(c) Networked Account Servicing Fees to Third Parties: Subject to the limitation set forth in paragraph (d) below, the Investment Company will reimburse FTIS for servicing fee payments (“Networked Account Servicing Fees”) made by FTIS on the Investment Company’s behalf to an institution for each Fund account (a “Networked Account”) maintained by FTIS in which servicing is shared with that institution by the exchange of account data through the National Securities Clearing Corporation (NSCC) networking system.

(d) Maximum Reimbursement Amount for Beneficial Owner Servicing Fees and Networked Account Servicing Fees. The Investment Company authorizes FTIS to negotiate Beneficial Owner Servicing Fees and Networked Account Servicing Fees on the Investment Company’s behalf and shall reimburse FTIS for those fees negotiated and paid up to the “Maximum Reimbursement Amount”. The Maximum Reimbursement Amount for each fiscal year of the Investment Company, calculated on the basis of all Omnibus Accounts, Participant Directed Plans and all Networked Accounts open during that fiscal year, shall equal the total amount (including out-of-pocket expenses) that would otherwise have been payable by the Investment Company to FTIS under the terms of this Agreement if (i) all Beneficial Owners for which Beneficial Owner Servicing fees were paid had been Full Service Accounts (as defined in Schedule A); and (ii) all Networked Accounts for which Networked Account Servicing Fees were paid had been Full Service Accounts.

(e) Compensation Adjustments. Any compensation agreed to hereunder may be adjusted from time to time by mutual agreement by attaching revised Schedules A or B to this Agreement.

4. Documents. In connection with the appointment of FTIS, the Investment Company shall, within a reasonable period of time for FTIS to prepare to perform its duties hereunder, deliver to FTIS the following documents:

(a) If applicable, specimens of the certificates for the Shares;

(b) All account application forms and other documents relating to Shareholder accounts or to any plan, program or service offered by the Investment Company;

(c) A certificate identifying the Authorized Persons and specimen signatures of Authorized Persons who will sign Written Instructions; and

(d) All documents and papers necessary under the laws of the Investment Company’s state of domicile, under the Investment Company’s Articles, and as may be required for the due performance of FTIS’s duties under this Agreement or for the due performance of additional duties as may from time to time be agreed upon between the Investment Company and FTIS.

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5. Duties of the Transfer Agent. FTIS shall be responsible for administering and/or performing transfer agent functions; for acting as service agent in connection with dividend and distribution functions; and for performing shareholder account and administrative agent functions in connection with the issuance, transfer, exchange, redemption or repurchase (including coordination with the Custodian) of Shares. FTIS shall be bound to follow its usual and customary operating standards and procedures, as they may be amended from time to time, and each current prospectus and Statement of Additional Information (hereafter, collectively, the “prospectus”) of the Investment Company. Without limiting the generality of the foregoing, FTIS agrees to perform the specific duties listed on Schedule C.

The duties to be performed by FTIS shall not include the engagement, supervision or compensation of any service providers, or any registrations or fees of any kind, which are required by the laws of any foreign country in which the Fund may choose to invest portfolio assets or sell Shares.

6. (a) Distributions Payable in Shares. In the event that the Board of the Investment Company shall declare a distribution payable in Shares, the Investment Company shall deliver to FTIS written notice of such declaration signed on behalf of the Investment Company by an officer thereof, upon which FTIS shall be entitled to rely for all purposes, certifying (i) the number of Shares involved, and (ii) that all appropriate action has been taken to effect such distribution.

(b) Distributions Payable in Cash; Redemption Payments. In the event that the Board of the Investment Company shall declare a distribution payable in cash, the Investment Company shall deliver to FTIS written notice of such declaration signed on behalf of the Investment Company by an officer thereof, upon which FTIS shall be entitled to rely for all purposes, certifying (i) the amount per share to be distributed, (ii) the record and payment dates for the distribution, and (iii) that all appropriate action has been taken to effect such distribution. Once the amount and validity of any dividend or redemption payments to shareholders have been determined, the Investment Company shall transfer the payment amounts from the Investment Company’s accounts to an account or accounts held in the name of FTIS, as paying agent for the shareholders, in accordance with any applicable laws or regulations, and FTIS shall promptly cause payments to be made to the shareholders.

7. Recordkeeping and Other Information. FTIS shall create, maintain and preserve all necessary records in accordance with all applicable laws, rules and regulations. Such records are the property of the Investment Company, and FTIS will promptly surrender them to the Investment Company upon request or upon termination of this Agreement. In the event of such a request or termination, FTIS shall be entitled to make and retain copies of all records surrendered, and to be reimbursed by the Investment Company for reasonable expenses actually incurred in making such copies. FTIS will take reasonable actions to maintain the confidentiality of the Investment Company’s records, which may nevertheless be disclosed to the extent required by law or by this Agreement, or to the extent permitted by the Investment Company.

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8. Other Duties. In addition, FTIS shall perform such other duties and functions, and shall be paid such amounts therefor, as may from time to time be agreed upon in writing between the Investment Company and FTIS. Such other duties and functions shall be reflected in a written amendment to Schedule C, and the compensation for such other duties and functions shall be reflected in a written amendment to Schedule A.

9. Reliance by Transfer Agent; Instructions.

(a) FTIS will be protected in acting upon Written or Oral Instructions reasonably believed to have been executed or orally communicated by an Authorized Person and will not be held to have any notice of any change of authority of any person until receipt of a Written Instruction thereof from an officer of the Investment Company. FTIS will also be protected in processing Share certificates which it reasonably believes to bear the proper manual or facsimile signatures of the officers of the Investment Company and the proper countersignature of FTIS.

(b) At any time FTIS may apply to any Authorized Person of the Investment Company for Written Instructions, or may seek advice at the Investment Company’s expense from legal counsel for the Investment Company, with respect to any matter arising in connection with this Agreement. FTIS shall not be liable for any action taken or not taken or suffered by it in good faith in accordance with such Written Instructions or in accordance with the opinion of counsel for the Investment Company. Written Instructions requested by FTIS will be provided by the Investment Company within a reasonable period of time.

10. Acts of God, etc. FTIS will not be liable or responsible for delays or errors by reason of circumstances beyond its control, including acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdown beyond its control, earthquake, flood or catastrophe, acts of God, insurrection, war, riots or failure beyond its control of transportation, communication or power supply.

11. Duty of Care and Indemnification. FTIS will indemnify the Investment Company against and hold it harmless from any and all losses, claims, damages, liabilities or expenses (including reasonable counsel fees and expenses) resulting from any claim, demand, action or suit resulting from willful misfeasance, bad faith or gross negligence on the part of FTIS, and arising out of, or in connection with, its duties hereunder. However, FTIS shall have no liability for or obligation to indemnify the Investment Company against any losses, claims, damages, liabilities or expenses (including reasonable counsel fees and expenses) incurred by the Investment Company as a result of: (i) any action taken in accordance with Written or Oral Instructions; (ii) any action taken in accordance with written or oral advice reasonably believed by FTIS to have been given by counsel for the Investment Company; (iii) any action taken as a result of any error or omission in any record (including but not limited to magnetic tapes, computer printouts, hard copies and microfilm copies) delivered, or caused to be delivered, by the Investment Company to FTIS in connection with this Agreement; or (iv) any action taken in accordance with shareholder instructions which meet the standards

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described in the Investment Company’s current prospectus, including without limitation oral instructions which meet the standards described in the section of the prospectus dealing with telephone transactions, so long as FTIS believes such instructions to be genuine. The obligations of the parties hereto under this Section shall survive the termination of this Agreement.

12. Term and Termination.

(a) This Agreement shall be effective as of the date first written above, shall continue through December 31, 2009, and thereafter shall continue automatically for successive annual periods ending on December 31 of each year, provided such continuance is specifically approved at least annually by the Investment Company’s Board.

(b) Either party hereto may terminate this Agreement by giving to the other party a notice in writing specifying the date of such termination, which shall be not less than 60 days after the date of receipt of such notice. Upon such termination, FTIS will (i) deliver to such successor a certified list of shareholders of the Investment Company (with names and addresses) and an historical record of the account of each Shareholder and the status thereof; (ii) surrender all other relevant records in accordance with section 7 of this Agreement, above, and (iii) cooperate in the transfer of such duties and responsibilities, including provisions for assistance from FTIS’s personnel in the establishment of books, records and other data by such successor or successors. FTIS shall be entitled to charge the Investment Company a reasonable fee for services rendered and expenses actually incurred in performing its duties under this paragraph.

13. Amendment. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties.

14. Subcontracting. The Investment Company agrees that FTIS may, in its discretion, subcontract for all or any portion of the services described under this Agreement or the Schedules hereto; provided that the appointment of any such agent shall not relieve FTIS of its responsibilities hereunder.

15. Data Processing System, Program and Information.

(a) The Investment Company shall not, solely by virtue of this Agreement, obtain any rights, title and interest in and to the computer systems and programs, including all related documentation, employed by FTIS in connection with rendering services hereunder; provided however, that the records prepared, maintained and preserved by FTIS pursuant to this Agreement shall be the property of the Investment Company.

(b) Any modifications, changes and improvements in the automatic data processing system (the “System”) or in the manner in which the services are rendered shall be made or provided as follows, and provided further that modifications for which the Investment Company will be required to bear any expenses shall be made only as set forth herein.

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(i) FTIS shall, at no expense to the Investment Company, make any revisions in the System necessary to (1) perform the services which it has contracted to perform and (2) create and maintain the records which it has contracted to create and maintain hereunder or (3) enhance or update the System to the extent and in the manner necessary to maintain said System. However, if specific reprogramming, coding or other changes are necessary in the records of the Investment Company or in its shareholder accounts in order to complete a system revision, the costs for completing work specific to the Investment Company shall be subject to a subsequent agreement between the parties. The System is at all times to be competitive with that which is generally available to the mutual fund industry from transfer agents.

(ii) To the extent that the System is modified to comply with changes in the accounting or record-keeping rules applicable to mutual funds, the Investment Company agrees to pay a reasonable pro rata portion of the costs of the design, revision and programming of the System; provided, however, that if the Investment Company’s pro rata portion exceeds $1,000 per 12 month period, the Investment Company’s obligation to pay a reasonable pro rata portion shall be conditioned upon FTIS’s having obtained prior Written Instructions from the Investment Company for any charge. The determination that such modifications or revisions are necessary, and that the System as so modified produces records which comply with the record-keeping requirements, as amended, shall be by mutual agreement; provided, however, that upon written request by the Investment Company, FTIS will provide the Investment Company with a written opinion of counsel to FTIS to the effect that the modifications were required by changes in the applicable laws or regulations and that the System, as modified, complies with the laws or regulations as amended. Upon completion of the changes FTIS shall render a statement to the Investment Company, in reasonably detailed form, identifying the nature of the revisions, the services, expenses and costs, and the basis for determining the Investment Company’s reasonable pro rata portion. Any determination by FTIS of the Investment Company’s pro rata portion based upon the ratio of the number of shareholder accounts of the Investment Company to the total number of shareholder accounts of all clients for which FTIS provides comparable services shall conclusively be presumed to be reasonable unless the nature of the change to the System relates to certain types of shareholder accounts, in which case the pro rata portion will be determined on a mutually agreeable basis.

(iii) If system improvements are requested by the Investment Company and are not otherwise required under this subsection 15(b), FTIS shall be entitled to request a reasonable fee before agreeing to make the improvements and shall be entitled to refuse to make any requested improvements which FTIS reasonably believes to be incompatible with its systems providing services to other funds.

16. Miscellaneous.

(a) Any notice or other instrument authorized or required by this Agreement to be given in writing to the Investment Company or FTIS shall be sufficiently given if addressed to that party and received by it at its office at the place described in the Investment Company’s most recent registration statement or at such other place as it may from time to time designate in writing.

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(b) This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by either party without the written consent of the other party.

(c) This Agreement shall be construed in accordance with the laws of the State of California applicable to contracts between California residents which are to be performed primarily within California.

(d) This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original; but such counterparts shall, together, constitute only one instrument. This Agreement supersedes all prior Shareholder Services Agreements between the parties, and supersedes all prior agreements between the parties relating to the subject matters of this Agreement to the extent they are inconsistent with this Agreement.

(e) The captions of this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.

(f) It is understood and expressly stipulated that neither the holders of Shares of the Investment Company nor any member of the Board, officer, agent or employee of the Investment Company shall be personally liable hereunder, nor shall any resort be had to other private property for the satisfaction of any claim or obligation hereunder, but the Investment Company only shall be liable.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective corporate officers thereunder duly authorized as of the day and year first above written.

	[NAME OF FUND/TRUST]	FRANKLIN TEMPLETON INVESTOR SERVICES, LLC
BY:
NAME:
TITLE:

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SCHEDULE A

ANNUAL BASE SERVICING FEE FOR EACH FULL SERVICE ACCOUNT. A “Full Service Account” is (i) an account maintained by FTIS for a Fund shareholder of record, other than a Networked Account (as defined in Section 3(c) of this Agreement) or an account on which Beneficial Owner Servicing Fees (as defined in Section 3(b) of this Agreement) are paid; or (ii) a Fund account registered to a 529 Portfolio for which FTIS provides 529 Plan investor level record keeping at the 529 Portfolio level and for which the Fund is allocated its pro-rata portion of the Fund’s annual base servicing fee for each 529 Plan investor, which fee is based on the 529 Portfolio’s holding of all Franklin Templeton Funds.

EQUITY FUND	$	24.00 per annum
FIXED INCOME FUND	$	28.00 per annum
MONEY FUND	$	19.50 per annum
CLOSED ACCOUNT	$	3.50 per annum
(pro-rated beginning with the calendar month in which the account is closed and continuing through the month of the following calendar year in which the account is purged from the operative record system)

ANNUAL BASE SERVICING FEE FOR EACH NETWORKED ACCOUNT (as defined in Section 3(c) of this Agreement):

EQUITY FUND	$	12.00 per annum
FIXED INCOME FUND	$	14.00 per annum
MONEY FUND	$	10.00 per annum
CLOSED ACCOUNT	$	3.50 per annum
(pro-rated beginning with the calendar month in which the account is closed and continuing through the month of the following calendar year in which the account is purged from the operative record system)

ANNUAL BASE SERVICING FEE FOR EACH BENEFICIAL OWNER (as defined in Section 3(b) of this Agreement):

OPEN ACCOUNT $ 6.00 per annum

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SCHEDULE B

OUT-OF-POCKET EXPENSES

In addition to Beneficial Owner Servicing Fees and Networked Account Servicing Fees paid in accordance with Section 3 of this Agreement, the Investment Company shall reimburse FTIS monthly for the following out-of-pocket expenses paid to third parties in connection with the servicing of Accounts as required under the terms of this Agreement:

• postage, mailing, freight, forms and stationary expenses associated with the delivery of shareholder communications such as prospectuses, reports, tax information, proxies, shareholder statements and transaction confirmations;

• telephone costs associated with servicing shareholders in accordance with this agreement;

• ACH, Federal Reserve and bank charges for check clearance, electronic funds transfers and wire transfers;

• Data Storage: Retention of electronic and paper account records; costs associated with data storage of account records and transactions records via magnetic tape, microfilm and microfiche;

• insurance against loss of Share certificates when in transit;

• terminals, transmitting lines and any expenses incurred in connection with such terminals and lines established and/or maintained by FTIS to perform its obligations under this agreement;

• Amounts paid to independent accounting firms to perform independent audits of FTIS and the issuance of reports such as a SAS 70;

• Amounts paid in connection with use of national data bases to comply with requirements for locating lost shareholders;

• Proxy solicitation and tabulation expenses;

• NSCC Networking/Commission Settlement Expenses. Costs to utilize NSCC system to send commissions to brokerage firms; NSCC Fee, NSCC Year End Fee, NSF Draft Fee Credit;

• IBM Global Services – Cost of sending out eStatements;

• all other miscellaneous expenses reasonably incurred by FTIS in the performance of its obligations under the Agreement.

This Schedule B may be amended by FTIS upon not less than 30 days’ written notice to the Investment Company, subject to approval by the Board.

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SCHEDULE C

AS TRANSFER AGENT FOR THE INVESTMENT COMPANY, FTIS WILL:

• Upon receipt of proper authorization, record the transfer of Fund shares (“Shares”) in its transfer records in the name(s) of the appropriate legal shareholder(s) of record;

• Upon receipt of proper authorization, redeem Shares, debit shareholder accounts and provide for payment to Shareholders; and

• If the Fund issues certificated Shares, upon receipt of proper authorization, countersign as transfer agent and deliver certificates upon issuance, countersign certificates to reflect ownership transfers, and cancel certificates when redeemed.

AS SHAREHOLDER SERVICE AGENT FOR THE INVESTMENT COMPANY, FTIS WILL:

• Receive from the Investment Company, from the Investment Company’s Principal Underwriter or from a Fund shareholder, in a manner acceptable to FTIS, information necessary to record Share sales and redemptions and to generate sale and/or redemption confirmations;

• Mail, or electronically transmit, sale and/or redemption confirmations;

• Accept and process payments from investors and their broker-dealers or other agents, for the purchase of Shares;

• Support the use of automated systems for payment and other share transactions, such as NSCC Fund/Serv and Networking and other systems which may be reasonably requested by FTIS customers;

• Keep records as necessary to implement any deferred sales charges, exchange restrictions or other policies of the Investment Company affecting Share transactions, including without limitation any restrictions or policies applicable to certain classes of shares, as stated in the applicable prospectus;

• Requisition Shares in accordance with instructions of the Principal Underwriter;

• Open, maintain and close shareholder accounts;

• Establish registration of ownership of Shares in accordance with generally accepted form;

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• Maintain records of (i) issued Shares and (ii) number of Shareholders and their aggregate Shareholdings classified according to their residence in each State of the United States or foreign country;

• Accept and process telephone exchanges and redemptions for Shares in accordance with a Fund’s Telephone Exchange and Redemption Privileges as described in the Fund’s current prospectus.

• Maintain and safeguard records for each Shareholder showing name(s), address, number of any certificates issued, and number of Shares registered in such name(s), together with continuous proof of the outstanding Shares, and dealer identification, and reflecting all current changes. On request, provide information as to an investor’s qualification for Cumulative Quantity Discount. Provide all accounts with, at minimum, quarterly and year-end historical statements;

• Provide on request a duplicate set of records for file maintenance in the Investment Company’s office;

• Provide for the proper allocation of proceeds of share sales to the Investment Company and to the Principal Underwriter, in accordance with the applicable prospectus;

• Redeem Shares and provide for the preparation and delivery of liquidation proceeds;

• Provide for the processing of redemption checks, and maintain checking account records;

• Exercise reasonable and good-faith business judgment in the registration of Share transfers, pledges and releases from pledges in accordance with the California Uniform Commercial Code — Investment Securities;

• From time to time make transfers of certificates for such Shares as may be surrendered for transfer properly endorsed, and countersign new certificates issued in lieu thereof;

• Upon receipt of proper documentation, place stop transfers, obtain necessary insurance forms, and reissue replacement certificates against lost, stolen or destroyed Share certificates;

• Check surrendered certificates for stop transfer restrictions. Although FTIS cannot insure the genuineness of certificates surrendered for cancellation, it will employ all due reasonable care in deciding the genuineness of such certificates and the guarantor of the signature(s) thereon;

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• Cancel surrendered certificates and record and countersign new certificates;

• Certify outstanding Shares to auditors;

• In connection with any meeting of Shareholders, upon receiving appropriate detailed instructions and written materials prepared by the Investment Company and proxy proofs checked by the Investment Company, provide for: (a) the printing of proxy cards, (b) the delivery to Shareholders of all reports, prospectuses, proxy cards and related proxy materials of suitable design for enclosing, (c) the receipt and tabulation of executed proxies, (d) solicitation of Shareholders for their votes and (e) delivery of a list of Shareholders for the meeting;

• Answer routine written correspondence, email, and telephone inquiries about individual accounts. Prepare monthly reports for correspondence volume and correspondence data necessary for the Investment Company’s Semi-Annual Report on Form N-SAR;

• Provide for the preparation and delivery of dealer commission statements and checks;

• Maintain and furnish the Investment Company and its Shareholders with such information as the Investment Company may reasonably request for the purpose of compliance by the Investment Company with the applicable tax and securities laws of applicable jurisdictions;

• Mail confirmations of transactions to investors and dealers in a timely fashion;

• Provide for the payment or reinvestment of income dividends and/or capital gains distributions to Shareholders of record, in accordance with the Investment Company’s and/or Shareholder’s instructions, provided that:

(a) The Investment Company shall notify FTIS in writing promptly upon declaration of any such dividend and/or distribution, and in any event at least forty-eight (48) hours before the record date;

(b) Such notification shall include the declaration date, the record date, the payable date, the rate, and, if applicable, the reinvestment date and the reinvestment price to be used; and

(c) Prior to the payable date, the Investment Company shall furnish FTIS with sufficient fully and finally collected funds to make such distribution;

• Prepare and file annual U.S. information returns of dividends and capital gain distributions, gross redemption proceeds, foreign person’s U.S. source income,

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and other U.S. federal and state information returns as required, and mail payee copies to shareholders, report and pay U.S. backup withholding on all reportable payments; report and pay U.S. federal income taxes withheld from distributions and other payments made to nonresidents of the U.S.; prepare and mail to shareholders any notice required by the Internal Revenue Code as to taxable dividends, tax-exempt interest dividends, realized net capital gains distributed and/or retained, foreign taxes paid and foreign source income distributed or deemed distributed, U.S. source income and any tax-withheld on such income, dividends received deduction information, or other applicable tax information appropriate for dissemination to shareholders of the Trust.

• Comply with all U.S. federal income tax requirements regarding the collection of tax identification numbers and other required shareholder certifications and information pertaining to shareholder accounts; respond to all notifications from the U.S. Internal Revenue Service regarding the application of the U.S. backup withholding requirements including tax identification number solicitation requirements;

• Prepare transfer journals;

• Set up wire order Share transactions on file;

• Provide for receipt of payment for Share transactions, and update the transaction file;

• Produce delinquency and other trade file reports;

• Provide dealer commission statements and provide for payments thereof for the Principal Underwriter;

• Sort and print shareholder information by state, social code, price break, etc.; and

• Mail promptly the Statement of Additional Information of the Investment Company to each Shareholder upon request

In connection with the Investment Company’s Systematic Withdrawal Plan, FTIS will:

• Make payment of amounts withdrawn periodically by the Shareholder pursuant to the Program by redeeming Shares, and confirm such redemptions to the Shareholder; and

• Provide confirmations of all redemptions, reinvestment of dividends and distributions, and any additional investments in the Program, including a summary confirmation at the year-end

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EX-10.10

EXHIBIT 10.10

[FORM]

FUND ADMINISTRATION AGREEMENT

AGREEMENT dated as of                      between [NAME OF TRUST] (the “Investment Company”), a Delaware Statutory trust, on behalf of [NAME OF FUND (S)] (each, the “Fund”), and FRANKLIN TEMPLETON SERVICES, LLC (“Administrator”).

In consideration of the mutual agreements herein made, the parties hereby agree as follows:

(1) The Administrator agrees, during the life of this Agreement, to provide the following services to the Fund:

(a) providing office space, telephone, office equipment and supplies for the Fund;

(b) providing trading desk facilities for the Fund, unless these facilities are provided by the Fund’s investment manager;

(c) authorizing expenditures and approving bills for payment on behalf of the Fund;

(d) supervising preparation of periodic reports to Fund shareholders, notices of dividends, capital gains distributions and tax credits; and attending to routine correspondence and other communications with individual Fund shareholders when asked to do so by the Fund’s shareholder servicing agent or other agents of the Fund;

(e) coordinating the daily pricing of the Fund’s investment portfolio, including collecting quotations from pricing services engaged by the Fund; providing fund accounting services, including preparing and supervising publication of daily net asset value quotations, periodic earnings reports and other financial data;

(f) monitoring relationships with organizations serving the Fund, including custodians, transfer agents, public accounting firms, law firms, printers and other third party service providers;

(g) supervising compliance by the Fund with recordkeeping requirements under the federal securities laws, including the Investment Company Act of 1940, as amended (“1940 Act”), and the rules and regulations thereunder, supervising compliance with recordkeeping requirements imposed by state laws or regulations, and maintaining books and records for the Fund (other than those maintained by the custodian and transfer agent);

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(h) preparing and filing of tax reports including the Fund’s income tax returns, and monitoring the Fund’s compliance with subchapter M of the Internal Revenue Code, and other applicable tax laws and regulations;

(i) monitoring the Fund’s compliance with: 1940 Act and other federal securities laws, and rules and regulations thereunder; state and foreign laws and regulations applicable to the operation of investment companies; the Fund’s investment objectives, policies and restrictions; and the Code of Ethics and other policies adopted by the Investment Company’s Board of Trustees (“Board”) or by the Manager and applicable to the Fund;

(j) providing executive, clerical and secretarial personnel needed to carry out the above responsibilities; and

(k) preparing regulatory reports, including without limitation, NSARs, proxy statements, and U.S. and foreign ownership reports.

Nothing in this Agreement shall obligate the Investment Company or the Fund to pay any compensation to the officers of the Investment Company. Nothing in this Agreement shall obligate the Administrator to pay for the services of third parties, including attorneys, auditors, printers, pricing services or others, engaged directly by the Fund to perform services on behalf of the Fund.

(2) The Fund agrees to pay to the Administrator as compensation for such services a monthly fee equal on an annual basis to 0.20% of the average daily net assets of the Fund.

From time to time, the Administrator may waive all or a portion of its fees provided for hereunder and such waiver shall be treated as a reduction in the purchase price of its services. The Administrator shall be contractually bound hereunder by the terms of any publicly announced waiver of its fee, or any limitation of each affected Fund’s expenses, as if such waiver or limitation were fully set forth herein.

(3) This Agreement shall remain in full force and effect through for one year after its execution and thereafter from year to year to the extent continuance is approved annually by the Board of the Investment Company.

(4) This Agreement may be terminated by the Investment Company at any time on sixty (60) days’ written notice without payment of penalty, provided that such termination by the Investment Company shall be directed or approved by the vote of a majority of the Board of the Investment Company in office at the time or by the vote of a majority of the outstanding voting securities of the Investment Company (as defined by the 1940 Act); and shall automatically and immediately terminate in the event of its assignment (as defined by the 1940 Act).

(5) In the absence of willful misfeasance, bad faith or gross negligence on the part of the Administrator, or of reckless disregard of its duties and obligations hereunder, the Administrator shall not be subject to liability for any act or omission in the course of, or connected with, rendering services hereunder.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers.

[NAME OF TRUST] on behalf of

[NAME OF FUND]

By:

Title:

FRANKLIN TEMPLETON SERVICES, LLC

By:

Title:

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EX-10.11

EXHIBIT 10.11

[FORM]

MULTIPLE CLASS PLAN

on behalf of

[NAME OF FUND/SERIES]

This Multiple Class Plan (the “Plan”) has been adopted unanimously by the Board members of [NAME OF TRUST] (the “Investment Company”) for its series, [Name of Fund/Series] (the “Fund”). The Board has determined that the Plan, including the expense allocation methods among the classes, is in the best interests of each class of the Fund, the Fund and the Investment Company as a whole. The Plan sets forth the provisions relating to the establishment of multiple classes of shares of the Fund, and supersedes any Plan previously adopted for the Fund.

1. The Fund shall publicly offer [applicable number] classes of shares, to be known as [Class A Shares,] [Class C Shares,] [Class R Shares] and [Advisor Class/Class Z Shares.] [The sale to new investors of a fifth class of shares, known as Class B Shares, has been discontinued. Class B Shares continue to be available only for reinvestment of dividends by existing Class B shareholders of the Fund, or in connection with an exchange into the Fund by existing Class B shareholders of other funds within Franklin Templeton Investments.] (Added in 7/05 by BGL)

2. Class A Shares shall carry a front-end sales charge ranging from [    % -     %], and Class B Shares, Class C Shares, Class R Shares and the [Advisor Class/Class Z Shares] shall not be subject to any front-end sales charges.

3. Class A Shares shall not be subject to a contingent deferred sales charge (“CDSC”), except in the following limited circumstances. On investments of $1 million or more, a contingent deferred sales charge of 1.00% [0.75% for taxable income, tax-free income and hybrid funds added 9/08] of the lesser of the then-current net asset value or the original net asset value at the time of purchase applies to redemptions of those investments within the contingency period of 18 months from the calendar month following their purchase. The CDSC is waived in certain circumstances, as described in the Fund’s prospectus and statement of additional information (“SAI”).

Class B Shares shall be subject to a CDSC with the following CDSC schedule: (a) Class B Shares redeemed within 2 years of their purchase shall be assessed a CDSC of 4% on the lesser of the then-current net asset value or the original net asset value at the time of purchase; (b) Class B Shares redeemed within the third and fourth years of their purchase shall be assessed a CDSC of 3% on the lesser of the then-current net asset value or the original net asset value at the time of purchase; (c) Class B Shares redeemed within 5 years of their purchase shall be assessed a CDSC of 2% on the lesser of the then-current net asset value or the original net asset value at the time of purchase; and (d) Class B Shares redeemed within 6 years of their purchase shall be assessed a CDSC of 1% on the lesser of the then-current net asset value or the original net asset value at the time of purchase. The CDSC is waived in certain circumstances described in the Fund’s prospectus and SAI.

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Class C Shares redeemed within 12 months of their purchase shall be assessed a CDSC of 1.00% on the lesser of the then-current net asset value or the original net asset value at the time of purchase. The CDSC is waived in certain circumstances as described in the Fund’s prospectus and SAI.

[Class R Shares/Advisor Class/Class Z Shares] shall not be subject to any CDSC.

4. The distribution plan adopted by the Investment Company pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, (the “Rule 12b-1 Plan”) associated with the Class A Shares may be used to compensate Franklin/Templeton Distributors, Inc. (the “Distributor”) or others for expenses incurred in the promotion and distribution of the Class A Shares. Such expenses include, but are not limited to, the printing of prospectuses and reports used for sales purposes, expenses of preparing and distributing sales literature and related expenses, advertisements, and other distribution-related expenses, any distribution or shareholder servicing fees paid to securities firms or others who provide personal assistance to shareholders in servicing their accounts and have executed a servicing agreement with the Investment Company for the Class A Shares, the Distributor or its affiliates.

The Rule 12b-1 Plan associated with the Class B Shares has two components. The first component is an asset-based sales charge to be retained by the Distributor to compensate Distributor for amounts advanced to securities dealers or their firms or others with respect to the sale of Class B Shares. In addition, such payments may be retained by the Distributor to be used in the promotion and distribution of Class B Shares in a manner similar to that described above for Class A Shares. The second component is a shareholder servicing fee to be paid to securities firms or others who provide personal assistance to shareholders in servicing their accounts and have executed a servicing agreement with the Investment Company for the Class B Shares, the Distributor or its affiliates.

The Rule 12b-1 Plan associated with the Class C has two components. The first component is a shareholder servicing fee, to be paid to securities firms or others who provide personal assistance to shareholders in servicing their accounts and have executed a servicing agreement with the Investment Company for the Class C, the Distributor or its affiliates. The second component is an asset-based sales charge to be retained by the Distributor during the first year after the sale of shares and, in subsequent years, to be paid to dealers or retained by the Distributor to be used in the promotion and distribution of Class C, in a manner similar to that described above for Class A Shares.

The Rule 12b-1 Plan associated with the Class R Shares may be used to compensate the Distributor or others for distribution activities and/or for providing shareholder services. Distribution fees paid under the Rule 12b-1 Plan may be retained by the Distributor to compensate the Distributor for amounts advanced to securities dealers or their firms or others (including retirement plan recordkeepers) with respect to the sale of Class R Shares. In addition, such distribution fee payments may be retained by the Distributor to be used in the promotion and distribution of Class R Shares in a manner similar to that described above for Class A Shares, or may be paid out to dealers or others (including retirement plan recordkeepers) that perform similar distribution activities. Shareholder servicing fees may be paid to the Distributor or to

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securities firms or others (including retirement plan recordkeepers) who have executed a servicing agreement for Class R Shares with the Investment Company, the Distributor or its affiliates as compensation for providing personal assistance to shareholders or beneficial owners in servicing their accounts.

The Rule 12b-1 Plans for the Class A, Class B, Class C and Class R Shares shall operate in accordance with the Conduct Rules of the Financial Industry Regulatory Authority (“FINRA”).

No Rule 12b-1 Plan has been adopted on behalf of the [Advisor Class/Class Z Shares] and, therefore, the [Advisor Class/Class Z Shares] shall not be subject to deductions relating to Rule 12b-1 fees.

5. The only difference in expenses as between Class A, Class B, Class C, Class R and [Advisor Class/Class Z] shall relate to differences in Rule 12b-1 plan expenses, as described in the applicable Rule 12b-1 Plans; however, to the extent that the Rule 12b-1 Plan expenses of one Class are the same as the Rule 12b-1 Plan expenses of another Class, such classes shall be subject to the same expenses.

6. There shall be no conversion features associated with the Class A, Class C, Class R and [Advisor Class/Class Z]. Each Class B Share, however, shall be converted automatically, and without any action or choice on the part of the holder of the Class B Shares, into Class A Shares on the conversion date specified, and in accordance with the terms and conditions approved by the [NAME OF TRUST]’s Board of Trustees [or Directors] and as described, in the Fund’s prospectus relating to the Class B Shares, as such prospectus may be amended from time to time; provided, however, that the Class B Shares shall be converted automatically into Class A Shares to the extent and on the terms permitted by the Investment Company Act of 1940, as amended (the “Act”), and the rules and regulations adopted thereunder.

7. Shares of Class A, Class B, Class C, Class R and [Advisor Class/Class Z] may be exchanged for shares of another investment company within the Franklin Templeton Group of Funds according to the terms and conditions stated in each fund’s prospectus, as it may be amended from time to time, to the extent permitted by the Investment Company Act of 1940, as amended (the “1940 Act”), and the rules and regulations adopted thereunder.

8. Each class will vote separately with respect to any Rule 12b-1 Plan related to, or which now or in the future may affect, that class.

9. On an ongoing basis, the Board members of the Fund, pursuant to their fiduciary responsibilities under the 1940 Act and otherwise, will monitor the Fund for the existence of any material conflicts between the interests of the various classes of shares. The Board members, including a majority of the Board members who are not “interested persons” (as defined in the 1940 Act) of the Fund, its investment manager or the Distributor and who have no direct, or indirect financial interest in the operation of the Rule 12b-1 Plan (the “independent Board members”), shall take such action as is reasonably necessary to eliminate any such conflict that may develop. [Franklin Advisers, Inc.] and Franklin/Templeton Distributors, Inc. shall be responsible for alerting the Board to any material conflicts that arise.

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10. All material amendments to this Plan must be approved by a majority of the Board members, including a majority of the independent Board members.

11. I, Karen L. Skidmore, Vice President and Secretary of the [Name of Fund/Trust], do hereby certify that this Multiple Class Plan was adopted on behalf of the [Name of Fund/Series], by a majority of the Board members of the Fund, including a majority of the independent Board members, on                     .

Karen L. Skidmore

Vice President & Secretary

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EX-10.12

EXHIBIT 10.12

INVESTMENT MANAGEMENT AGREEMENT

This Agreement is made this      day of         , 200[  ] (the “Agreement”), by and between [Name of Adviser] (the “Manager”), a [                    ] company, and                      (the “Client”).

1. Appointment. Client hereby appoints Manager as an investment manager to manage such of Client’s assets as Client shall from time to time assign to it, the proceeds from the sale of such assets, and the income attributable to such assets (the “Account”). Client shall promptly notify Manager in writing of any increase or reduction in the amount of the Account’s assets subject to Manager’s investment direction.

2. Authority of Manager. Manager is authorized to supervise and direct the investment and reinvestment of the assets in the Account, subject to such limitations as are contained in the Guidelines described in Section 3 of this Agreement, as they may be from time to time amended, and subject to Client’s right to direct the investment of the Account by means of Instructions as described in Section 3 of this Agreement. Manager, as Client’s agent and attorney-in-fact with respect to the Account, when it deems appropriate and without prior consultation with Client, may: (a) buy, sell, exchange, convert and otherwise invest or trade in any stocks, bonds, options, units and other securities, including money market instruments, whether the issuer is organized in the United States or outside the United States, at such times and in such manner as Manager determines; (b) place orders for the execution of such securities transactions with or through such brokers, dealers or issuers as Manager may select, which brokers or dealers are entitled to receive compensation out of the Account for their services; (c) execute any documentation as the Account’s agent and attorney-in-fact as Manager may deem necessary to facilitate any such investment or reinvestment; and (d) purchase, sell, exchange or convert foreign currency in the spot or forward markets as agent or principal, at the market rate, as determined by Manager in its sole discretion. Manager, as Client’s agent and attorney-in-fact with respect to the Account, when it deems appropriate and without prior consultation with Client, may engage external legal counsel to review trade-related documentation for bank loans and other over-the-counter instruments, and charge the Account for such costs. Manager may give a copy of this Agreement to any broker, dealer or other party to a transaction, as evidence of its authority to act on the Account’s behalf.

Manager is not authorized to accept delivery of cash or securities for the Account or to establish or maintain custodial arrangements for the Account. Client shall choose a custodian

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(the “Custodian”) to hold physical custody of the Account. Client shall direct the Custodian to segregate the assets in the Account and to invest and reinvest them in accordance with the directions transmitted by Manager and received by the Custodian. Such directions shall be given in writing, or given orally and confirmed in writing promptly thereafter. Client shall not change the Custodian without giving Manager reasonable advance written notice of its intention to do so, together with the name and other relevant information with respect to the new Custodian. Manager shall not be liable for any act or omission of the Custodian.

3. Guidelines and Instructions. Attached hereto as Exhibit A is a statement of the investment objectives of Client together with a statement of any and all specific investment restrictions applicable to the investment of the Account (the “Guidelines”). Client shall have the right at all times to modify the Guidelines or to give Manager instructions (“Instructions”) to buy, sell or retain any investment, but no modification of the Guidelines and no Instructions or modifications of Instructions shall be binding upon Manager unless Manager has received written notice of them from an Authorized Person (as defined in Section 5(d)). Manager shall have a reasonable period to bring the Account into compliance with any changes to the Guidelines. Manager shall be under no duty to make any investigation or inquiry as to any statement contained in any written Guidelines or Instruction given and, unless and until specifically advised otherwise, Manager may accept the same as conclusive evidence of the truth and accuracy of the statements contained therein. The Guidelines and all Instructions, unless they expressly provide otherwise, shall continue to be effective until duly canceled by subsequent modifications duly communicated to Manager in writing.

4. Fees. As full compensation for its services under this Agreement, Manager shall be paid quarterly a fee equal to one-fourth of the annual rates specified in Exhibit B, based on the asset value of the Account as of the last day of each calendar quarter on which the New York Stock Exchange is open for trading (the “Valuation Date”). The initial billing period will begin when this Agreement is signed by Client and accepted by Manager, and initial funding has been received by the Custodian (the “Inception Date”). The initial fee will be pro-rated to cover the period from the Inception Date through the Valuation Date for that calendar quarter and will be based on the valuation as of that Valuation Date. Future quarterly fees will be calculated similarly in arrears. If Manager shall serve for less than the whole of any quarter, its compensation shall be determined as provided above on the basis of the value of the assets in the Account as of the end of the date of termination and shall be payable on a pro rata basis for the period of the quarter for which it served as Manager hereunder. Client shall direct the Custodian automatically to charge to the Account and pay directly to Manager all of Manager’s fees upon the Custodian’s receipt of an invoice from Manager.

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5. Representations and Warranties. Client hereby acknowledges, represents and warrants to, and agrees with Manager, as follows:

(a) Client Assets. Client is the sole owner of all assets in the Account and (i) there are no restrictions on the transfer, sale or public distribution of any such assets and (ii) no option, lien, charge, security or encumbrance exists over such assets, except as disclosed to Manager in writing.

(b) Authority. The Client has full authority and power to engage Manager under the terms and conditions of this Agreement, and such engagement does not violate Client’s constituent documents, any other material agreement, order or judgment of any court or governmental authority, or any law applicable to Client. Client further represents that all investments permitted herein are within its power to enter into and have been duly authorized.

(c) Form ADV. Client acknowledges receipt of Part II of Manager’s Form ADV. Notwithstanding anything to the contrary herein, if Client did not receive a copy of the Form ADV at least forty-eight (48) hours prior to execution of this Agreement, Client shall have the right to terminate this Agreement without penalty within five (5) business days of the execution of this Agreement; provided, however, that Client shall be at risk for any market fluctuations in the Account up to the time of such termination.

(d) Authorized Persons. Any individual whose signature is affixed to this Agreement on Client’s behalf has full authority and power to execute this Agreement on Client’s behalf. Client represents that the officer specified on the attached Certification of Authorized Persons (Exhibit C) is authorized to act for Client and to certify to Manager from time to time, by listing on, and delivering to Manager Exhibit C or a substantially similar form, those other persons who also are so authorized to act on Client’s behalf (“Authorized Persons”). The Client shall promptly notify Manager in writing of any event that could reasonably be anticipated to affect any such individual’s authority under this Agreement.

(e) Notice of Certain Events. Client will promptly notify Manager in writing of any occurrence that results, or threatens to result, in any representations by Client contained in this Agreement becoming inaccurate, false, misleading or incomplete.

6. Non-Exclusive Agreement. Nothing in this Agreement shall be deemed to limit or restrict Manager’s right, or the right of any of its officers, directors or employees, to engage in any other business or to devote time and attention to the management or other aspects of any business, whether of a similar or dissimilar nature, or to render investment advisory services or services of any kind to any other corporation, firm, association or individual. Client understands

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that Manager provides investment advisory services to numerous other clients and accounts. Client also understands that Manager may give advice and take action with respect to any of its other clients or for its own account which may differ from the timing or nature of action taken by Manager with respect to the Account.

Nothing in this Agreement shall impose upon Manager any obligation to purchase or sell or to recommend for purchase or sale, with respect to the Account, any security (including long and short positions) which Manager, or its affiliates, or its or their shareholders, directors, officers or employees may purchase or sell for its or their own account(s) or for the account of any other client. Client acknowledges that Manager’s ability and that of its affiliates to effect or recommend transactions may be restricted by applicable regulatory requirements in the United States and elsewhere or its or their internal policies designed to comply with such requirements. Consequently, there may be periods when Manager may not initiate or recommend certain types of transactions in certain investments when Manager or its affiliates are performing services or when aggregated position limits have been reached, and Client will not be advised of that fact.

7. Liability of Manager. Except as may otherwise be provided by law, Client specifically agrees that Manager shall not be liable for: (a) any loss that Client may suffer by reason of any investment decision made or other action taken or omitted in good faith and with that degree of care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity would use in the conduct of an enterprise of a like character and with like aims; (b) any loss, expense or other liability (including but not limited to attorneys’ fees) incurred by Client or Manager arising from or in connection with Manager’s compliance with the Guidelines or Instructions believed by Manager to be accurate; (c) any act or failure to act by any broker or other person with whom Manager or Client may deal in connection with the subject matter of this Agreement; or (d) any loss or failure or delay in performance of any obligation under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond Manager’s reasonable control, including, without limitation, acts of God, earthquakes, fires, floods, wars, terrorism, civil or military disturbances, sabotage, epidemics, riots, interruptions, loss or malfunctions of utility, computer software or hardware, transportation or communication service, accidents, labor disputes, acts of civil or military authority, governmental actions and inability to obtain labor, material, equipment or transportation.

8. Brokerage. Where Manager places orders, or directs the placement of orders, for the purchase or sale of portfolio securities for the Account, in selecting brokers or dealers to execute such orders, Manager is expressly authorized to consider, among other factors, the fact that a broker or dealer has furnished statistical, research or other information or services which

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enhance Manager’s investment research and portfolio management capability generally. It is further understood in accordance with Section 28(e) of the Securities Exchange Act of 1934, as amended, that Manager may negotiate with and assign to a broker a commission which may exceed the commission which another broker would have charged for effecting the transaction if Manager determines in good faith that the amount of commission charged was reasonable in relation to the value of brokerage and research services (as defined in Section 28(e)) provided by such broker, viewed in terms either of the Account or Manager’s overall responsibilities to Manager’s discretionary accounts.

Nothing herein shall preclude the aggregation or “bunching” of orders for the sale or purchase of portfolio securities in the Account with other accounts managed by Manager. With respect to the allocation of trades, Manager shall not favor any account over any other and purchase or sale orders executed contemporaneously shall be allocated in a manner it deems equitable among the accounts involved. In some cases, prevailing trading activity may cause Manager to receive various execution prices on the entire volume of any security sold for the accounts of its clients. In such cases, Manager may, but shall not be obligated to, average the various prices and charge or credit the Account with the average price, even though the effect of this aggregation of price may sometimes work to the disadvantage of the Account. Client understands and acknowledges that Manager or its affiliates may, based upon such factors as Manager deems to be important, such as Manager’s or its affiliates’ respective trading strategies or their respective accounts’ relative sizes or investment objectives or investment restrictions, restrict to certain accounts purchases and sales of securities acquired in initial public offerings, including those that trade or are expected to trade at a premium in the secondary market.

In no event shall Manager be obligated to effect or place an order for any transaction for Client which Manager believes would violate any applicable state or federal law, rule, or regulation, or of the regulations of any regulatory or self-regulatory body to which Manager or any of its affiliates is subject to at the time of the proposed transaction.

9. Confidential Relationship. Each party agrees that all non-public confidential information concerning the other party which may become available to such party in connection with services, transactions or relationships contemplated in this Agreement shall at all times be treated in strictest confidence and shall not be disclosed to third persons except as (a) may be required by law or regulatory authority, including but not limited to any subpoena, administrative, regulatory or judicial demand or court order, (b) as otherwise set forth in this Agreement, or (c) upon the prior written approval of the other party to this Agreement. Client authorizes Manager (i) to include Client’s name in a representative or sample client list prepared by Manager, provided Manager shall not disclose Client contact information or any information

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about Client’s holdings, and (ii) to use Manager’s investment experience with respect to the Account, or the Account’s performance, in composite performance presentations, marketing materials, attribution analyses, statistical compilations, or other similar compilations or presentations, provided such use does not disclose Client’s identity except to the extent permitted by Client.

10. Reports. Manager shall send to Client a written report of the Account as of the Valuation Date of each calendar quarter. Such reports shall be submitted within a reasonable period following such Valuation Date. For the purposes of all reports made by Manager to Client, foreign securities denominated in foreign currencies will be valued in United States dollars, unless otherwise agreed by Manager and Client. Client shall examine promptly each such report and any other report provided by Manager. To the extent permissible under applicable law, upon the expiration of the sixty (60) day period immediately following the date of such report, or the termination of this Agreement as provided herein, if earlier, Manager shall be forever released and discharged from all liability and accountability to anyone with respect to each such report, including, without limitation, all acts and omissions of Manager shown or reflected in each such report, except with respect to any acts or omissions as to which Client shall have filed written objections with Manager within such sixty (60) day period. Nothing herein shall impair the right of Manager to a judicial settlement of any report rendered by it.

11. Valuation. In computing the asset value of the Account, if market quotations are readily available for securities listed on a securities exchange or on the NASDAQ National Market or NASDAQ Small Cap Market, Manager shall value those securities at the last quoted sales price or the official closing price, respectively, on the Valuation Date, or, if there is no reported sale, within the range of the most recently quoted bid and ask prices. Manager shall value over-the-counter securities within the range of the most recent bid and ask prices. If securities trade both in the over-the-counter market and on a stock exchange, Manager shall value them according to the broadest and most representative market as determined by Manager. Any security for which a current market quotation cannot be established or a market event occurs that calls into question the reliability of current market quotations, or any other security or asset, shall be valued in a manner determined in good faith by Manager to reflect its fair market value.

12. Proxies and Other Legal Notices. Decisions on proxy voting will be made by Manager unless such decisions are expressly reserved by Client. Manager’s obligation to vote proxies shall be contingent upon (i) receipt of proxies from the Custodian or Client in a timely manner, and (ii) the lack of any legal encumbrance to voting, including any securities lending or similar program. Manager shall not be expected or required to take any action with respect to lawsuits involving securities presently or formerly held in the Account, or the issuers thereof.

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However, Manager will use commercially reasonable efforts to file proofs of claim on behalf of the Account in class-action lawsuits involving securities presently or formerly held in the Account and, in that regard, Manager may, without prior permission or consent, disclose information about the Account whether by including such information in any such proofs of claim or otherwise disclosing such information in any matter related thereto. Manager may, at any time, terminate this service of filing proofs of claim by giving notice of such termination to Client, and such service shall, if not sooner terminated, automatically terminate upon the termination of this Agreement. Client acknowledges that by filing a proof of claim on Client’s behalf, Manager may waive Client’s right to pursue separate litigation against the issuer with respect to the subject matter of the lawsuit.

Client also acknowledges that Manager or its affiliates may, from time to time, recommend litigation against an issuer (whether by opting out of any existing class action lawsuit or otherwise) on behalf of one or more of the registered investment companies or other pooled investment vehicles advised by Manager or its affiliates. In such cases, Manager will not provide Client with notice of, or the opportunity to participate in, such litigation. Client agrees to hold Manager harmless for not including the Account in any such litigation.

With respect to bankruptcies involving issuers of securities on behalf of one or more of the registered investment companies or other pooled investment vehicles advised by Manager or its affiliates, Client also acknowledges that Manager may, in its sole discretion, participate in bankruptcy proceedings and join creditors’ committees on behalf of one or more of the registered investment companies or other pooled investment vehicles advised by Manager or its affiliates. Unless otherwise agreed, Manager will not be expected or required to file proofs of claim with respect to securities held in the portfolio of the Client that may be the subject of bankruptcy proceedings. Manager will not be responsible for any failures to make such filings or, if Manager is acting under the authority granted to it, determines in its sole discretion to make such filings, for any failure to make such filings in a timely manner.

13. Acknowledgment of Investment Risk. Notwithstanding any provision herein to the contrary, Client understands that the value of investments made for the Account may go down as well as up and is not guaranteed. Client agrees that Manager has not made and is not making any guarantees, including without limitation a guarantee as to any specific level of performance of the Account. Client further understands and acknowledges that investment decisions made on behalf of Client’s Account by Manager are subject to various market, currency, economic, and business risks as well as the risk that those investment decision will not always be profitable. Client acknowledges that past performance results achieved by accounts supervised or managed by Manager are not indicative of the future performance of the Account. Client understands that securities, mutual funds and other non-deposit investments are not

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deposits or other obligations of, or guaranteed by, Manager or any affiliate, are not insured by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency, and are subject to investment risk, including possible loss of principal amounts invested.

14. Termination; Survival. This Agreement may be terminated by either party upon thirty (30) days’ written notice to the other party. Such termination will not, however, affect the liabilities or obligations of the parties under this Agreement arising from transactions initiated prior to such termination. Sections 4, 7, 9, 10, 17, and 18 shall survive the termination of this Agreement. Upon any termination of this Agreement, Manager shall have no further obligations hereunder, provided that: (a) any liability under this Agreement of one party to the other shall survive and remain in full force and effect, notwithstanding such termination, with respect to any claim or matter on which either of the parties has given the other written notice prior to such termination (except that Manager may render to Client a statement of fees due Manager through the date of termination after such date), until such liability has been finally settled; (b) Manager retains the right to complete any transactions open as of the termination date and to retain amounts in the Account sufficient to effect such completion; and (c) Manager shall be entitled to its fees and expenses, pro rated to the date of termination. Upon termination, it shall be Client’s exclusive responsibility to issue instructions in writing regarding any assets in the Account.

15. Assignment. This Agreement may not be assigned (within the meaning of the Investment Advisers Act of 1940, as amended), in whole or in part, by Manager without the prior written consent of Client. Subject to the preceding sentence, Manager may delegate all or part of its duties under this Agreement to any affiliate.

16. Communications. All reports and other communications required hereunder to be in writing shall be delivered in person or sent by first-class mail postage prepaid, overnight courier, or confirmed facsimile with original to follow.

If to Client:

Attention:                             

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If to Manager:

Attention:                             

Either party to this Agreement may, by written notice given at any time, designate a different address for the receipt of reports and other communications due hereunder.

17. Governing Law; Venue. This Agreement shall be governed by and construed and enforced in accordance with the laws of the United States and with the laws of the State of [California] [New York] without giving effect to the choice of law or conflict of law provisions thereof. The parties hereby consent to jurisdiction and venue in the federal and state courts located in [the State of California] [New York County of the State of New York].

18. Entire Agreement; Modification. This Agreement: (a) sets forth the entire understanding of the parties with respect to the subject matter hereof; (b) supercedes any and all previous agreements, understandings and communications, oral or written, regarding this subject matter; and (c) may not be modified, amended, or waived except by a specific written instrument duly executed by the party against whom such modification, amendment, or waiver is sought to be enforced. In the event of any conflict or inconsistency with this Agreement and any instructions or investment guidelines that are not made part of this Agreement or any investment policy statement, this Agreement will control.

19. Headings. The headings of the sections of this Agreement are for convenience of reference only and will not affect the meaning or operation of this Agreement. As used herein, references in the singular shall, as and if appropriate, include the plural.

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20. Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

21. Severability. In the event that any provision of this Agreement is deemed to be void, voidable, illegal, or invalid for any reason, such provision will be of no force and effect only to the extent that it is so declared void, voidable, illegal, or invalid. All of the provisions of this Agreement not specifically found to be so deficient will remain in full force and effect.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers to be effective as of the date first written above.

[NAME OF CLIENT]
By:
Name:	[Authorized officer]
Title:
[NAME OF ADVISER]
By:
Name:
Title:

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EXHIBIT A

Statement of Investment Objectives

[To be provided by Client]

Statement of Client Account Restrictions

[To be provided by Client]

Exhibit A

EXHIBIT B

FEE SCHEDULE

As compensation for managing the Account, Manager shall be paid as follows:

Exhibit B

EXHIBIT C

CERTIFICATION OF AUTHORIZED PERSONS

I certify, as the                              (specify title;

e.g., general partner [of a partnership]; president, secretary [of a corporation]) that the

following persons are “Authorized Persons” under the Agreement:

NAME TITLE SPECIMEN SIGNATURE

Name of Legal Entity (Please Print)
By:
	Signature
	Name and Title (Please Print)

Date:                     

Exhibit C

EX-10.13

EXHIBIT 10.13

To: Fiduciary Trust Company International

INVESTMENT MANAGEMENT WITH CUSTODY AGREEMENT

FOR ACCOUNT ENTITLED

“                                                                                                                                                                        ”

1. Investment Management Account. I appoint you to be the agent for the undersigned (referred to as “I” or “me”) to act as investment manager of an Investment Management with Custody Account (“Account”) in the name specified above to manage all assets and cash, including but not limited to the proceeds from the sale of such assets, and the income attributable to such assets, that are delivered to you for the Account (“Account Assets”). I will deliver to you only assets owned solely by me, and will advise you of the cost, date and manner of acquisition of any additional assets contributed to the Account. I will promptly notify you in writing of any reduction in the amount of the Account Assets subject to your investment management direction.

2. Investment of Account Assets. Subject to my right to give instructions with respect to the Account as described in Section 4 of this Investment Management with Custody Agreement (the “Agreement”), I authorize you, in your discretion, to:

(a) invest, reinvest and/or hold cash uninvested, at the Account’s risk, at such times and in such manner as you determine. You may buy, sell, exchange, convert and otherwise invest or trade in any stocks, bonds, units and other instruments, whether the issuer is organized in or outside the United States, including but not limited to:

(1) deposit accounts, including your own or those of any of your Affiliated or Subsidiary Companies, as defined in Section 12;

(2) shares of any mutual fund (including any money market mutual fund), including, without limiting the generality of this discretion, any mutual fund for which you and/or any of your Affiliated or Subsidiary Companies, acts as sponsor, distributor, administrator, adviser, or in any other capacity, or receives investment advisory or other fees (collectively, “Affiliated Funds”); provided, however, that if you invest in any Affiliated Fund, to the extent required by any applicable law, rule or regulation, this Agreement or any other governing document, you will exclude the value of any Account Assets so invested, from the calculation of your fee under Section 11 of this Investment Management Agreement; and

(3) securities acquired pursuant to any public, private and direct placement, including, without limiting the generality of this discretion, any fund not registered under the Investment Company Act of 1940, as amended (a “Non-Registered Fund”), for which you and/or any of your Affiliated or Subsidiary Companies acts sponsor, distributor, administrator, adviser, or in any other capacity, or receives investment advisory or other fees; provided, however, that if you invest in any Non-Registered Fund, to the extent required by any applicable law, rule or regulation, this Agreement or any other governing document, you will exclude the value of any Account Assets so invested, from the calculation of your fee under Section 11 of this Investment Management Agreement.

(b) execute any documentation as the Account’s agent and attorney-in-fact as you may deem necessary to facilitate any such investment or reinvestment, including but not limited to signing the Account’s or my name, as the case may be, (1) on any securities registered in the Account’s or my name, respectively, in order to sell them or enable them to be deposited as authorized above, (2) on any documents necessary to establish your security interest under Section 8, and (3) on all necessary certificates of ownership or other instruments required by an issuer, depository or governmental authority under applicable law or regulation, and authorize your sub-custodians to do likewise;

(c) place Account trades with any issuers or with any brokers or dealers, as you may select, including any of your Affiliated or Subsidiary Companies, which brokers or dealers are entitled to receive compensation out of my Account Assets for their services; and

(d) purchase, sell, exchange, convert and otherwise execute non-US currency transactions in the spot or forward market as agent or as principal, at the market rate, as determined by you at your discretion.

3. Custody of Account Assets. Subject to Sections 4 and 5(a), I authorize you, in your discretion:

(a) to hold cash and hold any issue of securities in the Account with securities of the same issue of your other clients, and deposit Account Assets (whether in “book entry” or physical form) with any domestic or non-US bank, broker or dealer, or securities depository, as your sub-custodian, in nominee name or otherwise;

(b) with respect to trades reported on the Account’s behalf through Depository Trust Company (“DTC”), to accept instructions from DTC (whether in a DTC report or otherwise) as though they were given by me; and

(c) in those cases in which securities that have been purchased at varying prices are being sold, to use the “specific identification method” for allocating tax lots to a particular sale of securities, unless I specifically request you to use another method of tax lot selection.

4. Special Instructions. I authorize you to record telephone conversations related to the Account, and to rely on my oral or written instructions or notices when you receive them. I agree to confirm in writing any oral instruction given to you as soon thereafter as possible. You shall be under no duty to make any investigation or inquiry as to any statement contained in any oral or written instruction given and, unless and until specifically advised otherwise, you may accept the same as conclusive evidence of the truth and accuracy of the statements contained therein. You agree to comply with the following special instructions:

Notwithstanding the foregoing, I agree that these special instructions shall continue to be effective until canceled or modified by me in a subsequent writing delivered to you.

5. Administrative Provisions.

(a) Income. Please remit income as follows:                                                                                                                                    

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(b) Statements. You agree to send me statements of principal and income transactions and appraisals of Account Assets at least quarterly, in written form or in any other form that you choose to make available, and provide an annual statement of income classified for federal income tax purposes, and a schedule of security transactions for the calendar year showing gains and losses, if the income tax costs and dates of acquisition are available. For purposes of all reports made by you, any non-US securities denominated in non-US currencies will be valued in the Account’s base currency, which will be in United States dollars unless you and I agree otherwise. I agree to accept any form of communication transmitting such information.

(c) Preparation of Income Tax Returns. You are ¨ are not ¨ authorized to prepare my income tax returns. If I have requested this service, you are authorized to charge the Account based on the amount of work involved.

(d) Shareholder Disclosure. You may disclose the Account’s or my name, address and security position when requested to do so by any issuer of securities held in the Account, unless I indicate that you may not (unless required by law) by checking the box  ¨.

6. Representations and Warranties. I hereby acknowledge, represent and warrant to, and agree with you, as follows:

(a) Client Assets. I am the sole owner of all Account Assets and (1) there are no restrictions on the transfer, sale or public distribution of any such Account Assets and (2) no option, lien, charge, security or encumbrance exists over such Account Assets, except as described to you in writing.

(b) Authority. All authority given to you under this Agreement will remain in effect until changed or terminated by me in writing. You may give a copy of this Agreement to any broker, dealer or other party to a transaction, as evidence of your authority to act on the Account’s behalf.

(c) Understanding of Terms. I have reviewed, either alone or with my independent agent, and understand the matters set forth in this Agreement. I have received all information that I deem necessary or desirable in connection with my decision to enter into this Agreement.

(d) Compliance with Anti-Money Laundering Laws. To comply with United States anti-money laundering laws and regulations, I represent as follows:

(1) The Account Assets were not, and are not, directly or indirectly derived from activities that may contravene United States federal, state or international anti-money laundering laws or regulations to the extent that any such laws or regulations may be applicable to me.

(2) I am not:

(A) a current or former senior official in the executive, legislative, administrative, military, or judicial branches of a non-US government (whether elected or not), or

(B) a senior official of a major non-US political party, or

(C) a senior executive of a non-US government-owned commercial enterprise, or

(D) an immediate family member of any of the individuals described in subsections (A) through (C) above, or a person known to maintain a close personal or professional relationship with any such individuals.

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For purposes of this representation, “senior official or executive” means an individual with substantial authority over policy, operations, or the use of government-owned resources; “immediate family” includes a spouse, parents, siblings, children, and a spouse’s parents or siblings.

(3) I acknowledge that Federal law requires that you obtain, verify and record information and documents to identify the persons opening new accounts. For natural persons, this may include, without limitation, name, address, date of birth, and social security numbers, as well as government-issued photo identification, and for clients, other than natural persons, tax identification numbers and documents evidencing formation (e.g., Articles of Incorporation). I further acknowledge that you may also screen such names against various databases to verify identity.

(4) I agree to provide you with information and documentation evidencing my identity and the source of the Account’s funds, upon your request, or if no request has been made, promptly upon the occurrence of any change thereto.

(e) Changes to Account, Circumstances or Representations in Agreement. I will promptly notify you in writing of: (1) any change to the Account of which you would not otherwise have knowledge; (2) any bankruptcy; (3) any event that might affect the validity of, or your authority under, this Agreement; and/or (4) any other occurrence that results, or threatens to result, in any of my representations contained in this Agreement becoming false, misleading or incomplete.

(f) Past Performance Not Indicative of Future Results. I acknowledge that past performance results achieved by accounts supervised and/or managed by you may not be indicative of the future performance of the Account.

I agree to notify you promptly in writing of any change in the information specified above.

7. Repayment of Debts; Payment of Interest. I agree to repay you whether or not demand is made (a) the amount of any overdraft or other amounts (including but not limited to fees) owed by me, or charges or liabilities advanced or incurred by you, a sub-custodian, or nominee in connection with the Account (including but not limited to attorneys’ fees), or any other account that I maintain with you and (b) interest thereon at the rate then charged by you to your investment management clients on demand notes, as that rate may change from time to time (collectively “Debts”). You may charge the Account, or any other account that I may then have with you, for any Debts.

8. Grant of Security Interest. To collateralize my obligations to repay any Debts, by signing this Agreement I grant you a continuing security interest in the Account Assets and the assets in any other account (including, but not limited to cash, certificated and uncertificated securities and other financial assets) that I maintain with you in the same legal capacity at any time that any Debts are outstanding (“Collateral”). You may apply any cash, or sell any other Collateral and apply the proceeds to repayment of the Debts and related expenses. I agree that you will have all the rights of a secured creditor that are provided by New York law and that you may assign any such rights.

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9. Your Responsibilities. Your responsibilities are solely as stated in this Agreement. Specifically, I agree that, except as may otherwise be provided by law, you shall not be liable for:

(a) any loss that the Account may suffer by reason of any investment decision made or other action taken or omitted in good faith and with that degree of care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity would use in the conduct of an enterprise of a like character and with like aims;

(b) any loss, expense or other liability (including but not limited to attorneys’ fees) arising or incurred as a result of your compliance with my instructions, reasonably and in good faith believed by you to be genuine;

(c) any act or failure to act by any broker or other person with whom you or the Account may deal in connection with the subject matter of this Agreement; or

(d) any failure or delay in performance of any obligation under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond your reasonable control, including without limitation, acts of God; earthquakes; fires; floods; wars; terrorism; civil or military disturbances; sabotages; epidemics; riots; interruptions, loss or malfunctions of utility, transportation or communication service; accidents; labor disputes; acts of civil or military authority; governmental actions and inability to obtain labor, material, equipment or transportation.

I understand that the value of investments made for the Account may go down as well as up, and may be subject to various market, economic and/or business risks (and if the Account is invested in international markets, currency and political risks, including but not limited to the risks of nationalization, confiscatory taxation and exchange restrictions), as well as the risk that the investment decisions made may not always be profitable or prove to have been wise. I also understand that there is no guarantee as to the value of the Account’s investments or the specific performance level of the Account.

I understand that securities, mutual funds and other non-deposit investments are not deposits or other obligations of, or guaranteed by you or any other bank, are not insured by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency, and are subject to investment risk, including possible loss of principal amounts invested.

10. General Indemnification. I agree to indemnify you to the fullest extent permitted by law for any expense or liability (including, without limitation, attorneys’ fees and related charges and expenses) incurred by you with respect to the Account when acting in accordance with this Agreement or to enforce this Agreement or any part thereof, including, without limitation, this Section 10.

11. Compensation. For your services under this Agreement, I authorize you to charge the fees and charges as set forth in Schedule 1 attached to this Agreement, as that schedule may be amended from time to time by agreement by both parties to this Agreement. You may charge         % against income and         % against principal; or to the extent that the income is insufficient to cover the percentage of fees and charges indicated, then the balance thereof is to be charged against principal.

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12. Conflicts. Nothing in this Agreement shall be deemed to limit or restrict your right, or the right of any of your officers, directors or employees, to engage in any other business or to render investment management services or services of any kind to any other client. I understand that you provide investment management services to numerous other accounts. I understand that you may give advice and take action with respect to any of your other clients and their accounts that may differ from the timing or nature of action taken by you with respect to the Account. Nothing in this Agreement shall impose upon you any obligation to purchase or sell or to recommend for purchase or sale, with respect to the Account, any security (including long and short positions) that you, or your Affiliated or Subsidiary Companies, or your or their directors, officers, employees or family members of any of them may purchase or sell for its or their own account(s) or for the account of any other client. For purposes of this Agreement, “Affiliated or Subsidiary Companies” are those operating companies and investment entities, directly or indirectly controlled by, or under common control with, you or your parent company, Franklin Resources, Inc., and whether using the name Fiduciary, Templeton, Franklin, FTI or any other name.

I acknowledge that your ability and that of your Affiliated and Subsidiary Companies to effect and/or recommend transactions may be restricted by applicable regulatory requirements in the United States and elsewhere and/or your or their internal policies designed to comply with such requirements. Consequently, there may be periods when you may not initiate or recommend certain types of transactions in certain investments when you or your Affiliated or Subsidiary Companies are performing services or when aggregated position limits have been reached, and I will not be advised of that fact.

I acknowledge that you or your Affiliated or Subsidiary Companies may obtain and keep profits, commissions and fees in connection with activities for other clients and from their own accounts. I also acknowledge that you may receive compensation from distributors of mutual funds, including money market funds, for performing shareholder servicing functions that such distributors would otherwise have to perform themselves. If any Account Assets are invested in such funds, you are authorized to receive this compensation.

13. Proxies and Other Legal Notices. Decisions on proxy voting will be made by you unless such decisions are expressly reserved by me. You shall not be expected or required to take any action other than the rendering of investment-related advice with respect to lawsuits involving securities presently or formerly held in the Account, or the issuers thereof. However, you will use commercially reasonable efforts to file proofs of claim on behalf of the Account in class-action suits and, in that connection, you may, without prior permission or consent, include information about the Account. I acknowledge that by filing a proof of claim on my behalf, you may waive my right to pursue separate litigation against the issuer with respect to the subject matter of the lawsuit. Should you determine to undertake litigation against an issuer on behalf of one or more clients, you shall obtain my prior written consent to undertake such litigation before I am included in any such litigation. If I consent to such litigation, I agree to pay the portion of any reasonable legal fees associated with my claim or I will forfeit any claim to any assets that you may recover on behalf of the Account, up to the amount of such legal fees owed by me to you. If I do not consent to such litigation, I agree to hold you harmless for excluding the Account from such action and agree to indemnify you against any claims the Account may have against you resulting from the Account exclusion.

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14. Brokerage. In selecting brokers or dealers to execute trades, you are expressly authorized to consider the fact that a broker or dealer has furnished statistical, research or other information or services which enhance your investment research and portfolio management capability, generally, even if the commission exceeds the commission which another broker would have charged for effecting the transaction; provided that you determine in good faith that the amount of commission charged was reasonable in relation to the value of brokerage and/or research services provided by such broker, either in respect of the Account or your overall responsibilities to your discretionary accounts.

Nothing herein shall preclude the “bunching” of orders for the sale or purchase of portfolio securities in the Account with other accounts managed by you. In some cases, prevailing trading activity may cause you to receive various execution prices on the entire volume of any security sold for the accounts of your clients. When this happens you may average the various prices and charge or credit the Account with the average price, even though the effect of this aggregation of price may sometimes work to the disadvantage of the Account. I also understand and acknowledge that you or your affiliates may, based upon factors that you deem to be important, such as the relative size, investment objectives and/or investment restrictions of client accounts, restrict to certain accounts purchases and sales of securities acquired in initial public offerings, including those that trade or are expected to trade at a premium in the secondary market.

15. Confidential Relationships. All information and recommendations furnished by either party to the other shall at all times be treated in strictest confidence and shall not be disclosed to third persons, except as may be permitted by law or regulation, or except upon the prior written approval of the other party to this Agreement.

16. Communications. All Account documents and other instructions or notices, as applicable, required to be in writing shall be deemed duly given when delivered in person or sent by first-class mail, postage prepaid, overnight courier, or confirmed facsimile, with original to follow, to me at my address below, or to you addressed as follows:

Fiduciary Trust Company International

600 Fifth Avenue

New York, New York 10020

Either party may, by written notice given at any time, designate a different address for the receipt of Account documents, instructions or notices due under this Agreement.

17. Use of Affiliated or Subsidiary Companies. You may delegate all or part of your duties under this Agreement to any Affiliated or Subsidiary Company.

18. Governing Law. This Agreement will be governed by the laws of the State of New York without regard to any laws that might otherwise apply under principles of choice of law or conflicts of law.

19. Entire Agreement; Amendment; Termination. This Agreement sets forth and restates the entire understanding of the parties with respect to the Account, and replaces all previous agreements, understandings and communications, oral or written. It can only be amended by both parties in writing, except that, if you send me notice of an amendment, it will become effective thirty days later unless I object in writing within that time. I may terminate this

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Agreement at any time by written notice to you. You may terminate it on thirty days’ written notice to me. Sections 6, 7, 8, 9, 10, 11, 15, 16, 18 and 19 shall survive the termination of this Agreement. This Agreement will not be terminated automatically or otherwise affected by any subsequent disability or legal incompetence on my part. Upon termination you will have no further obligations hereunder, provided that any liability under this Agreement of either party to the other shall survive and remain in full force and effect with respect to transactions that have been initiated, but not completed, and with respect to any other claim or matter on which either of the parties has given the other written notice prior to such termination, until such liability has been finally settled (except that you will be entitled to your fees, prorated to the date of termination). If liquidation of any part of the Account is necessary or desired by me, you will do so in an orderly manner and, after settlement of all amounts outstanding from the Account, you will transfer such liquidated assets and any other remaining Account Assets to me or in accordance with my instructions.

20. Severability. The provisions of this Agreement are severable. If any provision, or part thereof, is determined to be void, voidable, illegal or invalid, the remaining provisions of this Agreement, and parts thereof, shall continue to be valid and enforceable.

AGREED:		Signature
FIDUCIARY TRUST COMPANY INTERNATIONAL		Name (Please Print)
By:
	Signature	Address
	Name and Title (Please Print)	City                                        State                                 Zip Code
Date:
		Telephone

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EX-10.14

EXHIBIT 10.14

To: Fiduciary Trust Company International

CUSTODY AGREEMENT FOR ACCOUNT ENTITLED

“                                                                                                                  ”

1. Custody Account. We appoint you to be the agent for the undersigned entity (referred to as “we” or “us”) to act as custodian of a Custody Account (“Account”) in the name specified above and receive and hold all assets and cash, including but not limited to the proceeds from the sale of such assets, and the income attributable to such assets, that are delivered to you for the Account (“Account Assets”). We will deliver to you only assets owned solely by us, and will advise you of the cost, date and manner of acquisition of any additional assets contributed to the Account.

2. Custody of Account Assets. Subject to our right to give instructions with respect to the Account as described in Section 3 of this Custody Agreement (the “Agreement”), we authorize you, in your discretion:

(a) to hold cash and hold any issue of securities in the Account with securities of the same issue of your other clients, and deposit Account Assets (whether in “book entry” or physical form) with any domestic or non-US bank, broker or dealer, or securities depository, as your sub-custodian, in nominee name or otherwise;

(b) with respect to trades reported on the Account’s behalf through Depository Trust Company (“DTC”), to accept instructions from DTC (whether in a DTC report or otherwise) as though they were given by us or our Investment Manager, as defined in Section 3;

(c) to execute any documentation as the Account’s agent and attorney-in-fact, in furtherance of the rights and obligations set forth in this Agreement, as you may deem necessary, including but not limited to signing the Account’s or our name, as the case may be, (1) on any securities registered in the Account’s or our name, respectively, in order to sell them or enable them to be deposited as authorized above, (2) on any documents necessary to establish your security interest under Section 7, and (3) on all necessary certificates of ownership or other instruments required by an issuer, depository or governmental authority under applicable law or regulation, including but not limited to documents pertaining to tax reclamation, and authorize your sub-custodians to do likewise;

(d) to use the “specific identification method” for allocating tax lots to a particular sale of securities in cases in which securities have been purchased at varying prices, unless the Account is tax exempt or we specifically request you to use another method of tax lot selection; and

(e) to provide all necessary and applicable information to any “Investment Manager,” as defined in Section 3 of this Agreement, with respect to us, the Account and the Account Assets.

3. Special Instructions. We authorize you to record telephone conversations related to the Account and to rely on oral or written instructions or notices when you receive them from any of our Authorized Persons, as defined in Section 5(i), or from such person(s) as we may designate to you in writing as the manager(s) of the Account (“Investment Manager”). We agree that, upon your request, the Investment Manager or we will confirm in writing any oral instruction given to you as soon thereafter as possible. You shall be under no duty to make any investigation or inquiry as to any statement contained in any oral or written instruction given and, unless and until specifically advised otherwise, you may accept the same as conclusive evidence of the truth and accuracy of the statements contained therein. You agree to comply with the following special instructions:

(a) invest otherwise un-invested Account Assets on an overnight or short term basis, at the Account’s risk, in one or more of the following investments: (1) deposit accounts, including your own or those of any of your Affiliated or Subsidiary Companies, as defined in Section 10, (2) any money market mutual fund, selected by us or our Investment Manager, for which you or any of your Affiliated or Subsidiary Companies may act as investment adviser or custodian, and/or (3) any money market mutual fund, selected by us or our Investment Manager, with respect to which you may receive compensation for performing distribution or shareholder servicing functions (such compensation being commonly referred to as “12b-1 fees”);

(b) you are authorized, as follows: (i) to accept into custody hedge funds and other private equity investments that are not publicly traded (“Alternative Investments”), (ii) to receive valuations of the Alternative Investments from the custodian or manager of the hedge fund or from the manager or sponsor of the private equity investment, as the case may be (each, a “Third-Party Valuation Source”), (iii) to rely on the valuations you receive from the Third Party Valuation Sources as accurate assessments of the value of each Alternative Investment, and (iv) to report such valuations in all account statements, appraisals and reports that you render, prepare or are otherwise required to file, including, without limitation, any reports that you may be required to file with the Internal Revenue Service; and

(c)

Notwithstanding the foregoing, we agree that these special instructions shall continue to be effective until canceled or modified by the Investment Manager or by us in a subsequent writing delivered to you.

4. Administrative Provisions.

(a) Income. Please remit income as follows:

(b) Shareholder Servicing Compensation. We acknowledge that you may receive compensation from investment advisers or distributors of mutual funds, including money

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market funds, for performing shareholder servicing functions that such investment advisers or distributors would otherwise have to perform themselves. If any Account Assets are invested in such funds, you are authorized to receive this compensation.

(c) Maturities and Other Rights. You are authorized to present bonds for payment when due and, to the extent practicable, sell fractional shares issued in connection with any stock dividends.

(d) Purchase and Sales. Whenever possible, please effect such Account trades as our Investment Manager or we direct from time to time. You may, but are not required to, advance funds for such purchases if there are insufficient funds in the Account. You will not effect any sales or exchanges unless the subject securities are in your custody and in good deliverable form. You may place Account trades with any broker or dealer, including any of your Affiliated or Subsidiary Companies, which brokers and dealers are entitled to receive compensation out of Account Assets for their services.

(e) Foreign Exchange. You are authorized to purchase, sell, exchange, convert and otherwise execute non-US currency transactions in the spot or forward market, as instructed by us or our Investment Manager as agent, or as principal, at the market rate, as determined by you at your discretion.

(f) Statements. You agree to send us monthly statements of principal and income transactions and a list of Account Assets, in written form or in any other form that you choose to make available. Statements of Account Assets and of transactions shall serve as conclusive proof of assets received by you in the Account and of transactions entered into in the Account unless we object in a writing received by you within 30 days of statement mailing or other transmission. Statements shall be governed by, and read in accordance with the Important Disclosures attached to this Agreement as Appendix 1. Assets will be valued as determined by you in good faith, based on information provided to you as described in the Important Disclosures, which may include, without limitation, from publicly available market quotations provided to you or from a Third Party Valuation Source. For purposes of all reports made by you, any non-US securities denominated in non-US currencies will be valued in the Account’s base currency, which will be in United States dollars unless you and we agree otherwise. We agree to accept any form of communication transmitting such information.

(g) Shareholder Disclosure. You may disclose the Account’s or our name, address and security position when requested to do so by any issuer of securities held in the Account, unless we indicate that you may not (unless required by law) by marking the box  ¨.

(h) Tax Reclamation. We acknowledge that our inability to provide you with evidence that we are exempt from taxation in any given jurisdiction may limit your ability to invest in such jurisdiction without subjecting the Account to withholding tax, may prevent effective tax reclamation on behalf of the Account, should you so invest, and, consequently, may influence your decision whether or not to invest in such jurisdiction.

5. Representations and Warranties. We hereby acknowledge, represent and warrant to, and agree with you, as follows:

(a) Client Assets. We are the sole owner of all Account Assets and (1) there are no restrictions on the transfer, sale or public distribution of any such Account Assets and (2) no option, lien, charge, security or encumbrance exists over such Account Assets, except as described to you in writing.

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(b) Authority. All authority given to you under this Agreement will remain in effect until changed or terminated by us in writing. You may give a copy of this Agreement to any broker, dealer or other party to a transaction, as evidence of your authority to act on the Account’s behalf.

(c) Understanding of Terms. We have reviewed, either alone or with our independent agent, and understand the matters set forth in this Agreement. We have received all information that we deem necessary or desirable in connection with our decision to enter into this Agreement.

(d) Compliance with Anti-Money Laundering Laws. To comply with United States anti-money laundering laws and regulations, we represent as follows:

(1) The Account Assets were not, and are not, directly or indirectly derived from activities that may contravene United States federal, state or international anti-money laundering laws or regulations to the extent that any such laws or regulations may be applicable to us.

(2) If we are acting as agent or nominee for the beneficial owners of the Account Assets, we have adopted anti-money laundering policies and procedures with which we are in compliance.

(3) If we are a non-US bank, we are not operating under an offshore banking license, which as a condition of our license, prohibits us from conducting banking activities with the citizens of, or in the local currency of, the jurisdiction that issued such license.

(4) We have not been formed by, or for the benefit of, any individual described below; and none of the Authorized Persons, identified to you from time to time in accordance herewith, is an individual described below:

(A) a current or former senior official in the executive, legislative, administrative, military, or judicial branches of a non-US government (whether elected or not), or

(B) a senior official of a major non-US political party, or

(C) a senior executive of a non-US government-owned commercial enterprise, or

(D) an immediate family member of any of the individuals described in subsections (A) through (C) above, or a person known to maintain a close personal or professional relationship with any such individuals.

For purposes of this representation, “senior official or executive” means an individual with substantial authority over policy, operations, or the use of government-owned resources; “immediate family” includes a spouse, parents, siblings, children, and a spouse’s parents or siblings.

(5) We acknowledge that Federal law requires that you obtain, verify and record information and documents to identify the persons opening new accounts. For natural

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persons, this may include, without limitation, name, address, date of birth, and social security numbers, as well as government-issued photo identification, and for clients, other than natural persons, tax identification numbers and documents evidencing formation (e.g., Articles of Incorporation). We further acknowledge that you may also screen such names against various databases to verify identity.

(6) We agree to provide you with information and documentation relating to our organizational structure, beneficial ownership, source of funds and Authorized Persons, including any changes relating thereto, whenever such changes occur, or if there are no such changes, upon request by you.

(e) Changes to Account or Representations in Agreement. We will promptly notify you in writing of: (1) any change to the Account of which you would not otherwise have knowledge; and/or (2) any occurrence that results, or threatens to result, in any representations by us contained in this Agreement becoming false, misleading or incomplete.

(f) Notice of Certain Events. We or our successor or legal representative, as the case may be, shall promptly notify you in writing of our dissolution, termination, merger, bankruptcy and/or the occurrence of any other event which might affect the validity of this Agreement or your authority under this Agreement. All directions given and actions taken or omitted by you prior to the time that such notice is given to you and which would otherwise be appropriate under the terms of this Agreement shall be binding upon us and any successor or legal representative thereto. Neither we nor any successor or legal representative thereto shall hold you liable for any loss, damage or liability arising out of or based upon any action taken or omitted by you in accordance with this Section 5(f).

(g) Authority to Enter Into Agreement and of Signatory. We have full authority and power to engage you under the terms and conditions of this Agreement and to execute, deliver and perform this Agreement without the need for any governmental or other authorizations, approvals or consents. Any individual whose signature is affixed to this Agreement on our behalf has full authority and power to execute this Agreement on our behalf. Any such individual and/or we shall promptly notify you in writing of any event that could reasonably be anticipated to affect any such individual’s authority under this Agreement.

(h) Binding Obligations. We represent that your engagement by us pursuant to the terms of this Agreement constitutes our legal, valid and binding obligation, and does not violate our constituent documents, any other material agreement, order or judgment of any court or governmental authority, or any law applicable to us. We further represent that all trades directed hereunder by us or our Investment Manager are within our power to enter into and have been duly authorized, and that when you enter into such trades on our behalf and they are binding against a counterparty, they will constitute our legal, valid, and binding obligations.

(i) Organizational Documents. We represent that you have been furnished a true and complete copy of such documentation, as amended to date, that establishes and evidences

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our organization as a legal entity and our authority to retain you. We will furnish promptly to you any amendments to such documentation, and we agree that, if any amendment affects your rights or obligations, such amendment will be binding on you only when you agree in writing. If the Account contains only part of our investment assets, we understand that you will have no responsibility for the diversification or concentration of all of our investments, and that you will have no duty, responsibility or liability for assets that are not in the Account.

(j) Corporations, Partnerships and Other Entities. We represent that the individual(s) specified below in subsections (1) and (2) of this Section 5(i) are authorized to certify to you from time to time those persons who are duly authorized to act for us under this Agreement (“Authorized Persons”) and those persons or entities who are our shareholders, partners or members. We agree to notify you promptly in writing of any changes in the information specified below or on the Exhibits referred to below and attached hereto. We further represent as follows:

(1) Corporations. If we are a Corporation:

(A) Our President, Secretary or Chief Financial Officer listed on the attached Certification of Authorized Persons (Exhibit A) is authorized to act for us as an Authorized Person and to certify to you from time to time, by listing on, and delivering to you, Exhibit A or a substantially similar form, those other persons who also are so authorized to act on our behalf.

(B) We have not issued bearer shares.

(C) If we have five or fewer shareholders, we have accurately and completely listed on the attached Certification of Ownership (Exhibit B) all of the applicable information requested.

(D) Check as applicable:

¨ we are incorporated under the laws of                      as a for-profit corporation; or

¨ we are incorporated under the laws of                      as a not-for-profit corporation.

(2) Partnerships and Other Entities.

(A) If we are a partnership, an Authorized Person is any one of the general partners named on the attached Certification of Authorized Persons (Exhibit A).

(B) If we are an entity other than a corporation or partnership, the officer specified on the attached Certification of Authorized Persons (Exhibit A) is authorized to act for us as an Authorized Person and to certify to you from time to time, by listing on, and delivering to you, Exhibit A or a substantially similar form, those other persons who also are so authorized to act on our behalf.

(C) If we are a partnership or other entity, other than a corporation, and have five or fewer partners or members, we have accurately and completely listed on the attached Certification of Ownership (Exhibit B) all of the applicable information requested.

(D) If we are a partnership or other entity, other than a corporation, we were formed under the laws of                     .

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(3) Our taxable (or fiscal year) ends                     .

(4) We are not required to be registered under the United States Investment Company Act of 1940, as amended.

(k) Non-US Entities. If we are a non-US entity including but not limited to a corporation or partnership formed under the laws of a country other than the United States, we further represent as follows:

(1) We have checked here ¨ if we meet any of the criteria under Test I on Exhibit C hereto; and we have checked here ¨ if we meet any of the criteria under Test II on such Exhibit C.

(2) We are not a dealer in stocks or securities and we do not have our principal office in the United States, nor are we otherwise engaged in trade or business in the United States.

(l) Investment Manager. We have ¨ have not ¨ duly appointed an Investment Manager, as our agent and attorney-in-fact, to give instructions to you with respect to the Account, pursuant to a legally binding agreement between us. If so, the Investment Manager is                                                                                                                                                            .

We will notify you immediately if such power and authority is revoked and will provide the name and other relevant information with respect to the new Investment Manager, if any.

We agree to notify you promptly in writing of any changes in the information specified herein.

6. Repayment of Debts; Payment of Interest. We agree to repay you whether or not demand is made (a) the amount of any overdraft or other amounts (including but not limited to fees) owed by us, or charges or liabilities advanced or incurred by you, a sub-custodian, or nominee in connection with the Account (including but not limited to attorney’s fees) or any other account that we maintain with you, and (b) interest thereon at the rate then charged by you to your investment management clients on demand notes, as that rate may change from time to time (collectively, “Debts”). You may charge the Account, or any other account that we may then have with you, for any Debts.

7. Grant of Security Interest. To collateralize our obligations to repay any Debts, by signing this Agreement we grant you a continuing security interest in the Account Assets and the assets in any other account (including, but not limited to, cash, certificated and uncertificated securities and other financial assets) that we maintain with you in the same legal capacity at any time that any Debts are outstanding (“Collateral”). You may apply any cash, or sell any other Collateral and apply the proceeds to repayment of the Debts and related expenses. We agree that you will have all the rights of a secured creditor that are provided by New York law and that you may assign any such rights.

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8. Your Responsibilities. Your responsibilities are solely as stated in this Agreement. Specifically, we agree that, except as may otherwise be provided by law, you shall not be liable for:

(a) any loss that the Account may suffer by reason of any transaction or other action taken or omitted in good faith and with that degree of care under the circumstances then prevailing that a reasonable person acting in a like capacity would use in the conduct of an enterprise of a like character and with like aims;

(b) any loss, expense or other liability (including but not limited to attorneys’ fees) arising or incurred by you as a result of your compliance with our instructions or those of our Investment Manager, reasonably and in good faith believed by you to be genuine;

(c) any act or failure to act by any broker or other person with whom you or the Account may deal in connection with the subject matter of this Agreement; or

(d) any failure or delay in performance of any obligation under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond your reasonable control, including without limitation, acts of God; earthquakes; fires; floods; wars; terrorism; civil or military disturbances; sabotages; epidemics; riots; interruptions, loss or malfunctions of utility, transportation or communication service; accidents; labor disputes; acts of civil or military authority; governmental actions and inability to obtain labor, material, equipment or transportation.

We understand that securities, mutual funds and other non-deposit investments are not deposits or other obligations of, or guaranteed by you or any other bank, are not insured by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency, and are subject to investment risk, including possible loss of principal amounts invested.

9. General Indemnification. We agree to indemnify you to the fullest extent permitted by law for any expense or liability (including, without limitation, attorneys’ fees and related charges and expenses) incurred by you with respect to the Account when acting in accordance with this Agreement or to enforce this Agreement or any part thereof, including, without limitation, this Section 9, and Section 3 relating to your reliance on or reporting of valuations of Alternative Investments, which may prove to be untimely, incomplete or inaccurate, whether understated or overstated.

10. Conflicts. Nothing in this Agreement shall be deemed to limit or restrict your right, or the right of any of your officers, directors or employees, to engage in any other business or to render custody services or services of any kind to any other client directly or through any Affiliated or Subsidiary Companies. We acknowledge that you or your Affiliated or Subsidiary Companies may obtain and keep profits, commissions and fees in connection with activities for other clients and from their own accounts. For purposes of this Agreement, “Affiliated or Subsidiary Companies” are those operating companies and investment entities, directly or indirectly controlled by, or under common control with, you or your parent company, Franklin Resources, Inc., and whether using the name Fiduciary, Templeton, Franklin, FTI or any other name.

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11. Proxies and Other Legal Notices. You are authorized to dispose of proxies and other requests received to take corporate action with respect to any securities in the Account as follows:                                                                                                                                                                                                                                                                                                                                                      .

You shall not be expected or required to take any action with respect to lawsuits involving securities presently or formerly held in the Account, or the issuers thereof, including class action suits and actions involving bankruptcy. Notwithstanding the above, in the case of class action suits involving issues held in the Account, you may include information about the Account for purposes of participating in any settlements, whether or not we have authorized disclosure of any information in Section 4(g) hereof.

12. Use of Affiliated or Subsidiary Companies. You may delegate all or part of your duties under this Agreement to any Affiliated or Subsidiary Company.

13. Custody Fees. For your services under this Agreement, we authorize you to charge the fees and charges as set forth in the Fee Schedule attached to this Agreement, as that schedule may be amended from time to time by agreement by both parties to this Agreement. You may charge     % against income and     % against principal; or to the extent that the income is insufficient to cover the percentage of fees and charges indicated, then the balance thereof is to be charged against principal.

14. Confidential Relationships. All information and recommendations furnished by either party to the other shall at all times be treated in strictest confidence and shall not be disclosed to third persons, except as may be permitted by law or regulation, or except upon the prior written approval of the other party to this Agreement.

15. Communications. All Account documents and other instructions or notices required to be in writing shall be deemed duly given when delivered in person or sent by first-class mail, postage prepaid, overnight courier, or confirmed facsimile, with original to follow, to us at our address below, or to you addressed as follows:

Fiduciary Trust Company International

600 Fifth Avenue

New York, New York 10020

Either party may, by written notice given at any time, designate a different address for the receipt of Account documents, instructions or notices due under this Agreement.

16. Optional Additional Services. You are authorized to charge the Account additional compensation, based on the amount of work involved, for the services checked below (if any):

¨ Annual statement of income classified for federal income tax purposes, and a schedule of security transactions for the calendar year showing gains and losses, if the income tax costs and dates of acquisition are available

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¨ Complete appraisal of Account Assets with current values, tax costs, if available, and estimated income

¨ Preparation of income tax returns

17. Optional Investment Strategies. You are authorized in your discretion on our behalf, as our agent, to enter into the transactions checked below, if any, with such counterparties to be selected by you; and in furtherance thereof, to negotiate, execute and deliver to such counterparties appropriate agreements on terms acceptable to you and perform any administrative duties required.

¨ Transactions relating to securities lending

¨ Transactions relating to repurchase agreement transactions

¨ Other:                                                                                                                                                                                 

If requested by you, we agree to sign and deliver to you for further delivery to such counterparties, if any, such documents as we may reasonably be required to deliver for you to carry out the transactions checked above.

18. Right of Set-off. We agree that you have a right of set-off against any of our funds that are held by, or on deposit with, you in the Account or any other account that we maintain with you in the same legal capacity at any time that any Debts are outstanding. To enforce this right, you may use any of our funds that are on deposit with you or held by you to repay any Debts that are outstanding.

19. Entire Agreement; Amendment; Termination. This Agreement sets forth and restates the entire understanding of the parties with respect to the Account and replaces all previous agreements, understandings and communications, oral or written. It can only be amended by both parties in writing, except that, if you send us notice of an amendment, it will become effective thirty days later unless we object in writing within that time. We may terminate this Agreement at any time by written notice to you. You may terminate it on thirty days’ written notice to us. Sections 5, 6, 7, 8, 9, 13, 14, 15, 18, 19 and 20 shall survive the termination of this Agreement. Upon termination you will have no further obligations hereunder, provided that any liability under this Agreement of either party to the other shall survive and remain in full force and effect with respect to transactions that have been initiated, but not completed, and with respect to any other claim or matter of which either of the parties has given the other written notice prior to such termination, until such liability has been finally settled (except that you will be entitled to your fees, prorated to the date of termination). If liquidation of any part of the Account is necessary or desired by us, you will do so in an orderly manner and, after settlement of all amounts outstanding from the Account, you will transfer such liquidated assets and any other remaining Account Assets to us or in accordance with our instructions.

20. Governing Law. This Agreement will be governed by the laws of the State of New York without regard to any laws that might otherwise apply under principles of choice of law or conflicts of law.

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21. Severability. The provisions of this Agreement are severable. If any provision, or part thereof, is determined to be void, voidable, illegal or invalid, the remaining provisions of this Agreement, including parts thereof, if applicable, shall continue to be valid and enforceable.

		Name of Legal Entity
		By:
			Signature
		Name and Title (Please Print)
		Address
AGREED:		City                                             State                                     Zip Code
FIDUCIARY TRUST COMPANY
INTERNATIONAL
		Telephone
By:
	Signature
	Name and Title (Please Print)
Date:

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Fiduciary Trust Company International

EXHIBIT A

CERTIFICATION OF AUTHORIZED PERSONS

UNDER THE CUSTODY AGREEMENT

FOR ACCOUNT ENTITLED

“                                                                                                                                                                                ”

I certify, as the                                          (specify title; e.g., general partner [of a partnership]; president, secretary [of a corporation]; managing member [of an LLC]), that the following persons are “Authorized Persons” under the Agreement. If box is checked  ¨, complete shaded fields.

NAME TITLE TAX ID NO. SPECIMEN SIGNATURE

Name of Legal Entity (Please Print)
By:
	Signature
	Name and Title (Please Print)
Date:

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Fiduciary Trust Company International

EXHIBIT B

CERTIFICATION OF OWNERSHIP

of                                          (the “Company”)*

*Insert Name of Company above signature line below

Part A.

The undersigned hereby certifies on behalf of the Company:

1. As of the              day of                     , 200    , the Company’s books and records reflect that those listed below are the sole holders and beneficial owners of the Company’s issued and outstanding shares or ownership interests:

Name of Holder of Ownership Interests (“Owner”)* (e.g., Shareholder / Partner / Member) Residential Address

* Complete Part B for each Owner that is a “Fiduciary Account” (e.g., Trust, Estate, Uniform Transfers to Minors Act Account, etc.)

2. For any Fiduciary Account specified above, the funder, each beneficiary to whom income or principal is currently distributable, and each acting trustee, executor, custodian (under the Uniform Transfers to Minors Act), and other fiduciary, together with the legal capacity and residence of each, are listed in Part B.

Part B.

Name of Person Legal Capacity Legal Residence (City and State)

Insert name of Company
By:
	Signature
Name:
	Please print
Title:

13

Fiduciary Trust Company International/

(APPLICABLE TO NON-US ENTITIES ONLY)

EXHIBIT C

TO THE CUSTODY AGREEMENT

FOR ACCOUNT ENTITLED

“                                                                                                                                                                   ”

U.S. federal law places certain restrictions on non-US ownership of any interest in oil and gas leases on federal (U.S.) land and on non-US control of United States shipping and communications companies. In connection with such securities that are or may be held in a client’s account, Fiduciary must certify to issuers or to domestic depositories where the securities may be held (e.g., Depository Trust Company (“DTC”)) whether the client meets any of the criteria set forth in either Test I or Test II.

TEST I

For purposes of shipping and communications companies, do you meet any of the following criteria?

(a) Any individual person who is not a United States citizen;

(b) Any non-US government;

(c) Any corporation, the president, chief executive officer, chairman of the board of directors or other executive officer of which is not a United States citizen, or of which more than a minority of its directors necessary to constitute a quorum or more than a minority of its directors are not United States citizens;

(d) Any corporation organized under the laws of any non-US government;

(e) Any corporation of which more than one-fourth of its stock is owned beneficially or of record, or may be voted, by persons who are not United States citizens, or which by any other means whatsoever is controlled by or in which control is permitted to be exercised by persons who are not United States citizens;

(f) Any partnership or association which is controlled by persons who are not United States citizens; or

(g) Any person (including any individual, partnership, corporation or association) who acts as representative of, or fiduciary for, any person described in clauses (a) through (f) above.

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Fiduciary Trust Company International/

(APPLICABLE TO NON-US ENTITIES ONLY)

EXHIBIT C (cont’d)

TO THE CUSTODY AGREEMENT

FOR ACCOUNT ENTITLED

“                                                                                                                                                                   ”

TEST II

For purposes of ownership interests in oil and gas leases on federal (U.S.) land, do you meet any of the following criteria?

(a) Any individual person who is not a citizen of the United States;

(b) Any association (including a partnership, joint tenancy and tenancy in common) organized or existing under the laws of any government outside the United States or any state or territory thereof, or of which any members are not citizens of the United States;

(c) Any corporation organized under the laws of any government outside the United States or any state or territory thereof, or of which corporation, to the best of its knowledge, more than 5% of the voting stock, or if all of the voting stock, is owned or controlled by citizens of countries that deny to United States citizens privileges to own stock in corporations holding oil and gas leases similar to the privileges of non-United States citizens to own stock in corporations holding oil and gas leases on federal lands; or

(d) Any person otherwise not qualified to hold an interest in oil and gas leases on federal lands, including offshore areas, under federal laws and regulations in effect from time to time.

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APPENDIX 1

IMPORTANT DISCLOSURES BY FIDUCIARY TRUST

Although the Account statements contain information from sources considered reliable, neither Fiduciary Trust Company International (“Fiduciary Trust”) nor any of its subsidiaries, affiliates, or vendors makes any representations or warranties, express or implied, concerning the accuracy, completeness or timeliness of such information. The Account statements should be examined carefully. Any errors or inquiries should be communicated to the portfolio manager, relationship manager or account officer immediately.

Fiduciary Trust has, without any independent verification, assumed that any information that has been provided to it is accurate and complete. Any changes in the client’s financial situation, investment objectives, or any modification of any reasonable restrictions to the management of the account should be communicated to the portfolio manager, relationship manager or account officer.

As portfolio holdings are subject to change, specific holdings mentioned may or may not be in the Account from time to time.

Account value is a snapshot of the estimated value of the Account (excluding accruals) based on the price at the close of trading of the market on which an asset is traded prior to close of business on the last day of the Account statement period, including cash and the market value of the holdings (where available and as described below). It reflects all deposits received and withdrawals/deductions (e.g., applicable transaction fees, custody fees, account expenses) Fiduciary Trust has posted to the Account during that period. It does not reflect the outstanding balance of any loans that Fiduciary Trust has issued to you nor does it reflect the value of any banking/checking accounts maintained with Fiduciary Trust outside the investment account.

All quotations and income estimates are expressed in U.S. dollars (or the account’s designated base currency, if other than USD), which currency is referred to as “the base currency.” Non-USD currency denominated par value is indicated in the security description by ( ) containing the appropriate currency symbol.

Asset positions are established and reflected on trade date. Outstanding payable and receivable information is provided in the “Short Term” section.

Market value information (including, without limitation, prices, accrued income, currency exchange rates and values for certain direct investments which may be held by a third party, such as interests in certain limited partnerships) and other information furnished in this Statement are based on data obtained from one or more third party vendors, including, without limitation, Third Party Valuation Sources. Fiduciary Trust shall have no responsibility for the accuracy and timeliness of any such data obtained from third party vendors.

Subtotals displayed in the “% of Market Value” columns for both equity and fixed income holdings are subject to rounding differences.

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Equity securities are valued at the closing price at the close of trading on the market on which an asset is traded immediately prior to close of business on the last banking business day of the Account statement period. If a closing price is unavailable, the last trade information is used.

Fixed income securities are valued at the most recent available mean price on the relevant primary financial market prior to close of business on the last banking business day of the Account statement period. If a closing price is unavailable, the last trade information is used.

Exchange-traded futures and options are valued at the most recent available mean price on the relevant exchange prior to the close of business on the last banking business day of the Account statement period.

Market values exclude income accrued before payable date. From payable date onward, uncollected income will be reflected under “income receivables” in the “Short Term” section.

Current market value of foreign exchange contracts is derived using forward replacement rates for the relevant time periods.

Over-the-counter currency option values are derived from information supplied by the original deal maker.

Market value of non-base currency denominated assets is determined by applying the closing foreign exchange rates as of the statement date. Non-base currency balances are accounted for using the average cost method. All assets are valued as of the Statement date and unrealized gains/losses result from the valuation difference between the acquisition cost and current market value.

Foreign exchange rates are used to determine value in the base currency equivalent as of the Account statement date for all non-base currency assets except for forward foreign exchange contracts.

Market value of non-base cash and pending currency balances is determined by applying the closing foreign exchange rates as of the Account statement date. Unrealized gains/losses result from the valuation difference between acquisition cost and market value.

Some assets may be valued at cost when no prevailing market exists. Assets for which component holdings are not readily available are presented as a single position, not broken down by their underlying holdings.

All cash receipts and disbursements transactions are reported in base currency equivalent. All non-base currency balances are accounted for using the average cost method. Currency equivalents are shown for informational purposes only. Such values may not be available in effecting actual currency conversions.

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Spot foreign exchange contracts are executed to facilitate non-base currency transactions. Forward foreign exchange contracts may be executed to manage (hedge) currency exposure for non-base currency asset positions.

The base equivalent value of pending balances may change upon settlement based on the currency exchange rates at the time of settlement.

When available, bond ratings appear at the end of the security description: municipal bonds are rated by Moody’s, corporate and other bonds by Standard & Poor’s. Non-USD bonds generally are not rated in a manner consistent with U.S. practice.

Money Market Deposit Accounts (“MMDA’s”) are transferable only on Fiduciary Trust’s books; Fiduciary Trust may request seven days’ notice of withdrawals. The interest rate shown is that which was applied to the average MMDA balance for the month ending on the Account statement date. Estimated MMDA income assumes that the interest rate (which Fiduciary Trust may adjust in its discretion from time to time) will remain in effect for the next year and settlement of all pending transactions.

For taxable accounts, the income and realized capital gain/loss information may not be all inclusive and has not necessarily been verified. In addition, for purposes of computing gains and losses on limited partnership interests, the cost basis of any master limited partnership has not been adjusted to reflect the current capital account. This section may include information furnished by or on behalf of the client, including, without limitation, by a Third-Party Valuation Source. Consultation with a tax advisor may be advisable.

Realized and Unrealized Gains and Losses information is provided for informational purposes only. Fiduciary Trust recommends that a tax advisor be contacted to determine the appropriate information to be used in the preparation of any tax return. Fiduciary Trust selects highest cost securities to sell first unless other securities are chosen by the portfolio manager or another selection method is designated by the client. This Gain and Loss summary is not a substitute 1099 (or any appropriate tax form.) Any change in the accounting method Fiduciary Trust applies to the Account should be communicated to the portfolio manager, relationship manager or account officer.

Historical market values (on the Customized Summary of Accounts page): Graph that depicts the 3-year quarterly historical market values of securities in the principal portfolio. For accounts not yet active three years, the earliest point is the inception date.

An explanation of the terms used in the Account statement can be found in the Statement of Accounts Guidebook and online at www.fiduicarytrust.com, or a term used herein may be as defined in the attached Fiduciary Trust Custody Agreement, but only to the extent that it is not inconsistent with any explanation found in the Statement of Accounts Guidebook. Inquiries may also be made to the portfolio manager, relationship manager or account officer.

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Outside Affiliations: From time to time, officers, directors and employees of Fiduciary Trust serve as officers and directors of entities not otherwise affiliated with Fiduciary Trust (“Outside Companies”). No such person provides non-public information to Fiduciary Trust about the Outside Company with which he or she is affiliated, nor is such person involved in investment decisions for Fiduciary Trust clients regarding securities issued by such Outside Company.

Fiduciary Trust and its affiliates will receive, and may share, compensation for investment management services from each mutual fund managed by an affiliate of Fiduciary Trust (“Affiliated Fund”) in which the account invests. These arrangements are described in the prospectus and statement of additional information for each such Affiliated Fund.

Extent of FDIC Insurance. Securities, mutual funds and other non-deposit investments in the Account are subject to investment risk, including possible loss of principal amounts invested, are not deposits or other obligations of, or guaranteed by, Fiduciary Trust, and are not insured by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency. Cash balances, if placed on deposit at Fiduciary Trust, are insured by the FDIC to the extent allowed under the Federal Deposit Insurance Act.

19

[FEE SCHEDULE TO BE INSERTED]

20

Fiduciary

Trust

International

PERMISSION TO USE YOUR NAME ON A REPRESENTATIVE CLIENT LIST

We frequently receive requests from prospective clients for a sample or representative list of clients invested in one of our investment styles or strategies. We would greatly appreciate your taking a moment to consider being included on such a list.

We wish to honor your preference with respect to releasing the name of your organization to any third-party entity. For this reason, we wish to obtain your permission prior to including your name on a representative client list. Please note that inclusion of your name on such a list does not constitute an endorsement by you of Fiduciary Trust Company International. In addition, in the event a prospective client asks us for additional contact information with respect to your organization, we will obtain your permission to do so prior to releasing any such information.

Please review and indicate your preference in the appropriate space below in the “Permission to Use Name” box. Should your preference change at a later date, simply let your Portfolio Manager know, and we will make the necessary changes.

Thank you for your time and consideration.

Permission to Use Name
You may use the name of our organization (but no contact or address information) in a representative or sample client list.
We prefer that the name of our organization not be used in any representative or sample client list.
[INSERT NAME OF CLIENT]
By:
Name:	Date
Title:

21

EX-10.15

EXHIBIT 10.15

Form of Agreement

Participation Agreement

as of             , 2009

Franklin Templeton Variable Insurance Products Trust

Franklin/Templeton Distributors, Inc.

[Company]

[Company Distributor]

CONTENTS

Section	Subject Matter
1.	Parties and Purpose
2.	Representations and Warranties
3.	Purchase and Redemption of Trust Portfolio Shares
4.	Fees, Expenses, Prospectuses, Proxy Materials and Reports
5.	Voting
6.	Sales Material, Information and Trademarks
7.	Indemnification
8.	Notices
9.	Termination
10.	Miscellaneous
	Schedules to this Agreement
A.	The Company and its Distributor
B.	Accounts of the Company
C.	Available Portfolios and Classes of Shares of the Trust
D.	Contracts of the Company
E.	[this schedule is not used]
F.	Rule 12b-1 Plans of the Trust
G.	Addresses for Notices
H.	Shared Funding Order

1. Parties and Purpose

This agreement (the “Agreement”) is entered by and between certain portfolios and classes thereof, specified below and in Schedule C, of Franklin Templeton Variable Insurance Products Trust, an open-end management investment company organized as a statutory trust under Delaware law (the “Trust”), Franklin/Templeton Distributors, Inc., a California corporation which is the principal underwriter for the Trust (the “Underwriter,” and together

Form of Agreement

with the Trust, “we” or “us”), the insurance company identified on Schedule A (together “you”) and your distributor, on your own behalf and on behalf of each segregated asset account maintained by you that is listed on Schedule B, as that schedule may be amended from time to time (“Account” or “Accounts”).

The purpose of this Agreement is to entitle you, directly on behalf of the Accounts, to purchase the shares, and classes of shares, of portfolios of the Trust (“Portfolios”) that are identified on Schedule C, consistent with the terms of the prospectuses of the Portfolios, solely for the purpose of funding benefits of your variable life insurance policies or variable annuity contracts (“Contracts”) that are identified on Schedule D. This Agreement does not authorize any other purchases or redemptions of shares of the Trust.

2. Representations and Warranties

2.1 Representations and Warranties by You

You represent and warrant that:

2.1.1 You are an insurance company duly organized and in good standing under the laws of your state of incorporation.

2.1.2 All of your directors, officers, employees, and other individuals or entities dealing with the money and/or securities of the Trust are and shall be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Trust, in an amount not less than $5 million. Such bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. You agree to make all reasonable efforts to see that this bond or another bond containing such provisions is always in effect, and you agree to notify us in the event that such coverage no longer applies.

2.1.3 Each Account is a duly organized, validly existing segregated asset account under applicable insurance law and interests in each Account are offered exclusively through the purchase of or transfer into a “variable contract” within the meaning of such terms under Section 817 of the Internal Revenue Code of 1986, as amended (“Code”) and the regulations thereunder. You will use your best efforts to continue to meet such definitional requirements, and will notify us immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future.

2.1.4 Each Account either: (i) has been registered or, prior to any issuance or sale of the Contracts, will be registered as a unit investment trust under the Investment Company Act of 1940 (“1940 Act”); or (ii) has not been so registered in proper reliance upon an exemption from registration under Section 3(c) of the 1940 Act; if the Account is exempt from registration as an investment company under Section 3(c) of the 1940 Act, you will use your best efforts to maintain such exemption and will notify us immediately upon having a reasonable basis for believing that such exemption no longer applies or might not apply in the future.

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2.1.5 The Contracts or interests in the Accounts: (i) are or, prior to any issuance or sale will be, registered as securities under the Securities Act of 1933, as amended (the “1933 Act”); or (ii) are not registered because they are properly exempt from registration under Section 3(a)(2) of the 1933 Act or will be offered exclusively in transactions that are properly exempt from registration under Section 4(2) or Regulation D of the 1933 Act, in which case you will make every effort to maintain such exemption and will notify us immediately upon having a reasonable basis for believing that such exemption no longer applies or might not apply in the future.

2.1.6 The Contracts: (i) will be sold by broker-dealers, or their registered representatives, who are registered with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (the “1934 Act”) and who are members in good standing of the Financial Industry Regulatory Authority (“FINRA”); (ii) will be issued and sold in compliance in all material respects with all applicable federal and state laws; and (iii) will be sold in compliance in all material respects with state insurance suitability requirements and FINRA suitability guidelines. Without limiting the foregoing, you agree that in recommending to a Contract owner the purchase, sale or exchange of any subaccount units under the Contracts, you shall have reasonable grounds for believing that the recommendation is suitable for such Contract owner and, to the extent such recommendations are made by broker-dealers not affiliated with you, you shall require in written agreements with such broker-dealers that they have reasonable grounds for believing that such recommendation is suitable for such Contract owner.

2.1.7 The Contracts currently are and will be treated as annuity contracts or life insurance contracts under applicable provisions of the Code and you will use your best efforts to maintain such treatment; you will notify us immediately upon having a reasonable basis for believing that any of the Contracts have ceased to be so treated or that they might not be so treated in the future.

2.1.8 The fees and charges deducted under each Contract, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by you.

2.1.9 You will use shares of the Trust only for the purpose of funding benefits of the Contracts through the Accounts.

2.1.10 Contracts will not be sold outside of the United States.

2.1.11 With respect to any Accounts which are exempt from registration under the 1940 Act in reliance on Section 3(c)(1) or Section 3(c)(7) thereof:

2.1.11.1 the principal underwriter for each such Account and any subaccounts thereof is a registered broker-dealer with the SEC under the 1934 Act;

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2.1.11.2 the shares of the Portfolios of the Trust are and will continue to be the only investment securities held by the corresponding subaccounts; and

2.1.11.3 with regard to each Portfolio, you, on behalf of the corresponding subaccount, will:

(a) vote such shares held by it in the same proportion as the vote of all other holders of such shares; and

(b) refrain from substituting shares of another security for such shares unless the SEC has approved such substitution in the manner provided in Section 26 of the 1940 Act.

2.2 Representations and Warranties by the Trust

The Trust represents and warrants that:

2.2.1 It is duly organized and in good standing under the laws of the State of Delaware.

2.2.2 All of its directors, officers, employees and others dealing with the money and/or securities of a Portfolio are and shall be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Trust in an amount not less than the minimum coverage required by Rule 17g-1 or other regulations under the 1940 Act. Such bond shall include coverage for larceny and embezzlement and be issued by a reputable bonding company.

2.2.3 It is registered as an open-end management investment company under the 1940 Act.

2.2.4 Each class of shares of the Portfolios of the Trust is registered under the 1933 Act.

2.2.5 It will amend its registration statement under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares.

2.2.6 It will comply, in all material respects, with the 1933 and 1940 Acts and the rules and regulations thereunder.

2.2.7 It is currently qualified as a “regulated investment company” under Subchapter M of the Code, it will make every effort to maintain such qualification, and will notify you immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future.

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2.2.8 The Trust will use its best efforts to comply with the diversification requirements for variable annuity, endowment or life insurance contracts set forth in Section 817(h) of the Code, and the rules and regulations thereunder, including without limitation Treasury Regulation 1.817-5. Upon having a reasonable basis for believing any Portfolio has ceased to comply and will not be able to comply within the grace period afforded by Regulation 1.817-5, the Trust will notify you immediately and will take all reasonable steps to adequately diversify the Portfolio to achieve compliance.

2.2.9 It currently intends for one or more classes of shares (each, a “Class”) to make payments to finance its distribution expenses, including service fees, pursuant to a plan (“Plan”) adopted under rule 12b-1 under the 1940 Act (“Rule 12b-1”), although it may determine to discontinue such practice in the future. To the extent that any Class of the Trust finances its distribution expenses pursuant to a Plan adopted under rule 12b-1, the Trust undertakes to comply with any then current SEC interpretations concerning rule 12b-1 or any successor provisions.

2.3 Representations and Warranties by the Underwriter

The Underwriter represents and warrants that:

2.3.1 It is registered as a broker dealer with the SEC under the 1934 Act, and is a member in good standing of FINRA.

2.3.2 Each investment adviser (each, an “Adviser”) of a Portfolio, as indicated in the current prospectus of the Portfolio, is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended or exempt from such registration.

2.4 Warranty and Agreement by Both You and Us

We received an order from the SEC dated November 16, 1993 (file no. 812-8546), which was amended by a notice and an order we received on September 17, 1999 and October 13, 1999, respectively (file no. 812-11698) (collectively, the “Shared Funding Order,” attached to this Agreement as Schedule H). The Shared Funding Order grants exemptions from certain provisions of the 1940 Act and the regulations thereunder to the extent necessary to permit shares of the Trust to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies and qualified pension and retirement plans outside the separate account context.

2.4.1 You and we both warrant and agree that both you and we will comply with the “Applicants’ Conditions” prescribed in the Shared Funding Order as though such conditions were set forth verbatim in this Agreement, including, without limitation, the provisions regarding potential conflicts of interest between the separate accounts which invest in the Trust and regarding contract owner voting privileges. In order for the Trust’s Board of Trustees to perform its duty to monitor for conflicts of interest, you agree to inform us of the occurrence of any of the events specified in condition 2 of the Shared Funding Order to the extent that such event may or does result in a material conflict of interest as defined in that order.

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2.4.2 As covered financial institutions we, only with respect to Portfolio shareholders, and you each undertake and agree to comply, and to take full responsibility in complying with any and all applicable laws, regulations, protocols and other requirements relating to money laundering including, without limitation, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (Title III of the USA PATRIOT Act).

3. Purchase and Redemption of Trust Portfolio Shares

3.1 Availability of Trust Portfolio Shares

3.1.1 We will make shares of the Portfolios available to the Accounts for the benefit of the Contracts. The shares will be available for purchase by the Accounts at the net asset value per share next computed after we (or our agent, or you as our designee) receive a purchase order, as established in accordance with the provisions of the then current prospectus of the Trust. All such orders are subject to acceptance by us and by the Portfolio or its transfer agent, and become effective only upon confirmation by us. Notwithstanding the foregoing, the Trust’s Board of Trustees (“Trustees”) may refuse to sell shares of any Portfolio to any person, or may suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Trustees, they deem such action to be in the best interests of the shareholders of such Portfolio.

3.1.2 Without limiting the other provisions of this Section 3.1, among other delegations by the Trustees, the Trustees have determined that there is a significant risk that the Trust and its shareholders may be adversely affected by investors with short term trading activity and/or whose purchase and redemption activity follows a market timing pattern as defined in the prospectus for the Trust, and have authorized the Trust, the Underwriter and the Trust’s transfer agent to adopt procedures and take other action (including, without limitation, rejecting specific purchase orders in whole or in part) as they deem necessary to reduce, discourage, restrict or eliminate such trading and/or market timing activity. You agree that your purchases and redemptions of Portfolio shares are subject to, and that you will assist us in implementing, the Market Timing Trading Policy and Additional Policies (as described in the Trust’s prospectus) and the Trust’s restrictions on excessive and/or short term trading activity and/or purchase and redemption activity that follows a market timing pattern. You further agree to cooperate fully in the implementation and fulfillment of the Trust’s obligations pursuant to Rule 22c-2 under the 1940 Act.

3.1.3 We agree that shares of the Trust will be sold only to: (i) life insurance companies which have entered into fund participation agreements with the Trust (“Participating Insurance Companies”) and their separate accounts or to qualified pension and retirement plans in accordance with the terms of the Shared Funding Order; and (ii) investment companies in the form of funds of funds. No shares of any Portfolio will be sold to the general public.

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3.2 Manual or Automated Portfolio Share Transactions

3.2.1 Section 3.3 of this Agreement shall govern and Section 3.4 shall not be operative, unless we receive from you at the address provided in the next sentence, written notice that you wish to communicate, process and settle purchase and redemptions for shares (collectively, “share transactions”) via the Fund/SERV and Networking systems of the National Securities Clearing Corporation (“NSCC”). The address for you to send such written notice shall be: Retirement Services, Franklin Templeton Investments, 910 Park Place, 1^st Floor, San Mateo, California 94403-1906. After giving ten (10) days’ advance written notice at the address provided in the previous sentence of your desire to use NSCC processing, Section 3.4 of this Agreement shall govern and Section 3.3 shall not be operative.

3.2.2 At any time when, pursuant to the preceding paragraph, Section 3.4 of this Agreement governs, any party to this Agreement may send written notice to the other parties that it chooses to end the use of the NSCC Fund/SERV and Networking systems and return to manual handling of share transactions. Such written notice shall be sent: (i) if from you to us, to the address provided in the preceding paragraph; (ii) if from us to you, to your address in Schedule G of this Agreement. After giving ten (10) days’ advance written notice at the address as provided in the previous sentence, Section 3.3 of this Agreement shall govern and Section 3.4 shall not be operative.

3.3 Manual Purchase and Redemption

3.3.1 You are hereby appointed as our designee for the sole purpose of receiving from Contract owners purchase and exchange orders and requests for redemption resulting from investment in and payments under the Contracts that pertain to subaccounts that invest in Portfolios (“Instructions”). “Business Day” shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the SEC and its current prospectus. “Close of Trading” shall mean the close of trading on the New York Stock Exchange, generally 4:00 p.m. Eastern Time. You represent and warrant that all Instructions transmitted to us for processing on or as of a given Business Day (“Day 1”) shall have been received in proper form and time stamped by you prior to the Close of Trading on Day 1. Such Instructions shall receive the share price next calculated following the Close of Trading on Day 1, provided that we receive such Instructions from you before 9:00 a.m. Eastern Time on the next Business Day (“Day 2”). You represent and warrant that Instructions received in proper form and time stamped by you after the Close of Trading on Day 1 shall be treated by you and transmitted to us as if received on Day 2. Such Instructions shall receive the share price next calculated following the Close of Trading on Day 2. You represent and warrant that you have, maintain and periodically test, procedures and systems in place reasonably designed to prevent Instructions received after the Close of Trading on Day 1 from being executed with Instructions received before the Close of Trading on Day 1. All Instructions we receive from you after 9:00 a.m. Eastern Time on Day 2 shall be processed by us on the following Business Day and shall receive the share price next calculated following the Close of Trading on Day 2.

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3.3.2 We shall calculate the net asset value per share of each Portfolio on each Business Day, and shall communicate these net asset values to you or your designated agent on a daily basis as soon as reasonably practical after the calculation is completed (normally by 6:30 p.m. Eastern Time).

3.3.3 You shall submit payment for the purchase of shares of a Portfolio on behalf of an Account in federal funds transmitted by wire to the Trust or to its designated custodian, which must receive such wires no later than the close of the Reserve Bank, which is currently 6:00 p.m. Eastern Time, on the same Business Day on which such purchase orders are transmitted to us for processing on that Business Day in conformance with section 3.3.1.

3.3.4 We will redeem any full or fractional shares of any Portfolio, when requested by you on behalf of an Account, at the net asset value next computed after receipt by us (or our agent or you as our designee) of the request for redemption, as established in accordance with the provisions of the then current prospectus of the Trust. We shall make payment for such shares in the manner we establish from time to time, but in no event shall payment be delayed for a greater period than is permitted by the 1940 Act.

3.3.5 Issuance and transfer of the Portfolio shares will be by book entry only. Stock certificates will not be issued to you or the Accounts. Portfolio shares purchased from the Trust will be recorded in the appropriate title for each Account or the appropriate subaccount of each Account.

3.3.6 We shall furnish, on or before the ex-dividend date, notice to you of any income dividends or capital gain distributions payable to the Accounts on the shares of any Portfolio. You hereby elect to receive all such income dividends and capital gain distributions as are payable on shares of a Portfolio in additional shares of that Portfolio, and you reserve the right to change this election in the future. We will notify you of the number of shares so issued as payment of such dividends and distributions.

3.3.7 Each party to this Agreement agrees that, in the event of a material error resulting from incorrect information or confirmations, the parties will seek to comply in all material respects with the provisions of applicable federal securities laws.

3.4 Automated Purchase and Redemption

3.4.1 “Fund/SERV” shall mean NSCC’s Mutual Fund Settlement, Entry and Registration Verification System, a system for automated, centralized processing of mutual fund purchase and redemption orders, settlement, and account registration; “Networking” shall mean NSCC’s system that allows mutual funds and life insurance companies to exchange account level information electronically; and “Settling Bank” shall mean the entity appointed by the Trust or you, as applicable, to perform such settlement services on behalf of the Trust and you, as applicable, which entity agrees to abide by NSCC’s then current rules and procedures insofar as they relate to same day funds settlement. In all cases, processing and settlement of share transactions shall be done in a manner consistent with applicable law.

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3.4.2 You are hereby appointed as our designee for the sole purpose of receiving from Contract owners purchase and exchange orders and requests for redemption resulting from investment in and payments under the Contracts that pertain to subaccounts that invest in Portfolios (“Instructions”). “Business Day” shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the SEC and its current prospectus. “Close of Trading” shall mean the close of trading on the New York Stock Exchange, generally 4:00 p.m. Eastern Time. Upon receipt of Instructions, and upon your determination that there are good funds with respect to Instructions involving the purchase of shares, you will calculate the net purchase or redemption order for each Portfolio.

3.4.3 On each Business Day, you shall aggregate all purchase and redemption orders for shares of a Portfolio that you received prior to the Close of Trading. You represent and warrant that all orders for net purchases or net redemptions derived from Instructions received by you and transmitted to Fund/SERV for processing on or as of a given Business Day (“Day 1”) shall have been received in proper form and time stamped by you prior to the Close of Trading on Day 1. Such orders shall receive the share price next calculated following the Close of Trading on Day 1, provided that we receive Instructions from Fund/SERV by 6:30 a.m. Eastern Time on the next Business Day (“Day 2”). You represent and warrant that orders received in good order and time stamped by you after the Close of Trading on Day 1 shall be treated by you and transmitted to Fund/SERV as if received on Day 2. Such orders shall receive the share price next calculated following the Close of Trading on Day 2. All Instructions we receive from Fund/SERV after 6:30 a.m. Eastern Time on Day 2 shall be processed by us on the following Business Day and shall receive the share price next calculated following the close of trading on Day 2. You represent and warrant that you have, maintain and periodically test, procedures and systems in place reasonably designed to prevent orders received after the Close of Trading on Day 1 from being executed with orders received before the Close of Trading on Day 1, and periodically monitor the systems to determine their effectiveness. Subject to your compliance with the foregoing, you will be considered the designee of the Underwriter and the Portfolios, and the Business Day on which Instructions are received by you in proper form prior to the Close of Trading will be the date as of which shares of the Portfolios are deemed purchased, exchanged or redeemed pursuant to such Instructions. Dividends and capital gain distributions will be automatically reinvested at net asset value in accordance with the Portfolio’s then current prospectus.

3.4.4 We shall calculate the net asset value per share of each Portfolio on each Business Day, and shall furnish to you through NSCC’s Networking or Mutual Fund Profile System: (i) the most current net asset value information for each Portfolio; and (ii) in the case of fixed income funds that declare daily dividends, the daily accrual or the interest rate factor. All such information shall be furnished to you by 6:30 p.m. Eastern Time on each Business Day or at such other time as that information becomes available.

3.4.5 You will wire payment for net purchase orders by the Trust’s NSCC Firm Number, in immediately available funds, to an NSCC settling bank account designated by you in accordance with NSCC rules and procedures on the same Business Day such purchase orders are communicated to NSCC. For purchases of shares of daily dividend accrual funds, those shares will not begin to accrue dividends until the day the payment for those shares is received.

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3.4.6 We will redeem any full or fractional shares of any Portfolio, when requested by you on behalf of an Account, at the net asset value next computed after receipt by us (or our agent or you as our designee) of the request for redemption, as established in accordance with the provisions of the then current prospectus of the Trust. NSCC will wire payment for net redemption orders by the Trust, in immediately available funds, to an NSCC settling bank account designated by you in accordance with NSCC rules and procedures on the Business Day such redemption orders are communicated to NSCC, except as provided in the Trust’s prospectus and statement of additional information.

3.4.7 Issuance and transfer of the Portfolio shares will be by book entry only. Stock certificates will not be issued to you or the Accounts. Portfolio shares purchased from the Trust will be recorded in the appropriate title for each Account or the appropriate subaccount of each Account.

3.4.8 We shall furnish through NSCC’s Networking or Mutual Fund Profile System on or before the ex-dividend date, notice to you of any income dividends or capital gain distributions payable to the Accounts on the shares of any Portfolio. You hereby elect to receive all such income dividends and capital gain distributions as are payable on shares of a Portfolio in additional shares of that Portfolio, and you reserve the right to change this election in the future. We will notify you of the number of shares so issued as payment of such dividends and distributions.

3.4.9 All orders are subject to acceptance by Underwriter and become effective only upon confirmation by Underwriter. Underwriter reserves the right: (i) not to accept any specific order or part of any order for the purchase or exchange of shares through Fund/SERV; and (ii) to require any redemption order or any part of any redemption order to be settled outside of Fund/SERV, in which case the order or portion thereof shall not be “confirmed” by Underwriter, but rather shall be accepted for redemption in accordance with Section 3.4.11 below.

3.4.10 All trades placed through Fund/SERV and confirmed by Underwriter via Fund/SERV shall settle in accordance with Underwriter’s profile within Fund/SERV applicable to you. Underwriter agrees to provide you with account positions and activity data relating to share transactions via Networking.

3.4.11 If on any specific day you or Underwriter are unable to meet the NSCC deadline for the transmission of purchase or redemption orders for that day, a party may at its option transmit such orders and make such payments for purchases and redemptions directly to you or us, as applicable, as is otherwise provided in the Agreement; provided, however, that we must receive written notification from you by 9:00 a.m. Eastern Time on any day that you wish to transmit such orders and/or make such payments directly to us.

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3.4.12 In the event that you or we are unable to or prohibited from electronically communicating, processing or settling share transactions via Fund/SERV, you or we shall notify the other, including providing the notification provided above in Section 3.4.11. After all parties have been notified, you and we shall submit orders using manual transmissions as are otherwise provided in the Agreement.

3.4.13 These procedures are subject to any additional terms in each Portfolio’s prospectus and the requirements of applicable law. The Trust reserves the right, at its discretion and without notice, to suspend the sale of shares or withdraw the sale of shares of any Portfolio.

3.4.14 Each party to the Agreement agrees that, in the event of a material error resulting from incorrect information or confirmations, the parties will seek to comply in all material respects with the provisions of applicable federal securities laws.

3.4.15 You and Underwriter represent and warrant that each: (a) has entered into an agreement with NSCC; (b) has met and will continue to meet all of the requirements to participate in Fund/SERV and Networking; (c) intends to remain at all times in compliance with the then current rules and procedures of NSCC, all to the extent necessary or appropriate to facilitate such communications, processing, and settlement of share transactions; and (d) will notify the other parties to this Agreement if there is a change in or a pending failure with respect to its agreement with NSCC.

4. Fees, Expenses, Prospectuses, Proxy Materials and Reports

4.1 We shall pay no fee or other compensation to you under this Agreement except as provided on Schedule F, if attached.

4.2 We shall prepare and be responsible for filing with the SEC, and any state regulators requiring such filing, all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), prospectuses and statements of additional information of the Trust. We shall bear the costs of preparation and filing of the documents listed in the preceding sentence, registration and qualification of the Trust’s shares of the Portfolios.

4.3 We shall use reasonable efforts to provide you, on a timely basis, with such information about the Trust, the Portfolios and each Adviser, in such form as you may reasonably require, as you shall reasonably request in connection with the preparation of disclosure documents and annual and semi-annual reports pertaining to the Contracts.

4.4 At your option, we shall provide you, at our expense, with either: (i) for each Contract owner who is invested through the Account in a subaccount corresponding to a Portfolio (“designated subaccount”), one copy of each of the following documents on each occasion that such document is required by law or regulation to be delivered to such Contract owner who is invested in a designated subaccount: the Trust’s current prospectus, including any profile or summary prospectus (if, at the sole discretion of the Trust, it chooses to create or authorize creation of such short profile or summary prospectus), annual report, semi-annual report and other shareholder communications, including any amendments or

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supplements to any of the foregoing, pertaining specifically to the Portfolios (“Designated Portfolio Documents”); (ii) a camera ready copy of such Designated Portfolio Documents in a form suitable for printing and from which information relating to series of the Trust other than the Portfolios has been deleted to the extent practicable; or (iii) a .pdf format file of such Designated Portfolio Documents for posting on your website or using in other electronic format. In connection with clause (ii) of this paragraph, we will pay for proportional printing costs for such Designated Portfolio Documents in order to provide one copy for each Contract owner who is invested in a designated subaccount on each occasion that such document is required by law or regulation to be delivered to such Contract owner, and provided the appropriate documentation is provided and approved by us. We shall provide you with a copy of the Trust’s current statement of additional information, including any amendments or supplements, in a form suitable for you to duplicate or, upon your request, in a .pdf format file. The expenses of furnishing, including mailing or posting on your website, to Contract owners the documents referred to in this paragraph in typeset or electronic format shall be borne by you. For each of the documents provided to you in accordance with clause (i) of this paragraph 4.4, we shall provide you, upon your request and at your expense, additional copies. In no event shall we be responsible for the costs of printing or delivery of Designated Portfolio Documents to potential or new Contract owners or the delivery of Designated Portfolio Documents to existing contract owners.

4.5 We shall provide you, at our expense, with copies of any Trust-sponsored proxy materials in such quantity as you shall reasonably require for distribution to Contract owners who are invested in a designated subaccount. You shall bear the costs of distributing proxy materials (or similar materials such as voting solicitation instructions) to Contract owners.

4.6 You assume sole responsibility for ensuring that the Trust’s Designated Portfolio Documents and proxy materials are delivered to Contract owners in accordance with applicable federal and state securities laws. For Designated Portfolio Documents and other Trust materials provided by you on your website or by other electronic means, you assume sole responsibility for ensuring that such delivery is in compliance with applicable state and federal requirements pertaining to electronic delivery, including consent, access, searchability by users, notice and evidence of delivery.

5. Voting

5.1 All Participating Insurance Companies shall have the obligations and responsibilities regarding pass-through voting and conflicts of interest corresponding to those contained in the Shared Funding Order.

5.2 If and to the extent required by law, you shall: (i) solicit voting instructions from Contract owners; (ii) vote the Trust shares in accordance with the instructions received from Contract owners; and (iii) vote Trust shares owned by subaccounts for which no instructions have been received from Contract owners in the same proportion as Trust shares of such Portfolio for which instructions have been received from Contract owners; so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners. You reserve the right to vote Trust shares held in any Account in your own right, to the extent permitted by law.

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5.3 So long as, and to the extent that, the SEC interprets the 1940 Act to require pass-through voting privileges for Contract owners, you shall provide pass-through voting privileges to Contract owners whose Contract values are invested, through the Accounts, in shares of one or more Portfolios of the Trust. We shall require all Participating Insurance Companies to calculate voting privileges in the same manner and you shall be responsible for assuring that the Accounts calculate voting privileges in the manner established by us. With respect to each Account, you will vote shares of each Portfolio of the Trust held by an Account and for which no timely voting instructions from Contract owners are received in the same proportion as those shares held by that Account for which voting instructions are received. You and your agents will in no way recommend or oppose or interfere with the solicitation of proxies for Portfolio shares held to fund the Contracts without our prior written consent, which consent may be withheld in our sole discretion.

6. Sales Material, Information and Trademarks

6.1 For purposes of this Section 6, “Sales literature or other Promotional material” includes, but is not limited to, portions of the following that use any logo or other trademark related to the Trust, or Underwriter or its affiliates, or refer to the Trust: advertisements (such as material published or designed for use in a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, electronic communication or other public media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts or any other advertisement, sales literature or published article or electronic communication), educational or training materials or other communications distributed or made generally available to some or all agents or employees in any media, and disclosure documents, shareholder reports and proxy materials.

6.2 You shall furnish, or cause to be furnished to us or our designee, at least one complete copy of each registration statement, prospectus, statement of additional information, private placement memorandum, retirement plan disclosure information or other disclosure documents or similar information, as applicable (collectively “Disclosure Documents”), as well as any report, solicitation for voting instructions, Sales literature or other Promotional materials, and all amendments to any of the above that relate to the Contracts or the Accounts prior to its first use. You shall furnish, or shall cause to be furnished, to us or our designee each piece of Sales literature or other Promotional material in which the Trust or an Adviser is named, at least fifteen (15) Business Days prior to its proposed use. No such material shall be used unless we or our designee approve such material and its proposed use.

6.3 You and your agents shall not give any information or make any representations or statements on behalf of the Trust or concerning the Trust, the Underwriter or an Adviser, other than information or representations contained in and accurately derived from the registration statement or prospectus for the Trust shares (as such registration

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statement and prospectus may be amended or supplemented from time to time), annual and semi-annual reports of the Trust, Trust-sponsored proxy statements, or in Sales literature or other Promotional material approved by the Trust or its designee, except as required by legal process or regulatory authorities or with the written permission of the Trust or its designee. You shall send us a complete copy of each Disclosure Document and item of Sales literature or other Promotional materials in its final form within twenty (20) days of its first use.

6.4 We shall not give any information or make any representations or statements on behalf of you or concerning you, the Accounts or the Contracts other than information or representations, including naming you as a Trust shareholder, contained in and accurately derived from Disclosure Documents for the Contracts (as such Disclosure Documents may be amended or supplemented from time to time), or in materials approved by you for distribution, including Sales literature or other Promotional materials, except as required by legal process or regulatory authorities or with your written permission.

6.5 Except as provided in Section 6.2, you shall not use any designation comprised in whole or part of the names or marks “Franklin” or “Templeton” or any logo or other trademark relating to the Trust or the Underwriter without prior written consent, and upon termination of this Agreement for any reason, you shall cease all use of any such name or mark as soon as reasonably practicable.

6.6 You shall furnish to us ten (10) Business Days prior to its first submission to the SEC or its staff, any request or filing for no-action assurance or exemptive relief naming, pertaining to, or affecting, the Trust, the Underwriter or any of the Portfolios.

6.7 You agree that any posting of Designated Portfolio Documents on your website or use of Designated Portfolio Documents in any other electronic format will result in the Designated Portfolio Documents: (i) appearing identical to the hard copy printed version or .pdf format file provided to you by us (except that you may reformat .pdf format prospectus files in order to delete blank pages and to insert .pdf format prospectus supplement files provided by us to you); (ii) being clearly associated with the particular Contracts in which they are available and posted in close proximity to the applicable Contract prospectuses; (iii) having no less prominence than prospectuses of any other underlying funds available under the Contracts; (iv) in compliance with any statutory prospectus delivery requirements applicable to profile and summary prospectus and (v) being used in an authorized manner. Notwithstanding the above, you understand and agree that you are responsible for ensuring that participation in the Portfolios, and any website posting, or other use, of the Designated Portfolio Documents is in compliance with this Agreement and applicable state and federal securities and insurance laws and regulations, including as they relate to paper or electronic use of fund prospectuses. The format of such presentation, the script and layout for any website that mentions the Trust, the Underwriter, an Adviser or the Portfolios shall be routed to us as sales literature or other promotional materials, pursuant to Section 6 of this Agreement. We reserve the right to inspect and review your website if any Designated Portfolio Documents and/or other Trust documents are posted on your website and you shall, upon our reasonable request, provide us timely access to your website materials to perform such inspection and review.

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Form of Agreement

In addition, you agree to be solely responsible for maintaining and updating the Designated Portfolio Documents’ .pdf files and removing and/or replacing promptly any outdated prospectuses and other documents, as necessary, ensuring that any accompanying instructions by us, for using or stopping use are followed. You agree to designate and make available to us a person to act as a single point of communication contact for these purposes. We are not responsible for any additional costs or additional liabilities that may be incurred as a result of your election to place the Designated Portfolio Documents on your website. We reserve the right to revoke this authorization, at any time and for any reason, although we may instead make our authorization subject to new procedures.

6.8 Each of your and your distributor’s registered representatives, agents, independent contractors and employees, as applicable, will have access to our websites at franklintempleton.com, and such other URLs through which we may permit you to conduct business concerning the Portfolios from time to time (referred to collectively as the “Site”) as provided herein: (i) upon registration by such individual on a Site, (ii) if you cause a Site Access Request Form (an “Access Form”) to be signed by your authorized supervisory personnel and submitted to us, as a Schedule to, and legally a part of, this Agreement, or (iii) if you provide such individual with the necessary access codes or other information necessary to access the Site through any generic or firm-wide authorization we may grant you from time to time. Upon receipt by us of a completed registration submitted by an individual through the Site or a signed Access Form referencing such individual, we shall be entitled to rely upon the representations contained therein as if you had made them directly hereunder and we will issue a user identification, express number and/or password (collectively, “Access Code”). Any person to whom we issue an Access Code or to whom you provide the necessary Access Codes or other information necessary to access the Site through any generic or firm-wide authorization we may grant you from time to time shall be an “Authorized User.”

We shall be entitled to assume that such person validly represents you and that all instructions received from such person are authorized, in which case such person will have access to the Site, including all services and information to which you are authorized to access on the Site. All inquiries and actions initiated by you (including your Authorized Users) are your responsibility, are at your risk and are subject to our review and approval (which could cause a delay in processing). You agree that we do not have a duty to question information or instructions you (including Authorized Users) give to us under this Agreement, and that we are entitled to treat as authorized, and act upon, any such instructions and information you submit to us. You agree to take all reasonable measures to prevent any individual other than an Authorized User from obtaining access to the Site. You agree to inform us if you wish to restrict or revoke the access of any individual Access Code. If you become aware of any loss or theft or unauthorized use of any Access Code, you agree to contact us immediately. You also agree to monitor your (including Authorized Users’) use of the Site to ensure the terms of this Agreement are followed. You also agree that you will comply with all policies and agreements concerning Site usage, including without limitation the Terms of Use Agreement(s) posted on the Site (“Site Terms”), as may be revised and reposted on the Site from time to time, and those Site Terms (as in effect from time to time) are a part of this Agreement. Your duties under this section are considered “services” required under the terms of this Agreement. You acknowledge that the Site is transmitted over the Internet on a

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Form of Agreement

reasonable efforts basis and we do not warrant or guarantee their accuracy, timeliness, completeness, reliability or non-infringement. Moreover, you acknowledge that the Site is provided for informational purposes only, and is not intended to comply with any requirements established by any regulatory or governmental agency.

7. Indemnification

7.1 Indemnification By You

7.1.1 You agree to indemnify and hold harmless the Underwriter, the Trust and each of its Trustees, officers, employees and agents and each person, if any, who controls the Trust within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” and individually the “Indemnified Party” for purposes of this Section 7) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with your written consent, which consent shall not be unreasonably withheld) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, “Losses”), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses are related to the sale or acquisition of shares of the Trust or the Contracts and

7.1.1.1 arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in a Disclosure Document for the Contracts or in the Contracts themselves or in sales literature generated or approved by you on behalf of the Contracts or Accounts (or any amendment or supplement to any of the foregoing) (collectively, “Company Documents” for the purposes of this Section 7), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to you by or on behalf of the Trust for use in Company Documents or otherwise for use in connection with the sale of the Contracts or Trust shares; or

7.1.1.2 arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Trust Documents as defined below in Section 7.2) or wrongful conduct of you or persons under your control, with respect to the sale or acquisition of the Contracts or Trust shares; or

7.1.1.3 arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Trust Documents as defined below in Section 7.2 or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to the Trust by or on behalf of you; or

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Form of Agreement

7.1.1.4 arise out of or result from any failure by you to provide the services or furnish the materials required under the terms of this Agreement;

7.1.1.5 arise out of or result from any material breach of any representation and/or warranty made by you in this Agreement or arise out of or result from any other material breach of this Agreement by you;

7.1.1.6 arise out of or result from a Contract failing to be considered a life insurance policy or an annuity Contract, whichever is appropriate, under applicable provisions of the Code thereby depriving the Trust of its compliance with Section 817(h) of the Code; or

7.1.1.7 arise out of or result from any failure by you to satisfy requirements, including but not limited to compliance with all applicable laws, relating to your electronic delivery of Designated Portfolio Documents or your making such documents available on-line.

7.1.2 You shall not be liable under this indemnification provision with respect to any Losses to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party’s willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations and duties under this Agreement or to the Trust or Underwriter, whichever is applicable. You shall also not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified you in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify you of any such claim shall not relieve you from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, you shall be entitled to participate, at your own expense, in the defense of such action. Unless the Indemnified Party releases you from any further obligations under this Section 7.1, you also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from you to such party of your election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and you will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.

7.1.3 The Indemnified Parties will promptly notify you of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Trust shares or the Contracts or the operation of the Trust.

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Form of Agreement

7.2 Indemnification By The Underwriter

7.2.1 The Underwriter agrees to indemnify and hold harmless you, and each of your directors and officers and each person, if any, who controls you within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” and individually an “Indemnified Party” for purposes of this Section 7.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Underwriter, which consent shall not be unreasonably withheld) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, “Losses”) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such Losses are related to the sale or acquisition by the Accounts of the shares of the Trust or the Contracts and:

7.2.1.1 arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the Registration Statement, prospectus or sales literature of the Trust (or any amendment or supplement to any of the foregoing) (collectively, the “Trust Documents”) or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission of such alleged statement or omission was made in reliance upon and in conformity with information furnished to us by or on behalf of you for use in the Registration Statement or prospectus for the Trust or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Trust shares; or

7.2.1.2 arise out of or as a result of statements or representations (other than statements or representations contained in the Disclosure Documents or sales literature for the Contracts not supplied by the Underwriter or persons under its control) or wrongful conduct of the Trust, Adviser or Underwriter or persons under their control, with respect to the sale or distribution of the Contracts or Trust shares to the Accounts; or

7.2.1.3 arise out of any untrue statement or alleged untrue statement of a material fact contained in a Disclosure Document or sales literature covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to you by or on behalf of the Trust; or

7.2.1.4 arise as a result of any failure by us to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the qualification representation specified above in Section 2.2.7 and the diversification requirements specified above in Section 2.2.8); or

7.2.1.5 arise out of or result from any material breach of any representation and/or warranty made by the Underwriter in this Agreement or arise out of or result from any other material breach of this Agreement by the Underwriter; as limited by and in accordance with the provisions of Sections 7.2.2 and 7.2.3 hereof.

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7.2.2 The Underwriter shall not be liable under this indemnification provision with respect to any Losses to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party’s willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations and duties under this Agreement or to you or the Accounts, whichever is applicable.

7.2.3 The Underwriter shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Underwriter in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Underwriter of any such claim shall not relieve the Underwriter from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Underwriter will be entitled to participate, at its own expense, in the defense thereof. Unless the Indemnified Party releases the Underwriter from any further obligations under this Section 7.2, the Underwriter also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Underwriter to such party of the Underwriter’s election to assume the defense thereof, the Indemnified Party shall bear the expenses of any additional counsel retained by it, and the Underwriter will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.

7.2.4 You agree promptly to notify the Underwriter of the commencement of any litigation or proceedings against you or the Indemnified Parties in connection with the issuance or sale of the Contracts or the operation of each Account.

7.3 Indemnification By The Trust

7.3.1 The Trust agrees to indemnify and hold harmless you, and each of your directors and officers and each person, if any, who controls you within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” for purposes of this Section 7.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Trust, which consent shall not be unreasonably withheld) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements result from the gross negligence, bad faith or willful misconduct of the Board or any member thereof, are related to the operations of the Trust, and arise out of or result from any material breach of any representation and/or warranty made by the Trust in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust; as limited by and in accordance with the provisions of Sections 7.3.2 and 7.3.3 hereof. It is understood and expressly stipulated that neither the holders of shares of the Trust nor any Trustee, officer, agent or employee of the Trust shall be personally liable hereunder, nor shall any resort be had to other private property for the satisfaction of any claim or obligation hereunder, but the Trust only shall be liable.

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7.3.2 The Trust shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against any Indemnified Party as such may arise from such Indemnified Party’s willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations and duties under this Agreement or to you, the Trust, the Underwriter or each Account, whichever is applicable.

7.3.3 The Trust shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Trust in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claims shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Trust of any such claim shall not relieve the Trust from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Trust will be entitled to participate, at its own expense, in the defense thereof. Unless the Indemnified Party releases the Trust from any further obligations under this Section 7.3, the Trust also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Trust to such party of the Trust’s election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Trust will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.

7.3.4 You agree promptly to notify the Trust of the commencement of any litigation or proceedings against you or the Indemnified Parties in connection with this Agreement, the issuance or sale of the Contracts, with respect to the operation of the Account, or the sale or acquisition of shares of the Trust.

8. Notices

Any notice, except for those provided in Sections 3.2.1 and 3.2.2 of the Agreement, shall be sufficiently given when sent by registered or certified mail, or by nationally recognized overnight courier services, to the other party at the address of such party set forth in Schedule G below or at such other address as such party may from time to time specify in writing to the other party.

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9. Termination

9.1 This Agreement may be terminated by mutual agreement at any time. If this Agreement is so terminated, we shall, at your option, continue to make available additional shares of any Portfolio and redeem shares of any Portfolio for any or all Contracts or Accounts existing on the effective date of termination of this Agreement, pursuant to the terms and conditions of this Agreement.

9.2 This Agreement may be terminated by any party in its entirety or with respect to one, some or all Portfolios for any reason by sixty (60) days’ advance written notice delivered to the other parties. If this Agreement is so terminated, we may, at our option, continue to make available additional shares of any Portfolio and redeem shares of any Portfolio for any or all Contracts or Accounts existing on the effective date of termination of this Agreement, pursuant to the terms and conditions of this Agreement; alternatively, we may, at our option, redeem the Portfolio shares held by the Accounts, provided that such redemption shall not occur prior to six (6) months following written notice of termination, during which time we will cooperate with you in effecting a transfer of Portfolio assets to another underlying fund pursuant to any legal and appropriate means. If termination by you occurs in connection with the substitution of securities, as provided for in Section 26(c) of the 1940 Act, advance written notice to us shall be no later than the date of the filing of the application for approval of the proposed substitution of securities.

9.3 This Agreement may be terminated immediately by us upon written notice to you if you materially breach any of the representations and warranties made in this Agreement or you are materially in default in the performance of any of your duties or obligations under the Agreement, receive a written notice thereof and fail to remedy such default or breach to our reasonable satisfaction within 30 days after such notice. If this Agreement so terminates, the parties shall cooperate to effect an orderly windup of the business which may include, at our option, a redemption of the Portfolio shares held by the Accounts, provided that such redemption shall not occur prior to a period of up to six (6) months following written notice of termination, during which time we will cooperate reasonably with you in effecting a transfer of Portfolio assets to another underlying fund pursuant to any legal and appropriate means.

9.4 This Agreement may be terminated immediately by us upon written notice to you if, with respect to the representations and warranties made in sections 2.1.3, 2.1.5, 2.1.7 and 2.4.2 of this Agreement: (i) you materially breach any of such representations and warranties; or (ii) you inform us that any of such representations and warranties may no longer be true or might not be true in the future; or (iii) any of such representations and warranties were not true on the effective date of this Agreement, are at any time no longer true, or have not been true during any time since the effective date of this Agreement. If this Agreement is so terminated, the Trust may redeem, at its option in kind or for cash, the Portfolio shares held by the Accounts on the effective date of termination of this Agreement.

9.5 This Agreement may be terminated by the Board of Trustees of the Trust, in the exercise of its fiduciary duties, either upon its determination that such termination is a necessary and appropriate remedy for a material breach of this Agreement which includes a violation of laws, or upon its determination to completely liquidate a Portfolio. Pursuant to such termination, the Trust may redeem, at its option in kind or for cash, the Portfolio shares held by the Accounts on the effective date of termination of this Agreement.

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9.6 This Agreement shall terminate immediately in the event of its assignment by any party without the prior written approval of the other parties, or as otherwise required by law. If this Agreement is so terminated, the Trust may redeem, at its option in kind or for cash, the Portfolio shares held by the Accounts on the effective date of termination of this Agreement.

9.7 This Agreement shall be terminated as required by the Shared Funding Order, and its provisions shall govern.

9.8 The provisions of Sections 2 (Representations and Warranties) and 7 (Indemnification) shall survive the termination of this Agreement. All other applicable provisions of this Agreement shall survive the termination of this Agreement, as long as shares of the Trust are held on behalf of Contract owners, except that we shall have no further obligation to sell Trust shares with respect to Contracts issued after termination.

9.9 You shall not redeem Trust shares attributable to the Contracts (as opposed to Trust shares attributable to your assets held in the Account) except: (i) as necessary to implement Contract owner initiated or approved transactions; (ii) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application (hereinafter referred to as a “Legally Required Redemption”); or (iii) as permitted by an order of the SEC pursuant to Section 26(c) of the 1940 Act. Upon request, you shall promptly furnish to us the opinion of your counsel (which counsel shall be reasonably satisfactory to us) to the effect that any redemption pursuant to clause (ii) of this Section 9.9 is a Legally Required Redemption. Furthermore, you shall not prevent Contract owners from allocating payments to any Portfolio that has been available under a Contract without first giving us ninety (90) days advance written notice of your intention to do so.

10. Miscellaneous

10.1 The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions of this Agreement or otherwise affect their construction or effect.

10.2 This Agreement may be executed simultaneously in two or more counterparts, all of which taken together shall constitute one and the same instrument.

10.3 If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby.

10.4 This Agreement shall be construed and its provisions interpreted under and in accordance with the laws of the State of California. It shall also be subject to the provisions of the federal securities laws and the rules and regulations thereunder, to any orders of the SEC on behalf of the Trust granting it exemptive relief, and to the conditions of such orders. We shall promptly forward copies of any such orders to you.

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10.5 The parties to this Agreement acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Trust and that no Trustee, officer, agent or holder of shares of beneficial interest of the Trust shall be personally liable for any such liabilities.

10.6 The parties to this Agreement agree that the assets and liabilities of each Portfolio of the Trust are separate and distinct from the assets and liabilities of each other Portfolio. No Portfolio shall be liable or shall be charged for any debt, obligation or liability of any other Portfolio.

10.7 Each party to this Agreement shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, FINRA, and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby.

10.8 Each party shall treat as confidential all information of the other party which the parties agree in writing is confidential (“Confidential Information”). Except as permitted by this Agreement or as required by appropriate governmental authority (including, without limitation, the SEC, FINRA, or state securities and insurance regulators) the receiving party shall not disclose or use Confidential Information of the other party before it enters the public domain, without the express written consent of the party providing the Confidential Information.

10.9 The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties to this Agreement are entitled to under state and federal laws.

10.10 The parties to this Agreement acknowledge and agree that this Agreement shall not be exclusive in any respect.

10.11 Neither this Agreement nor any rights or obligations created by it may be assigned by any party without the prior written approval of the other parties.

10.12 No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties. Notwithstanding the foregoing: (i) the Site Terms may be separately amended as provided therein and, as so amended and in effect from time to time, shall be a part of this Agreement; and (ii) Schedule C may be separately amended as provided therein and, as so amended shall be a part of this Agreement.

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10.13 Each party to the Agreement agrees to limit the disclosure of nonpublic personal information of Contract owners and customers consistent with its policies on privacy with respect to such information and Regulation S-P of the SEC. Each party hereby agrees that it will comply with all applicable requirements under the regulations implementing Title V of the Gramm-Leach-Bliley Act and any other applicable federal and state consumer privacy acts, rules and regulations. Each party further represents that it has in place, and agrees that it will maintain, information security policies and procedures for protecting nonpublic personal customer information adequate to conform to applicable legal requirements.

IN WITNESS WHEREOF, each of the parties has caused their duly authorized officers to execute this Agreement.

The Company:

By:

Name:

Title:

Distributor for the Company:

By:

Name:

Title:

The Trust:	Franklin Templeton Variable Insurance Products Trust
Only on behalf of each
Portfolio listed on
Schedule C hereof.

By:
Name:	Karen L. Skidmore
Title:	Vice President

The Underwriter: Franklin/Templeton Distributors, Inc.

By:
Name:	Thomas Regner
Title:	Senior Vice President

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Schedule A

The Company and its Distributor

THE COMPANY

[name]

[address]

An insurance company organized under the laws of the State of                     .

THE DISTRIBUTOR

[name of Distributor]

[address of Distributor]

A corporation organized under the laws of the State of                     .

A

Form of Agreement

Schedule B

Accounts of the Company

Name of Account	SEC Registration Yes/No
Smith VA Account	Yes
Smith VLI Account	No

B

Form of Agreement

Schedule C

Available Portfolios and Classes of Shares of the Trust

[funds and classes currently listed in schedule, if any]

In addition to portfolios and classes of shares listed above, any additional Portfolios and classes of shares other than Class 3 shares are included in this Schedule C listing provided that:

(1) the General Counsel of Franklin Templeton Investments receives from a person authorized by you a written notice in the form attached (which may be electronic mail or sent by electronic mail) (“Notice”) identifying this Agreement as provided in the Notice and specifying: (i) the names and classes of shares of additional Portfolios that you propose to offer as investment options of the Separate Accounts under the Contracts; and (ii) the date that you propose to begin offering Separate Account interests investing in the additional Portfolios under the Contracts; and

(2) we do not within ten (10) Business Days following receipt of the Notice send you a writing (which may be electronic mail) objecting to your offering such Separate Accounts investing in the additional Portfolios and classes of shares under the Contracts.

Provided that we do not object as provided above, your Notice shall amend, supplement and become a part of this Schedule C and the Agreement.

C

Form of Agreement

FORM OF NOTICE PURSUANT TO SCHEDULE C OF PARTICIPATION AGREEMENT

To: General Counsel c/o

[                    ]

Fax: [                    ]

Franklin Templeton Investments

1 Franklin Parkway,

Bldg. 920, 2^nd Floor

San Mateo, CA 94402

With respect to the following agreement(s) (altogether, the “Agreement”)

(please reproduce and complete table for multiple agreements):

Date of Participation Agreement:

Insurance Company(ies):

Insurance Company Distributor(s):

As provided by Schedule C of the Agreement, this Notice proposes to Franklin Templeton Variable Insurance Products Trust, and Franklin/Templeton Distributors, Inc. the addition as of the offering date(s) listed below of the following Portfolios as additional investment options listed on Schedule C:

Names and Classes of Shares of Additional Portfolios Listing of current classes for your reference: Class 1 (no 12b-1 fee); Class 2 (12b-1 fee of 25 bps); or Class 4 (12b-1 fee of 35 bps).           Offering Date(s)        

Name and title of authorized person of insurance company:

Contact Information:

C

Form of Agreement

Schedule D

Contracts of the Company

All variable life and variable annuity contracts issued by separate accounts listed on Schedule B of this Agreement.

D

Form of Agreement

Schedule E

This schedule is not used

E

Form of Agreement

Schedule F

Rule 12b-1 Plans of the Trust

Compensation

Each Class 2 or Class 4 Portfolio named or referenced on Schedule C of this Agreement may make payments at a rate stated in its prospectus pursuant to the terms and conditions of its Rule 12b-1 distribution plan.

Agreement Provisions

If the Company, on behalf of any Account, purchases Trust Portfolio shares (“Eligible Shares”) that are subject to a Rule 12b-1 plan adopted under the 1940 Act (the “Plan”), the Company, on behalf of its distributor, may participate in the Plan.

To the extent the Company or its affiliates, agents or designees (collectively “you”) provide any activity or service which is primarily intended to assist in the promotion, distribution or account servicing of Eligible Shares (“Rule 12b-1 Services”) or variable contracts offering Eligible Shares, the Underwriter, the Trust or their affiliates (collectively, “we”) may pay you a Rule 12b-1 fee. “Rule 12b-1 Services” may include, but are not limited to, printing of prospectuses and reports used for sales purposes, preparing and distributing sales literature and related expenses, advertisements, education of dealers and their representatives, and similar distribution-related expenses, furnishing personal services to owners of Contracts which may invest in Eligible Shares (“Contract Owners”), education of Contract Owners, answering routine inquiries regarding a Portfolio, coordinating responses to Contract Owner inquiries regarding the Portfolios, maintaining such accounts or providing such other enhanced services as a Trust Portfolio or Contract may require, or providing other services eligible for service fees as defined under FINRA rules.

Your acceptance of such compensation is your acknowledgment that eligible services have been rendered. All Rule 12b-1 fees shall be based on the value of Eligible Shares owned by the Company on behalf of its Accounts, and shall be calculated on the basis and at the rates set forth in the compensation provision stated above. The aggregate annual fees paid pursuant to each Plan shall not exceed the amounts stated as the “annual maximums” in the Portfolio’s prospectus, unless an increase is approved by shareholders as provided in the Plan. These maximums shall be a specified percent of the value of a Portfolio’s net assets attributable to Eligible Shares owned by the Company on behalf of its Accounts (determined in the same manner as the Portfolio uses to compute its net assets as set forth in its effective Prospectus). The Rule 12b-1 fee will be paid to you within thirty (30) days after the end of the three-month periods ending in January, April, July and October.

You shall furnish us with such information as shall reasonably be requested by the Trust’s Boards of Trustees (“Trustees”) with respect to the Rule 12b-1 fees paid to you pursuant to the Plans. We shall furnish to the Trustees, for their review on a quarterly basis, a written report of the amounts expended under the Plans and the purposes for which such expenditures were made.

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The Plans and provisions of any agreement relating to such Plans must be approved annually by a vote of the Trustees, including the Trustees who are not interested persons of the Trust and who have no financial interest in the Plans or any related agreement (“Disinterested Trustees”). Each Plan may be terminated at any time by the vote of a majority of the Disinterested Trustees, or by a vote of a majority of the outstanding shares as provided in the Plan, on sixty (60) days’ written notice, without payment of any penalty, or as provided in the Plan. Continuation of the Plans is also conditioned on Disinterested Trustees being ultimately responsible for selecting and nominating any new Disinterested Trustees. Under Rule 12b-1, the Trustees have a duty to request and evaluate, and persons who are party to any agreement related to a Plan have a duty to furnish, such information as may reasonably be necessary to an informed determination of whether the Plan or any agreement should be implemented or continued. Under Rule 12b-1, the Trust is permitted to implement or continue Plans or the provisions of any agreement relating to such Plans from year-to-year only if, based on certain legal considerations, the Trustees are able to conclude that the Plans will benefit each affected Trust Portfolio and class. Absent such yearly determination, the Plans must be terminated as set forth above. In the event of the termination of the Plans for any reason, the provisions of this Schedule F relating to the Plans will also terminate. You agree that your selling agreements with persons or entities through whom you intend to distribute Contracts will provide that compensation paid to such persons or entities may be reduced if a Portfolio’s Plan is no longer effective or is no longer applicable to such Portfolio or class of shares available under the Contracts.

Any obligation assumed by the Trust pursuant to this Agreement shall be limited in all cases to the assets of the Trust and no person shall seek satisfaction thereof from shareholders of the Trust. You agree to waive payment of any amounts payable to you by Underwriter under a Plan until such time as the Underwriter has received such fee from the Trust.

The provisions of the Plans shall control over the provisions of the Participation Agreement, including this Schedule F, in the event of any inconsistency. You agree to provide complete disclosure as required by all applicable statutes, rules and regulations of all rule 12b-1 fees received from us in the prospectus of the Contracts.

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Schedule G

Addresses for Notices

To the Company:	[         ] Insurance Company
	[address]
	[address]
	Attention: [name, title]
To the Distributor:	Address
	Attention:
To the Trust:	Franklin Templeton Variable Insurance Products Trust
	One Franklin Parkway, Bldg. 920 2nd Floor
	San Mateo, California 94403
	Attention: Karen L. Skidmore, Vice President
To the Underwriter:	Franklin/Templeton Distributors, Inc.
	140 Fountain Parkway, 8th Floor
	St. Petersburg, FL 33716
	Attention: Peter Jones, President
If to the Trust or Underwriter with a copy to:	Franklin Templeton Investments
	One Franklin Parkway, Bldg. 920 2nd Floor
	San Mateo, California 94403
	Attention: General Counsel

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Form of Agreement

Schedule H

Shared Funding Order

Templeton Variable Products Series Fund, et al.

File No. 812-11698

SECURITIES AND EXCHANGE COMMISSION

Release No. IC-24018

1999 SEC LEXIS 1887

September 17, 1999

ACTION: Notice of application for an amended order of exemption pursuant to Section 6(c) of the Investment Company Act of 1940 (the “1940 Act”) from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder.

TEXT: Summary of Application: Templeton Variable Products Series Fund (the “Templeton Trust”), Franklin Templeton Variable Insurance Products Trust (formerly Franklin Valuemark Funds) (the “VIP Trust,” and together with the Templeton Trust, the “Funds”), Templeton Funds Annuity Company (“TFAC”) or any successor to TFAC, and any future open-end investment company for which TFAC or any affiliate is the administrator, sub-administrator, investment manager, adviser, principal underwriter, or sponsor (“Future Funds”) seek an amended order of the Commission to (1) add as parties to that order the VIP Trust and any Future Funds and (2) permit shares of the Funds and Future Funds to be issued to and held by qualified pension and retirement plans outside the separate account context.

Applicants: Templeton Variable Products Series Fund, Franklin Templeton Variable Insurance Products Trust, Templeton Funds Annuity Company or any successor to TFAC, and any future open-end investment company for which TFAC or any affiliate is the administrator, sub-administrator, investment manager, adviser, principal underwriter, or sponsor (collectively, the “Applicants”).

Filing Date: The application was filed on July 14, 1999, and amended and restated on September 17, 1999.

Hearing or Notification of Hearing: An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Secretary of the Commission and serving Applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m., on October 12, 1999, and should be accompanied by proof of service on the Applicants in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer’s interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Secretary of the Commission.

Addresses: Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, D.C. 20549-0609.

Applicants: Templeton Variable Products Series Fund and Franklin Templeton Variable Insurance Products Trust, 777 Mariners Island Boulevard, San Mateo, California 94404, Attn: Karen L. Skidmore, Esq.

For Further Information Contact: Kevin P. McEnery, Senior Counsel, or Susan M. Olson, Branch Chief, Office of Insurance Products, Division of Investment Management, at (202) 942-0670.

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Supplementary Information: The following is a summary of the application. The complete application is available for a fee from the SEC’s Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 20549-0102 (tel. (202) 942-8090).

Applicants’ Representations:

1. Each of the Funds is registered under the 1940 Act as an open-end management investment company and was organized as a Massachusetts business trust. The Templeton Trust currently consists of eight separate series, and the VIP Trust consists of twenty-five separate series. Each Fund’s Declaration of Trust permits the Trustees to create additional series of shares at any time. The Funds currently serve as the underlying investment medium for variable annuity contracts and variable life insurance policies issued by various insurance companies. The Funds have entered into investment management agreements with certain investment managers (“Investment Managers”) directly or indirectly owned by Franklin Resources, Inc. (“Resources”), a publicly owned company engaged in the financial services industry through its subsidiaries.

2. TFAC is an indirect, wholly owned subsidiary of Resources. TFAC is the sole insurance company in the Franklin Templeton organization, and specializes in the writing of variable annuity contracts. The Templeton Trust has entered into a Fund Administration Agreement with Franklin Templeton Services, Inc. (“FT Services”), which replaced TFAC in 1998 as administrator, and FT Services subcontracts certain services to TFAC. FT Services also serves as administrator to all series of the VIP Trust. TFAC and FT Services provide certain administrative facilities and services for the VIP and Templeton Trusts.

3. On November 16, 1993, the Commission issued an order granting exemptive relief to permit shares of the Templeton Trust to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies (Investment Company Act Release No. 19879, File No. 812-8546) (the “Original Order”). Applicants incorporate by reference into the application the Application for the Original Order and each amendment thereto, the Notice of Application for the Original Order, and the Original Order, to the extent necessary, to supplement the representations made in the application in support of the requested relief. Applicants represent that all of the facts asserted in the Application for the Original Order and any amendments thereto remain true and accurate in all material respects to the extent that such facts are relevant to any relief on which Applicants continue to rely. The Original Order allows the Templeton Trust to offer its shares to insurance companies as the investment vehicle for their separate accounts supporting variable annuity contracts and variable life insurance contracts (collectively, the “Variable Contracts”). Applicants state that the Original Order does not (i) include the VIP Trust or Future Funds as parties, nor (ii) expressly address the sale of shares of the Funds or any Future Funds to qualified pension and retirement plans outside the separate account context including, without limitation, those trusts, plans, accounts, contracts or annuities described in Sections 401(a), 403(a), 403(b), 408(b), 408(k), 414(d), 457(b), 501(c)(18) of the Internal Revenue Code of 1986, as amended (the “Code”), and any other trust, plan, contract, account or annuity that is determined to be within the scope of Treasury Regulation 1.817.5(f)(3)(iii) (“Qualified Plans”).

4. Separate accounts owning shares of the Funds and their insurance company depositors are referred to in the application as “Participating Separate Accounts” and “Participating Insurance Companies,” respectively. The use of a common management investment company as the underlying investment medium for both variable annuity and variable life insurance separate accounts of a single insurance company (or of two or more affiliated insurance companies) is referred to as “mixed funding.” The use of a common management investment company as the underlying investment medium for variable annuity and/or variable life insurance separate accounts of unaffiliated insurance companies is referred to as “shared funding.”

Applicants’ Legal Analysis:

1. Applicants request that the Commission issue an amended order pursuant to Section 6(c) of the 1940 Act, adding the VIP Trust and Future Funds to the Original Order and exempting scheduled premium variable life insurance separate accounts and flexible premium variable life insurance separate accounts of Participating Insurance Companies (and, to the extent necessary, any principal underwriter and depositor of such an account) and the Applicants from Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)

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(and any comparable rule) thereunder, respectively, to the extent necessary to permit shares of the Funds and any Future Funds to be sold to and held by Qualified Plans. Applicants submit that the exemptions requested are appropriate in the public interest, consistent with the protection of investors, and consistent with the purposes fairly intended by the policy and provisions of the 1940 Act.

2. The Original Order does not include the VIP Trust or Future Funds as parties nor expressly address the sale of shares of the Funds or any Future Funds to Qualified Plans. Applicants propose that the VIP Trust and Future Funds be added as parties to the Original Order and the Funds and any Future Funds be permitted to offer and sell their shares to Qualified Plans.

3. Section 6(c) of the 1940 Act provides, in part, that the Commission, by order upon application, may conditionally or unconditionally exempt any person, security or transaction, or any class or classes of persons, securities or transactions from any provisions of the 1940 Act or the rules or regulations thereunder, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the 1940 Act.

4. In connection with the funding of scheduled premium variable life insurance contracts issued through a separate account registered under the 1940 Act as a unit investment trust (“UIT”), Rule 6e-2(b)(15) provides partial exemptions from various provisions of the 1940 Act, including the following: (1) Section 9(a), which makes it unlawful for certain individuals to act in the capacity of employee, officer, or director for a UIT, by limiting the application of the eligibility restrictions in Section 9(a) to affiliated persons directly participating in the management of a registered management investment company; and (2) Sections 13(a), 15(a) and 15(b) of the 1940 Act to the extent that those sections might be deemed to require “pass-through” voting with respect to an underlying fund’s shares, by allowing an insurance company to disregard the voting instructions of contractowners in certain circumstances.

5. These exemptions are available, however, only where the management investment company underlying the separate account (the “underlying fund”) offers its shares “exclusively to variable life insurance separate accounts of the life insurer, or of any affiliated life insurance company.” Therefore, Rule 6e-2 does not permit either mixed funding or shared funding because the relief granted by Rule 6e-2(b)(15) is not available with respect to a scheduled premium variable life insurance separate account that owns shares of an underlying fund that also offers its shares to a variable annuity or a flexible premium variable life insurance separate account of the same company or of any affiliated life insurance company. Rule 6e-2(b)(15) also does not permit the sale of shares of the underlying fund to Qualified Plans.

6. In connection with flexible premium variable life insurance contracts issued through a separate account registered under the 1940 Act as a UIT, Rule 6e-3(T)(b)(15) also provides partial exemptions from Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act. These exemptions, however, are available only where the separate account’s underlying fund offers its shares “exclusively to separate accounts of the life insurer, or of any affiliated life insurance company, offering either scheduled contracts or flexible contracts, or both; or which also offer their shares to variable annuity separate accounts of the life insurer or of an affiliated life insurance company.” Therefore, Rule 6e-3(T) permits mixed funding but does not permit shared funding and also does not permit the sale of shares of the underlying fund to Qualified Plans. As noted above, the Original Order granted the Templeton Trust exemptive relief to permit mixed and shared funding, but did not expressly address the sale of its shares to Qualified Plans.

7. Applicants note that if the Funds were to sell their shares only to Qualified Plans, exemptive relief under Rule 6e-2 and Rule 6e-3(T) would not be necessary. Applicants state that the relief provided for under Rule 6e-2(b)(15) and Rule 6e-3(T)(b)(15) does not relate to qualified pension and retirement plans or to a registered investment company’s ability to sell its shares to such plans.

8. Applicants state that changes in the federal tax law have created the opportunity for each of the Funds to increase its asset base through the sale of its shares to Qualified Plans. Applicants state that Section 817(h) of the Internal Revenue Code of 1986, as amended (the “Code”), imposes certain diversification standards on the assets underlying Variable Contracts. Treasury Regulations generally require that, to meet the diversification requirements, all of the beneficial interests in the underlying investment company must be held by the segregated asset accounts of

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one or more life insurance companies. Notwithstanding this, Applicants note that the Treasury Regulations also contain an exception to this requirement that permits trustees of a Qualified Plan to hold shares of an investment company, the shares of which are also held by insurance company segregated asset accounts, without adversely affecting the status of the investment company as an adequately diversified underlying investment of Variable Contracts issued through such segregated asset accounts (Treas. Reg. 1.817-5(f)(3)(iii)).

9. Applicants state that the promulgation of Rules 6e-2(b)(15) and 6e-3(T)(b)(15) under the 1940 Act preceded the issuance of these Treasury Regulations. Thus, Applicants assert that the sale of shares of the same investment company to both separate accounts and Qualified Plans was not contemplated at the time of the adoption of Rules 6e-2(b)(15) and 6e-3(T)(b)(15).

10. Section 9(a) provides that it is unlawful for any company to serve as investment adviser or principal underwriter of any registered open-end investment company if an affiliated person of that company is subject to a disqualification enumerated in Section 9(a)(1) or (2). Rules 6e-2(b)(15) and 6e-3(T)(b)(15) provide exemptions from Section 9(a) under certain circumstances, subject to the limitations on mixed and shared funding. These exemptions limit the application of the eligibility restrictions to affiliated individuals or companies that directly participate in the management of the underlying portfolio investment company.

11. Applicants state that the relief granted in Rule 6e-2(b)(15) and 6e-3(T)(b)(15) from the requirements of Section 9 limits, in effect, the amount of monitoring of an insurer’s personnel that would otherwise be necessary to ensure compliance with Section 9 to that which is appropriate in light of the policy and purposes of Section 9. Applicants submit that those Rules recognize that it is not necessary for the protection of investors or the purposes fairly intended by the policy and provisions of the 1940 Act to apply the provisions of Section 9(a) to the many individuals involved in an insurance company complex, most of whom typically will have no involvement in matters pertaining to investment companies funding the separate accounts.

12. Applicants to the Original Order previously requested and received relief from Section 9(a) and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) to the extent necessary to permit mixed and shared funding. Applicants maintain that the relief previously granted from Section 9(a) will in no way be affected by the proposed sale of shares of the Funds to Qualified Plans. Those individuals who participate in the management or administration of the Funds will remain the same regardless of which Qualified Plans use such Funds. Applicants maintain that more broadly applying the requirements of Section 9(a) because of investment by Qualified Plans would not serve any regulatory purpose. Moreover, Qualified Plans, unlike separate accounts, are not themselves investment companies and therefore are not subject to Section 9 of the 1940 Act.

13. Applicants state that Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) provide exemptions from the pass-through voting requirement with respect to several significant matters, assuming the limitations on mixed and shared funding are observed. Rules 6e-2(b)(15)(iii)(A) and 6e-3(T)(b)(15)(iii)(A) provide that the insurance company may disregard the voting instructions of its contractowners with respect to the investments of an underlying fund or any contract between a fund and its investment adviser, when required to do so by an insurance regulatory authority (subject to the provisions of paragraphs (b)(5)(i) and (b)(7)(ii)(A) of the Rules). Rules 6e-2(b)(15)(iii)(B) and 6e-3(T)(b)(15)(iii)(A)(2) provide that the insurance company may disregard contractowners’ voting instructions if the contractowners initiate any change in such company’s investment policies, principal underwriter, or any investment adviser (provided that disregarding such voting instructions is reasonable and subject to the other provisions of paragraphs (b)(5)(ii) and (b)(7)(ii)(B) and (C) of the Rules).

14. Applicants assert that Qualified Plans, which are not registered as investment companies under the 1940 Act, have no requirement to pass-through the voting rights to plan participants. Applicants state that applicable law expressly reserves voting rights to certain specified persons. Under Section 403(a) of the Employment Retirement Income Security Act (“ERISA”), shares of a fund sold to a Qualified Plan must be held by the trustees of the Qualified Plan. Section 403(a) also provides that the trustee(s) must have exclusive authority and discretion to manage and control the Qualified Plan with two exceptions: (1) when the Qualified Plan expressly provides that the trustee(s) are subject to the direction of a named fiduciary who is not a trustee, in which case the trustees are subject to proper directions made in accordance with the terms of the Qualified Plan and not contrary to ERISA; and (2) when the authority to manage, acquire or dispose of assets of the Qualified Plan is delegated to one or more

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investment managers pursuant to Section 402(c)(3) of ERISA. Unless one of the two above exceptions stated in Section 403(a) applies, Qualified Plan trustees have the exclusive authority and responsibility for voting proxies. Where a named fiduciary to a Qualified Plan appoints an investment manager, the investment manager has the responsibility to vote the shares held unless the right to vote such shares is reserved to the trustees or the named fiduciary. Where a Qualified Plan does not provide participants with the right to give voting instructions, Applicants do not see any potential for material irreconcilable conflicts of interest between or among variable contract holders and Qualified Plan investors with respect to voting of the respective Fund’s shares. Accordingly, Applicants state that, unlike the case with insurance company separate accounts, the issue of the resolution of material irreconcilable conflicts with respect to voting is not present with respect to such Qualified Plans since the Qualified Plans are not entitled to pass-through voting privileges.

15. Even if a Qualified Plan were to hold a controlling interest in one of the Funds, Applicants believe that such control would not disadvantage other investors in such Fund to any greater extent than is the case when any institutional shareholder holds a majority of the voting securities of any open-end management investment company. In this regard, Applicants submit that investment in a Fund by a Qualified Plan will not create any of the voting complications occasioned by mixed funding or shared funding. Unlike mixed or shared funding, Qualified Plan investor voting rights cannot be frustrated by veto rights of insurers or state regulators.

16. Applicants state that some of the Qualified Plans, however, may provide for the trustee(s), an investment adviser (or advisers), or another named fiduciary to exercise voting rights in accordance with instructions from participants. Where a Qualified Plan provides participants with the right to give voting instructions, Applicants see no reason to believe that participants in Qualified Plans generally or those in a particular Qualified Plan, either as a single group or in combination with participants in other Qualified Plans, would vote in a manner that would disadvantage Variable Contract holders. In sum, Applicants maintain that the purchase of shares of the Funds by Qualified Plans that provide voting rights does not present any complications not otherwise occasioned by mixed or shared funding.

17. Applicants do not believe that the sale of the shares of the Funds to Qualified Plans will increase the potential for material irreconcilable conflicts of interest between or among different types of investors. In particular, Applicants see very little potential for such conflicts beyond that which would otherwise exist between variable annuity and variable life insurance contractowners.

18. As noted above, Section 817(h) of the Code imposes certain diversification standards on the underlying assets of variable contracts held in an underlying mutual fund. The Code provides that a variable contract shall not be treated as an annuity contract or life insurance, as applicable, for any period (and any subsequent period) for which the investments are not, in accordance with regulations prescribed by the Treasury Department, adequately diversified.

19. Treasury Department Regulations issued under Section 817(h) provide that, in order to meet the statutory diversification requirements, all of the beneficial interests in the investment company must be held by the segregated asset accounts of one or more insurance companies. However, the Regulations contain certain exceptions to this requirement, one of which allows shares in an underlying mutual fund to be held by the trustees of a qualified pension or retirement plan without adversely affecting the ability of shares in the underlying fund also to be held by separate accounts of insurance companies in connection with their variable contracts (Treas. Reg. 1.817-5(f)(3)(iii)). Thus, Applicants believe that the Treasury Regulations specifically permit “qualified pension or retirement plans” and separate accounts to invest in the same underlying fund. For this reason, Applicants have concluded that neither the Code nor the Treasury Regulations or revenue rulings thereunder presents any inherent conflict of interest.

20. Applicants note that while there are differences in the manner in which distributions from Variable Contracts and Qualified Plans are taxed, these differences will have no impact on the Funds. When distributions are to be made, and a Separate Account or Qualified Plan is unable to net purchase payments to make the distributions, the Separate Account and Qualified Plan will redeem shares of the Funds at their respective net asset value in conformity with Rule 22c-1 under the 1940 Act (without the imposition of any sales charge) to provide proceeds to meet distribution needs. A Qualified Plan will make distributions in accordance with the terms of the Qualified Plan.

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21. Applicants maintain that it is possible to provide an equitable means of giving voting rights to Participating Separate Account contractowners and to Qualified Plans. In connection with any meeting of shareholders, the Funds will inform each shareholder, including each Participating Insurance Company and Qualified Plan, of information necessary for the meeting, including their respective share of ownership in the relevant Fund. Each Participating Insurance Company will then solicit voting instructions in accordance with Rules 6e-2 and 6e-3(T), as applicable, and its participation agreement with the relevant Fund. Shares held by Qualified Plans will be voted in accordance with applicable law. The voting rights provided to Qualified Plans with respect to shares of the Funds would be no different from the voting rights that are provided to Qualified Plans with respect to shares of funds sold to the general public.

22. Applicants have concluded that even if there should arise issues with respect to a state insurance commissioner’s veto powers over investment objectives where the interests of contractowners and the interests of Qualified Plans are in conflict, the issues can be almost immediately resolved since the trustees of (or participants in) the Qualified Plans can, on their own, redeem the shares out of the Funds. Applicants note that state insurance commissioners have been given the veto power in recognition of the fact that insurance companies usually cannot simply redeem their separate accounts out of one fund and invest in another. Generally, time-consuming, complex transactions must be undertaken to accomplish such redemptions and transfers. Conversely, the trustees of Qualified Plans or the participants in participant-directed Qualified Plans can make the decision quickly and redeem their interest in the Funds and reinvest in another funding vehicle without the same regulatory impediments faced by separate accounts or, as is the case with most Qualified Plans, even hold cash pending suitable investment.

23. Applicants also state that they do not see any greater potential for material irreconcilable conflicts arising between the interests of participants under Qualified Plans and contractowners of Participating Separate Accounts from possible future changes in the federal tax laws than that which already exist between variable annuity contractowners and variable life insurance contractowners.

24. Applicants state that the sale of shares of the Funds to Qualified Plans in addition to separate accounts of Participating Insurance Companies will result in an increased amount of assets available for investment by the Funds. This may benefit variable contractowners by promoting economies of scale, by permitting increased safety of investments through greater diversification, and by making the addition of new portfolios more feasible.

25. Applicants assert that, regardless of the type of shareholders in each Fund, each Fund’s Investment Manager is or would be contractually and otherwise obligated to manage the Fund solely and exclusively in accordance with that Fund’s investment objectives, policies and restrictions as well as any guidelines established by the Board of Trustees of such Fund (the “Board”). The Investment Manager works with a pool of money and (except in a few instances where this may be required in order to comply with state insurance laws) does not take into account the identity of the shareholders. Thus, each Fund will be managed in the same manner as any other mutual fund. Applicants therefore see no significant legal impediment to permitting the sale of shares of the Funds to Qualified Plans.

26. Applicants state that the Commission has permitted the amendment of a substantially similar original order for the purpose of adding a party to the original order and has permitted open-end management investment companies to offer their shares directly to Qualified Plan in addition to separate accounts of affiliated or unaffiliated insurance companies which issue either or both variable annuity contracts or variable life insurance contracts. Applicants state that the amended order sought in the application is identical to precedent with respect to the conditions Applicants propose should be imposed on Qualified Plans in connection with investment in the Funds.

Applicants’ Conditions:

If the requested amended order is granted, Applicants consent to the following conditions:

1. A majority of the Board of each Fund shall consist of persons who are not “interested persons” thereof, as defined by Section 2(a)(19) of the 1940 Act, and the rules thereunder and as modified by any applicable orders of the Commission, except that if this condition is not met by reason of the death, disqualification or bona fide resignation of any Board Member or Members, then the operation of this condition shall be suspended: (a) for a period of 45 days if the vacancy or vacancies may be filled by the remaining Board Members; (b) for a period of 60 days if a vote of shareholders is required to fill the vacancy or vacancies; or (c) for such longer period as the Commission may prescribe by order upon application.

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2. The Board will monitor their respective Fund for the existence of any material irreconcilable conflict among the interests of the Variable Contract owners of all Separate Accounts investing in the Funds and of the Qualified Plan participants investing in the Funds. The Board will determine what action, if any, shall be taken in response to such conflicts. A material irreconcilable conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretive letter, or any similar action by insurance, tax or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of the Funds are being managed; (e) a difference in voting instructions given by variable annuity contract owners, variable life insurance contract owners, and trustees of Qualified Plans; (f) a decision by an insurer to disregard the voting instructions of Variable Contract owners; or (g) if applicable, a decision by a Qualified Plan to disregard the voting instructions of Qualified Plan participants.

3. Participating Insurance Companies, the Investment Managers, and any Qualified Plan that executes a fund participation agreement upon becoming an owner of 10 percent or more of the assets of an Fund (a “Participating Qualified Plan”), will report any potential or existing conflicts of which it becomes aware to the Board of any relevant Fund. Participating Insurance Companies, the Investment Managers and the Participating Qualified Plans will be responsible for assisting the Board in carrying out its responsibilities under these conditions by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This responsibility includes, but is not limited to, an obligation by each Participating Insurance Company to inform the Board whenever voting instructions of Contract owners are disregarded and, if pass-through voting is applicable, an obligation by each Participating Qualified Plan to inform the Board whenever it has determined to disregard Qualified Plan participant voting instructions. The responsibility to report such information and conflicts, and to assist the Board, will be contractual obligations of all Participating Insurance Companies investing in the Funds under their agreements governing participation in the Funds, and such agreements shall provide that these responsibilities will be carried out with a view only to the interests of the Variable Contract owners. The responsibility to report such information and conflicts, and to assist the Board, will be contractual obligations of all Participating Qualified Plans under their agreements governing participation in the Funds, and such agreements will provide that their responsibilities will be carried out with a view only to the interests of Qualified Plan participants.

4. If it is determined by a majority of the Board of a Fund, or by a majority of the disinterested Board Members, that a material irreconcilable conflict exists, the relevant Participating Insurance Companies and Participating Qualified Plans will, at their own expense and to the extent reasonably practicable as determined by a majority of the disinterested Board Members, take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps could include: (a) in the case of Participating Insurance Companies, withdrawing the assets allocable to some or all of the Separate Account s from the Fund or any portfolio thereof and reinvesting such assets in a different investment medium, including another portfolio of an Fund or another Fund, or submitting the question as to whether such segregation should be implemented to a vote of all affected Variable Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., variable annuity contract owners or variable life insurance contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Variable Contract owners the option of making such a change; (b) in the case of Participating Qualified Plans, withdrawing the assets allocable to some or all of the Qualified Plans from the Fund and reinvesting such assets in a different investment medium; and (c) establishing a new registered management investment company or managed Separate Account. If a material irreconcilable conflict arises because of a decision by a Participating Insurance Company to disregard Variable Contract owner voting instructions, and that decision represents a minority position or would preclude a majority vote, then the insurer may be required, at the Fund’s election, to withdraw the insurer’s Separate Account investment in such Fund, and no charge or penalty will be imposed as a result of such withdrawal. If a material irreconcilable conflict arises because of a Participating Qualified Plan’s decision to disregard Qualified Plan participant voting instructions, if applicable, and that decision represents minority position or would preclude a majority vote, the Participating Qualified Plan may be required, at the Fund’s election, to withdraw its investment in such Fund, and no charge or penalty will be imposed as a result of such withdrawal. The responsibility to take remedial action in the event of a determination by a Board of a material irreconcilable conflict and to bear the cost of such remedial action will be a contractual obligation of all Participating Insurance Companies and Participating Qualified Plans under their agreements governing participation in the Funds, and these responsibilities will be carried out with a view only to the interest of Variable Contract owners and Qualified Plan participants.

H-7

Form of Agreement

5. For purposes of Condition 4, a majority of the disinterested Board Members of the applicable Board will determine whether or not any proposed action adequately remedies any material irreconcilable conflict, but in no event will the relevant Fund or the Investment Managers be required to establish a new funding medium for any Contract. No Participating Insurance Company shall be required by Condition 4 to establish a new funding medium for any Variable Contract if any offer to do so has been declined by vote of a majority of the Variable Contract owners materially and adversely affected by the material irreconcilable conflict. Further, no Participating Qualified Plan shall be required by Condition 4 to establish a new funding medium for any Participating Qualified Plan if (a) a majority of Qualified Plan participants materially and adversely affected by the irreconcilable material conflict vote to decline such offer, or (b) pursuant to governing Qualified Plan documents and applicable law, the Participating Qualified Plan makes such decision without a Qualified Plan participant vote.

6. The determination of the Board of the existence of a material irreconcilable conflict and its implications will be made known in writing promptly to all Participating Insurance Companies and Participating Qualified Plans.

7. Participating Insurance Companies will provide pass-through voting privileges to Variable Contract owners who invest in registered Separate Accounts so long as and to the extent that the Commission continues to interpret the 1940 Act as requiring pass-through voting privileges for Variable Contract owners. As to Variable Contracts issued by unregistered Separate Accounts, pass-through voting privileges will be extended to participants to the extent granted by issuing insurance companies. Each Participating Insurance Company will also vote shares of the Funds held in its Separate Accounts for which no voting instructions from Contract owners are timely received, as well as shares of the Funds which the Participating Insurance Company itself owns, in the same proportion as those shares of the Funds for which voting instructions from contract owners are timely received. Participating Insurance Companies will be responsible for assuring that each of their registered Separate Accounts participating in the Funds calculates voting privileges in a manner consistent with other Participating Insurance Companies. The obligation to calculate voting privileges in a manner consistent with all other registered Separate Accounts investing in the Funds will be a contractual obligation of all Participating Insurance Companies under their agreements governing their participation in the Funds. Each Participating Qualified Plan will vote as required by applicable law and governing Qualified Plan documents.

8. All reports of potential or existing conflicts received by the Board of a Fund and all action by such Board with regard to determining the existence of a conflict, notifying Participating Insurance Companies and Participating Qualified Plans of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the meetings of such Board or other appropriate records, and such minutes or other records shall be made available to the Commission upon request.

9. Each Fund will notify all Participating Insurance Companies that separate disclosure in their respective Separate Account prospectuses may be appropriate to advise accounts regarding the potential risks of mixed and shared funding. Each Fund shall disclose in its prospectus that (a) the Fund is intended to be a funding vehicle for variable annuity and variable life insurance contracts offered by various insurance companies and for qualified pension and retirement plans; (b) due to differences of tax treatment and other considerations, the interests of various Contract owners participating in the Fund and/or the interests of Qualified Plans investing in the Fund may at some time be in conflict; and (c) the Board of such Fund will monitor events in order to identify the existence of any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflict.

10. Each Fund will comply with all provisions of the 1940 Act requiring voting by shareholders (which, for these purposes, will be the persons having a voting interest in the shares of the Funds), and, in particular, the Funds will either provide for annual shareholder meetings (except insofar as the Commission may interpret Section 16 of the 1940 Act not to require such meetings) or comply with Section 16(c) of the 1940 Act, although the Funds are not the type of trust described in Section 16(c) of the 1940 Act, as well as with Section 16(a) of the 1940 Act and, if and when applicable, Section 16(b) of the 1940 Act. Further, each Fund will act in accordance with the Commission’s interpretation of the requirements of Section 16(a) with respect to periodic elections of Board Members and with whatever rules the Commission may promulgate with respect thereto.

H-8

Form of Agreement

11. If and to the extent Rules 6e-2 or 6e-3(T) under the 1940 Act is amended, or proposed Rule 6e-3 under the 1940 Act is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated thereunder, with respect to mixed or shared funding on terms and conditions materially different from any exemptions granted in the order requested in the application, then the Funds and/or Participating Insurance Companies and Participating Qualified Plans, as appropriate, shall take such steps as may be necessary to comply with such Rules 6e-2 and 6e-3(T), as amended, or proposed Rule 6e-3, as adopted, to the extent that such Rules are applicable.

12. The Participating Insurance Companies and Participating Qualified Plans and/or the Investment Managers, at least annually, will submit to the Board such reports, materials or data as the Board may reasonably request so that the Board may fully carry out obligations imposed upon it by the conditions contained in the application. Such reports, materials and data will be submitted more frequently if deemed appropriate by the Board. The obligations of the Participating Insurance Companies and Participating Qualified Plans to provide these reports, materials and data to the Board, when the Board so reasonably requests, shall be a contractual obligation of all Participating Insurance Companies and Participating Qualified Plans under their agreements governing participation in the Funds.

13. If a Qualified Plan should ever become a holder of ten percent or more of the assets of a Fund, such Qualified Plan will execute a participation agreement with the Fund that includes the conditions set forth herein to the extent applicable. A Qualified Plan will execute an application containing an acknowledgment of this condition upon such Qualified Plan’s initial purchase of the shares of any Fund.

Conclusion:

Applicants assert that, for the reasons summarized above, the requested exemptions are appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the 1940 Act.

For the Commission, by the Division of Investment Management, pursuant to delegated authority.

H-9

Form of Agreement

Templeton Variable Products Series Fund, et al.

File No. 812-11698

SECURITIES AND EXCHANGE COMMISSION

Release No. IC-24079

1999 SEC LEXIS 2177

October 13, 1999

ACTION: Order Granting Exemptions

TEXT: Templeton Variable Products Series Fund (“Templeton Trust”), Franklin Templeton Variable Insurance Products Trust (“VIP Trust”), Templeton Funds Annuity Company (“TFAC”) or any successor to TFAC, and any future open-end investment company for which TFAC or any affiliate is the administrator, sub-administrator, investment manager, adviser, principal underwriter, or sponsor (“Future Funds”) filed an application on July 14, 1999, and an amendment on September 17, 1999 seeking an amended order of the Commission pursuant to Section 6(c) of the Investment Company Act of 1940 (“1940 Act”) exempting them from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15). The prior order (Rel. No. IC-19879) granted exemptive relief to permit shares of the Templeton Trust to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies. The proposed relief would amend the prior order to add as parties to that order the VIP Trust and any Future Funds and to permit shares of the Templeton Trust, the VIP Trust, and Future Funds to be issued to and held by qualified pension and retirement plans outside the separate account context.

A notice of the filing of the application was issued on September 17, 1999 (Rel. No. IC-24018). The notice gave interested persons an opportunity to request a hearing and stated that an order granting the application would be issued unless a hearing should be ordered. No request for a hearing has been filed, and the Commission has not ordered a hearing.

The matter has been considered, and it is found that granting the requested exemptions is appropriate in the public interest and consistent with the protection of investors and the purposes intended by the policy and provisions of the 1940 Act.

Accordingly,

IT IS ORDERED, pursuant to Section 6(c) of the 1940 Act, that the requested exemptions from Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, be, and hereby are, granted, effective forthwith.

For the Commission, by the Division of Investment Management, pursuant to delegated authority.

H-10

EX-10.16

EXHIBIT 10.16

Form of Agreement

Participation Agreement Addendum

as of [            ], 200  

by and among

Franklin Templeton Variable Insurance Products Trust

Franklin Templeton Underwriters, Inc.

[name of insurance company]

[name of insurance company distributor]

Franklin Templeton Variable Insurance Products Trust (the “Trust”), Franklin Templeton Distributors, Inc. (together with the Trust, “we” or “us”) and [name of insurance company] and [name of insurance company distributor] (altogether, “you”), on your behalf and on behalf of certain Accounts, have previously entered into a Participation Agreement dated [date] (the “Agreement”). The parties now desire to supplement the Agreement in this Addendum (the “Addendum”). Except as modified hereby, all other terms and conditions of the Agreement shall remain in full force and effect. Unless otherwise indicated, the terms defined in the Agreement shall have the same meaning as in this Addendum. Schedules to this Addendum supplement the Schedules in the Agreement that share the same identifying letter.

WHEREAS, certain short-term trading practices may have a harmful or deleterious effect on the series of the Trust listed on Schedule C of this Addendum (the “Funds”), which serve as investment options through certain Accounts under the Contracts; and

WHEREAS, you acknowledge that such short-term trading practices may have a harmful or deleterious impact on the Funds; and

WHEREAS, the Trust has introduced a share class of the Funds with short-term redemption fees (“Class 3 shares”); and

WHEREAS, you have implemented administrative systems that will permit you to, on behalf of the Funds, assess and collect short-term redemption fees against owners of variable insurance contracts that offer Class 3 shares of the Funds as investment options of certain Accounts (“Class 3 Contracts”); and

WHEREAS, you and we agree that the imposition of short-term redemption fees on certain redemptions of Class 3 shares of the Funds may help offset costs of the Funds associated with short-term trading redemptions.

NOW, THEREFORE, in consideration of our mutual promises, you and we agree as follows:

1. Acceptance of Orders and Trust Policies. All orders submitted by you with respect to each Fund shall be subject to the terms of the then current prospectus of each Fund. You represent that Contracts are intended for long-term investors. You have adopted policies and procedures designed to detect and deter short-term trading and/or disruptive trading practices, including, but not limited to, monitoring of contract owner trading activity and imposing trading restrictions. These policies are disclosed in the Contract prospectuses.

1

Form of Agreement

2. Your Systems and Records. You represent and warrant that you have, maintain and periodically test, systems, processes and procedures to modify and track the holding period of interests of Class 3 Contract owners in Accounts corresponding to Class 3 shares of the Funds for sixty (60) days, and fulfill relevant regulatory obligations. You shall be responsible for monitoring the holding period of interests of Class 3 Contract owners and for tracking such holding periods for purposes of assessing redemption fees in conjunction with those transactions subject to such fees, subject to any reasonable exceptions as set forth in prospectuses for the Class 3 Contracts. You shall maintain records supporting your calculation of redemption fees payable to each Fund and shall provide the Trust and/or its designated agents with access to, or copies of, such records upon their reasonable request. You shall calculate the amount of redemption fees payable to each Fund on a daily basis and such amount shall be netted against the redemption proceeds payable by the Trust on behalf of the Funds for Class 3 shares of the Funds.

3. Actions by You. Nothing in this Agreement shall be construed to require actions on your part that would, in your best judgment, constitute the violation or breach of any duty you owe to purchasers of variable insurance contracts established prior to the creation of the Class 3 shares.

4. Acknowledgement by the Trust. The Trust acknowledges that, with the addition of Class 3 shares to the Funds and your offering of Class 3 shares of the Funds as investment options under Class 3 Contracts, you may be subjected to unfavorable comparisons with other insurance carriers that offer the Funds, but not Class 3 shares of the Funds, as investment options under their variable insurance products. Moreover, the Trust acknowledges that the ameliorative benefits that may be realized by the Funds in connection with your offering Class 3 shares of the Funds as investment options under the Class 3 Contracts may benefit other Fund investors and other insurance company contract and policy owners. Notwithstanding the foregoing sentences of this paragraph 4, you acknowledge that the Trust cannot and will not compel insurance carriers offering the Funds as investment options to offer Class 3 shares of the Funds as investment options under their variable insurance contracts.

5. Termination. In addition to the provisions of Section 9 of the Agreement, which shall remain in full force and effect, if the Trust’s Board of Trustees, in the exercise of its fiduciary duties, determines to terminate this Addendum with respect to any Fund or to eliminate the Class 3 shares of any or all of the Funds, then the Trust may redeem, in accordance with its prospectus, the Class 3 shares of the affected Fund(s) held by the Accounts on the effective date of such termination or such elimination, which shall be done in consultation with you to provide an orderly transfer; provided further that any such liquidation of a Fund will not occur prior to up to six (6) months following written notice to you, and during this time, the Trust will cooperate reasonably in effecting a transfer of assets to another investment vehicle pursuant to an exchange offer, SEC substitution order, SEC no-action letter, or other legal and appropriate means.

2

Form of Agreement

IN WITNESS WHEREOF, you and we have caused our duly authorized officers to execute this Addendum.

The Company:	[NAME OF INSURANCE COMPANY]
	By:
	Name:
	Title:
Distributor for the Company
	[NAME OF INSURANCE COMPANY DISTRIBUTOR]
	By:
	Name:
	Title:
The Trust:	FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Only on behalf of each Fund.
	By:
	Name:	Karen L. Skidmore
	Title:	Vice President
The Underwriter:	FRANKLIN TEMPLETON UNDERWRITERS, INC.
	By:
	Name:
	Title:

3

Form of Agreement

Schedule B

Separate Accounts of the Company

4

Form of Agreement

Schedule C

Available Portfolios and Classes of Shares of the Trust; Investment Advisers

Franklin Templeton Variable Insurance Products Trust Investment Adviser

5

Form of Agreement

Schedule D

Contracts of the Company

6

EX-10.17

EXHIBIT 10.17

Form of Agreement

Fund of Funds Subscription Agreement

Franklin Templeton Variable Insurance Products Trust

[name of acquiring variable insurance products fund of funds]

This Fund of Funds Subscription Agreement (the “Agreement”), dated             , 200  , by and between [name of acquiring variable insurance products fund of funds] (the “Acquiring Fund of Funds”), a registered management investment company investing in other management investment companies and existing under and by virtue of the laws of the State of                     , and Franklin Templeton Variable Insurance Products Trust (the “VIP Trust”), a business trust organized and existing under and by virtue of the laws of the State of Delaware (collectively, the “Parties”).

In consideration of the mutual promises set forth herein, the Parties hereto agree as follows:

1. The VIP Trust agrees to sell to the Acquiring Fund of Funds, and the Acquiring Fund of Funds agrees to purchase, Class 1 shares of beneficial interest of the various series of funds (individually, “Fund”; collectively, the “Funds” or “Designated Funds”) of the VIP Trust to the extent permitted pursuant to Section 12(d)(1) of the Investment Company Act of 1940, as amended (“1940 Act”) and executing such orders on a daily basis at the net asset value next computed after receipt by the VIP Trust or its designee of the order for the shares of the Funds and in accordance with the provisions of the then current prospectus for the VIP Trust. The VIP Trust, however, retains the right to reject an investment by the Acquiring Fund of Funds.

2. The VIP Trust calculates its net asset value pursuant to rules of the Securities and Exchange Commission (“SEC”) and the provisions of its current prospectus. The VIP Trust shall use its best efforts to calculate such net asset value on each day on which the New York Stock Exchange is open for trading and shall make reasonable efforts to communicate such net asset value to the Acquiring Fund of Funds on a daily basis as soon as reasonably practical after the calculation is completed (normally by 6:30 p.m. Eastern Time). Notwithstanding the foregoing, the Board of Trustees of the VIP Trust (the “Board”) may refuse to sell shares of any Fund to any person, or suspend or terminate the offering of shares of any Fund if such action is required by law or by regulatory authorities having jurisdiction, or is, in the sole discretion of the Board acting in good faith and in light of its fiduciary duties under federal and any applicable state laws, necessary or appropriate in the best interests of the shareholders of such Fund.

The VIP Trust agrees to redeem, on the Acquiring Fund of Funds’ request, any full or fractional shares of the Designated Funds held by the Acquiring Fund of Funds, executing such requests on a daily basis at the net asset value next computed after receipt by the VIP Trust or their designee of the order for redemption, except that the Funds reserve the right to suspend the right of redemption or postpone the date of payment or satisfaction upon redemption consistent with Section 22(e) of the 1940 Act and any rules

1

Form of Agreement

thereunder, and in accordance with the procedures and policies of the VIP Trust as described in the then current prospectus. The VIP Trust may redeem in cash or in-kind at its option. All requests by the Acquiring Fund of Funds for redemptions shall be separate and distinct from any orders by the Acquiring Fund of Funds for purchases of Fund shares; the Acquiring Fund of Funds will not net purchase and redemption orders.

For purposes of this Section 2, the VIP Trust’s transfer agent shall be the designee of the Funds for receipt of purchase and redemption orders from Acquiring Fund of Funds, and receipt by such designee shall constitute receipt by the Funds.

The Acquiring Fund of Funds agrees that all matters relating to its investment in a Fund are subject to the terms of the prospectus and Statement of Additional Information of each Fund. The Acquiring Fund of Funds further agrees that its purchases and redemptions of Fund shares are subject to, and that the Acquiring Fund of Funds will assist the VIP Trust in implementing, the Market Timing Trading Policy and Additional Policies (as described in the VIP Trust’s prospectus) and the VIP Trust’s restrictions on excessive and/or short term trading activity and/or purchase and redemption activity that follows a market timing pattern, and will comply with the terms of the Shareholder Information Agreement required of funds with respect to intermediaries to be entered into with the VIP Trust.

3. The Acquiring Fund of Funds shall pay for Fund shares one Business Day after receipt of an order to purchase Fund shares is made in accordance with the provisions of Section 1 hereof. “Business Day” shall mean any day on which the New York Stock Exchange is open for trading and on which the VIP Trust calculates its net asset value pursuant to the rules of the SEC and its current prospectus. Payment shall be in federal funds transmitted by wire to the VIP Trust or to its designated custodian, which must receive such wires no later than the close of the Reserve Bank, which is 6:00 p.m. Eastern Time. If payment in federal funds for any purchase is not received or is received by a Fund after 6:00 p.m. Eastern time on such Business Day, the Acquiring Fund of Funds shall promptly, upon a Fund’s request, reimburse a Fund for any charges, costs, fees, interest or other expenses incurred by a Fund in connection with any advances to, or borrowings or overdrafts by the Fund, or any similar expenses incurred by the Fund, as a result of portfolio transactions effected by the Fund based upon such purchase request. For purposes of Section 2 hereof, upon receipt by a Fund of the federal funds so wired, such monies shall cease to be the responsibility of the Acquiring Fund of Funds and shall become the responsibility of a Fund.

4. The Acquiring Fund of Funds represents that it has and will maintain policies and procedures compliant with and as required by Rule 38a-1 under the 1940 Act including, without limitation, policies and procedures that comply with any and all applicable laws, regulations, protocols and other requirements relating to money laundering.

2

Form of Agreement

5. The Acquiring Fund of Funds agrees that it is primarily responsible for assuring compliance with the limitations and restrictions provided by Section 12(d)(1) of the 1940 Act and any rule or interpretation thereunder, as applicable to it and the Designated Funds. The Acquiring Fund of Funds represents and warrants that it has and will continue to have personnel, and policies and procedures designed to fully implement this responsibility. With regard to the provisions of Section 12(d)(1)(B) of the 1940 Act, the Acquiring Fund of Funds shall monitor its percentage interests in the Designated Funds and verify their accuracy prior to placing any order that could result in exceeding such percentage limitations. The Acquiring Fund of Funds agrees to certify promptly in writing, upon the VIP Trust’s request, that the Acquiring Fund of Funds complies with the aforementioned limitations and restrictions. The VIP Trust agrees to provide to the Acquiring Fund of Funds or its designated agent, no more than once per business day, the total net assets as of the preceding business day of each Fund.

6. The Acquiring Fund of Funds agrees that it shall not use any designation comprised in whole or part of the names or marks “Franklin” or “Templeton” or any logo or other trademark relating to the VIP Trust or Franklin/Templeton Distributors, Inc. or its affiliates without prior written consent, and upon termination of this Agreement for any reason, the Acquiring Fund of Funds shall cease all use of any such name or mark as soon as reasonably practicable.

7. The Acquiring Fund of Funds agrees that its shares will not be sold outside of the United States.

8. The Acquiring Fund of Funds represents that it will use its best efforts to comply with the diversification requirements set forth in Section 817(h) of the Internal Revenue Code, and the rules and regulations thereunder, including without limitation Treasury Regulation 1.817-5. Upon having a reasonable basis for believing any Acquiring Fund of Funds has ceased to comply and will not be able to comply within the grace period afforded by Regulation 1.817-5, the Acquiring Fund of Funds shall immediately notify the VIP Trust and will take all reasonable steps to adequately diversify the Acquiring Fund of Funds to achieve compliance.

9. Upon termination of this Agreement, shares of Funds will no longer be available for purchase by the Acquiring Fund of Funds. This Agreement may be terminated by any party in its entirety or with respect to one, some or all Funds for any reason by sixty (60) days’ advance written notice delivered to the other parties. This Agreement may also be terminated by the Board of Trustees of the VIP Trust, in the exercise of its fiduciary duties, either upon its determination that such termination is a necessary and appropriate remedy for a material breach of this Agreement which includes a violation of laws, or upon its determination to completely liquidate a Fund.

3

Form of Agreement

10. This Agreement represents the entire agreement between the VIP Trust and the Acquiring Fund of Funds and shall be construed in compliance with the 1940 Act and the rules thereunder.

IN WITNESS WHEREOF, each of the Parties have caused their duly authorized officers to execute this Agreement.

[NAME OF ACQUIRING VARIABLE INSURANCE PRODUCTS FUND OF FUNDS]	FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
By:	By:
Name:	Name:	Karen L. Skidmore
Title:	Title:

4

EX-10.18

EXHIBIT 10.18

Administrative Services Agreement

Franklin Templeton Services, LLC

[Name of Insurance Company]

THIS AGREEMENT, by and between Franklin Templeton Services, LLC (the “Fund Administrator”), and [    ] Insurance Company[, [    ] Insurance Company (each of which is referred to as] (the “Company”), concerning certain administrative services with respect to each series (“Fund” or “Funds”) of Franklin Templeton Variable Insurance Products Trust (the “Trust”), which Funds are specified in the Participation Agreement, as may be amended from time to time, among the Company, the Trust, and Franklin Templeton Distributors, Inc. (the “Underwriter”), among others, dated                     , (the “Participation Agreement”).

1. Administrative Services. Administrative services for the Company’s Separate Accounts (the “Account” or “Accounts”) which invest in the Funds pursuant to the Participation Agreement, and administrative services for purchasers of variable life and annuity contracts (the “Contracts”) issued by the Company through the Accounts, are and shall be the responsibility of the Company. Administrative services with respect to the Funds in which the Accounts invest, and for purchasers of shares of the Funds, are and shall be the responsibility of the Fund Administrator or its affiliates. The Company has agreed to assist the Fund Administrator, as the Fund Administrator may request from time to time, with the provision of administrative services (“Administrative Services”) to the Funds, on a sub-administration basis, as they may relate to the investment in the Funds by the Accounts. It is anticipated that the Administrative Services may include, but may not be limited to, the services listed on Schedule A.

2. Administrative Expense Payments. The Fund Administrator recognizes the Company, on behalf of the Accounts, as the shareholder of shares of the Funds purchased under the Participation Agreement on behalf of the Accounts. The Fund Administrator further recognizes that it will derive a substantial administrative convenience by virtue of having the Company be the shareholder of record of shares of the Funds purchased under the Participation Agreement, rather than multiple shareholders having record ownership of such shares. The Fund Administrator recognizes that the Company will provide administrative services necessary to facilitate investment in the Funds.

In consideration of the Administrative Services provided by the Company and the administrative convenience resulting to the Fund Administrator described above, the Fund Administrator agrees to pay the Company a fee as set forth in Schedule B.

3. Computation of Administrative Expense Payments. As soon as practicable after the end of each quarter, the Company will send the Fund Administrator, at the address indicated in this Paragraph 3 and in the manner set forth below, a statement of the average daily net assets for the preceding quarter, of shares of the Fund as to which the fee stated in Schedule B is to be calculated. The Fund Administrator will calculate and pay the Company its fee within thirty (30) days after the end of the three-month periods ending in January, April, July and October. Such payment will be by wire transfer unless the amount thereof is less than $500.

Wire transfers will be sent to the bank account and in the manner specified by the Company. Such wire transfer will be separate from wire transfers of redemption proceeds and distributions. Amounts less than $500 shall be paid by check or by another method acceptable to both parties.

For purposes of this Paragraph 3, the average daily net asset value of the shares of a Fund will be based on the net assets reported by the Trust on behalf of each Fund to the Company. No adjustments will be made to such net assets to correct errors in the net asset value so reported for any day unless such error is corrected and the corrected net asset value per share is reported to the Company before 5:00 p.m. Eastern time on the first Business Day after the day to which the error relates. “Business Day” will mean any day on which the New York Stock Exchange is open for trading and on which the Fund calculates its net asset value pursuant to the rules of the Securities and Exchange Commission.

For purposes of this Paragraph 3, the address shall be Corporate Accounting, Franklin Resources, One Franklin Parkway, San Mateo, California 94403; Attention: Mike Corcoran, Manager.

4. Confidentiality of Payment Rate. The Company acknowledges that the rate and amount of payments to be made to the Company under this Agreement are proprietary and confidential information of the Fund Administrator and its affiliates, and that disclosure of this information to third parties may cause damage to Fund Administrator or its affiliates. The Company agrees to take any and all reasonable actions to limit disclosure of this information to only those of its employees, officers, consultants and agents who need the information in order to perform their duties, and to notify such persons of the terms of this paragraph. In the event any other party seeks to compel disclosure of confidential information through judicial or administrative process, then the Company shall promptly give the Fund Administrator written notice of such demand and, if requested by the Fund Administrator, shall cooperate in the Fund Administrator’s efforts to challenge or limit any such disclosure. Violation of the confidentiality provision shall be grounds for immediate termination of the Agreement by the Fund Administrator in its sole discretion. Nothing in this Agreement shall prevent the Company from disclosing the existence of this Agreement in the Contracts’ prospectuses or elsewhere.

5. Nature of Payments. The parties to this Agreement recognize and agree that the Fund Administrator’s payments to the Company relate to Administrative Services only and do not constitute payment in any manner for investment advisory services, for costs of distribution of Contracts or of shares of the Fund, or for services that the Company is otherwise required to perform, and that these payments are not otherwise related to investment advisory or distribution services or expenses. The amount of the payments made by the Fund Administrator to the Company under this Agreement shall not be deemed to be conclusive with respect to actual administrative expenses incurred by the Company or savings of the Fund Administrator.

6. Notice. Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth in Schedule C of this Agreement or at such other address as such party may from time to time specify in writing to the other party. The quarterly statements called for in Paragraph 3 above should be sent to the Fund Administrator at the address specified in Paragraph 3.

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7. Termination. This Agreement may be terminated upon thirty (30) days’ written notice from one party to the other party.

8. Representation. The Company represents and agrees that it will maintain and preserve all records as required by law to be maintained and preserved in connection with providing the Administrative Services, and will otherwise comply with all laws, rules and regulations applicable to Administrative Services.

9. Amendment. This Agreement may be amended only upon mutual agreement of the parties hereto in writing.

10. Assignment. This Agreement shall not be assigned by either party without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that such limitation shall not apply should the Fund Administrator cease to be the fund administrator for the Trust and the successor fund administrator for the Trust is willing to assume Fund Administrator’s responsibilities hereunder.

11. Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original but all of which will together constitute one and the same instrument.

12. Entire Agreement. This Agreement, together with the attached Schedules, contains the entire agreement among the parties with respect to the matters dealt with herein, and supersedes any prior or inconsistent agreements, documents, understandings or arrangements among the parties with respect to the subject matter of this Agreement.

13. Indemnification. This Agreement will be subject to the indemnification provisions of the Participation Agreement.

14. Arbitration. In the event of a dispute concerning any provision of this Agreement, either party may require the dispute to be submitted to binding arbitration under the commercial arbitration rules of the American Arbitration Association. Each party will pay its own costs and expenses. Judgment upon any arbitration award may be entered by any court having jurisdiction. This Agreement shall be interpreted in accordance with the laws of the state of California and shall be subject to any applicable federal securities laws.

15. Trust Not a Party. The parties to this Agreement acknowledge and agree that the Trust is not directly or indirectly a party to this Agreement. If, however, the Trust shall be so deemed, the parties to this Agreement acknowledge and agree that any liabilities of the Trust arising, directly or indirectly, under this Agreement will be satisfied out of the assets of the Trust and that no trustee, officer, agent or holder of shares of beneficial interest of the Trust or any Fund will be personally liable for such liabilities. No Fund of the Trust will be liable for the obligations or liabilities of any other Fund.

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This Agreement is executed as of this      day of              2009.

[NAME OF INSURANCE COMPANY]
By:
Name:
Title:
FRANKLIN TEMPLETON SERVICES, LLC
By:
Name:	Thomas Regner
Title:	Vice President

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Schedule A

Administrative Services

Maintenance of Books and Records

• Assist as necessary to maintain book entry records on behalf of the Funds regarding issuance to, transfer within (via net purchase orders) and redemption by the Accounts of Fund shares.

• Maintain general ledgers regarding the Accounts’ holdings of Fund shares, coordinate and reconcile information, and coordinate maintenance of ledgers by financial institutions and other contract owner service providers.

Communication with the Funds

• Serve as the designee of the Funds for receipt of purchase and redemption orders from the Account and to transmit such orders, and payment therefore, to the Funds.

• Coordinate with the Funds’ agents respecting daily valuation of the Funds’ shares and the Accounts’ units.

• Purchase Orders

• Determine net amount available for investment in the Funds.

• Deposit receipts at the Funds’ custodians (generally by wire transfer).

• Notify the custodians of the estimated amount required to pay dividends or distributions.

• Redemption Orders

• Determine net amount required for redemptions by the Funds.

• Notify the custodian and Funds of cash required to meet payments.

• Purchase and redeem shares of the Funds on behalf of the Accounts at the then-current price in accordance with the terms of each Fund’s then current prospectus.

• Assistance in enforcing procedures adopted on behalf of the Trust to reduce, discourage, or eliminate market timing transactions in a Fund’s shares in order to reduce or eliminate adverse effects on a Fund or its shareholders.

Processing Distributions from the Funds

• Process ordinary dividends and capital gains.

• Reinvest the Funds’ distributions.

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Reports

• Periodic information reporting to the Funds, including, but not limited to, furnishing registration statements, prospectuses or private offering memorandum, statements of additional information, reports, solicitations for instructions, disclosure statements, sales or promotional materials and any other filings with the Securities and Exchange Commission with respect to the Accounts invested in the Funds, if necessary.

• Periodic information reporting about the Funds to contract owners, including necessary delivery of the Funds’ prospectus and annual and semi-annual reports.

Fund-related Contract Owner Services

• Maintain adequate fidelity bond or similar coverage for all Company officers, employees, investment advisors and other individuals or entities controlled by the Company who deal with the money and/or securities of the Funds.

• Provide general information with respect to Fund inquiries (not including information about performance or related to sales).

• Provide information regarding performance of the Funds.

• Oversee and assist the solicitation, counting and voting of contract owner pass-through voting interests in the Funds pursuant to Fund proxy statements.

Other Administrative Support

• Provide other administrative and legal compliance support for the Funds as mutually agreed upon by the Company and the Funds or the Fund Administrator.

• Relieve the Funds of other usual or incidental administrative services provided to individual contract owners.

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Schedule B

Administrative Expense Payments

The Fund Administrator agrees to pay the Company a fee, computed daily and paid quarterly in arrears, equal to an annual rate as set forth below, applied to the average daily net assets of the shares of the Funds held in the subaccounts of the Accounts. The payment will be computed and paid in the manner described more completely in the Agreement.

#	Company Name	Product Name/     Securities Act No.	Funds of the Trust	Fee     Rate	Date of beginning of period for computation of fee
1.
2.
3.

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Schedule C

Addresses for Notices

If to the Company:
If to the Fund Administrator:	Franklin Templeton Services, LLC
	One Franklin Parkway, Bldg. 920, 2nd Floor
	San Mateo, California 94403
	Attention: Karen Skidmore
With a copy to:	Franklin Templeton Investments
	One Franklin Parkway, Bldg. 920, 2nd Floor
	San Mateo, California 94403
	Attention: General Counsel

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EX-10.26

EXHIBIT 10.26

FRANKLIN RESOURCES, INC.

2002 UNIVERSAL STOCK INCENTIVE PLAN

NOTICE OF RESTRICTED STOCK AWARD

Name:                                                       

Address:                                                  

In accordance with the Franklin Resources, Inc. 2002 Universal Stock Incentive Plan (the “2002 Plan”), as an incentive for increased efforts and successful achievements, Franklin Resources, Inc. (the “Company”), has awarded Participant shares of common stock of the Company subject to the terms and conditions of the accompanying Restricted Stock Award Agreement (the “Award Agreement”), this Notice of Restricted Stock Award (the “Notice of Award” and together with the Award Agreement, the “Award”) and the 2002 Plan, as follows:

Award Number

Award Date

Total Number of Shares (the “Shares”) Awarded

Subject to Participant’s Continuous Status as an Employee (as defined in the 2002 Plan) of the Company or any of its Subsidiaries (as defined in the 2002 Plan) and other limitations set forth in the Award and the 2002 Plan, the Shares shall vest in accordance with the following schedule:

Vesting Schedule Number of Shares

Participant acknowledges and agrees that the Shares subject to this Award shall vest only by Participant’s Continuous Status as an Employee of the Company or any of its Subsidiaries, and that such status is at the will of the Company or the applicable Subsidiary (not through the act of being hired, being granted this Award or acquiring Shares hereunder). Participant further acknowledges and agrees that nothing in this Award nor in the 2002 Plan, which is incorporated herein by this reference, affects the Company’s, or a Subsidiary’s, right to terminate, or to change the terms of, Participant’s employment at any time, with or without cause.

Participant acknowledges that, from time to time, the Company may be in a “Blackout Period” and/or subject to applicable securities laws that could subject Participant to liability for engaging in any transaction involving the sale of the Company’s shares. Participant further acknowledges and agrees that, prior to the sale of any Shares acquired under this Award, it is Participant’s responsibility to determine whether or not such sale of Shares will subject Participant to liability under insider trading rules or other applicable securities laws.

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Participant understands that the Award is subject to Participant’s consent to access, and acknowledgement of having accessed, the 2002 Plan prospectus in connection with the Form S-8 registration statement for the 2002 Plan, any updates thereto, the 2002 Plan, the Award Agreement and this Notice of Award (collectively, the “2002 Plan Documents”) in electronic form through Connected on the Company’s Intranet. By signing below, Participant hereby: (i) consents to access electronic copies (instead of receiving paper copies) of the 2002 Plan Documents via the Company’s Intranet; (ii) represents that Participant has access to the Company’s Intranet; (iii) acknowledges receipt of electronic copies, or that Participant is already in possession of paper copies, of the 2002 Plan Documents and the Company’s most recent annual report to stockholders; and (iv) acknowledges that Participant is familiar with and has accepted the Award subject to the terms and provisions of the 2002 Plan Documents.

Participant may receive, without charge, upon written or oral request, paper copies of any or all of the 2002 Plan Documents, documents incorporated by reference in the Form S-8 registration statement for the 2002 Plan, and the Company’s most recent annual report to stockholders by requesting them from Stock Administration at the Company, One Franklin Parkway, San Mateo, CA 94403-1906. Telephone (650) 312-2000. Participant may also withdraw Participant’s consent to receive any or all documents electronically by notifying Stock Administration at the above address in writing.

In the event of Participant’s death, Participant hereby designates the following as Participant’s beneficiary(ies) to receive all payments and Shares due to Participant pursuant to this Award. Please note that this designation applies only to this Award and not to any prior awards or grants under the 2002 Plan. This designation shall be binding upon the executors, administrators, heirs, successors and transferees of Participant only in jurisdictions where such beneficiary designations are enforceable under local law.

NAME: (Please print):
	(First)                                     (Middle)                                     (Last)
SSN/SIN/National Tax ID:
ADDRESS:
	(Please include Country and Zip/Postal Code)
TELEPHONE NO.:
	(Please include Country and/or Area Code)
RELATIONSHIP:
PERCENTAGE:
	(Enter the % Participant wishes the beneficiary(ies) to receive)

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By Participant’s electronic signature and by the signature of the Company’s representative below, Participant and the Company agree that the Award is granted under and governed by the terms and conditions of the 2002 Plan, this Notice of Award and the Award Agreement.

PARTICIPANT:	FRANKLIN RESOURCES, INC.
Participant’s Name	By:	Donna S. Ikeda
	Title:	Senior Vice President, Human Resources

Notice for residents of the EU: This Notice of Award and accompanying documents do not constitute a prospectus prepared in accordance with the EU Prospectus Directive 2003/71/EC (“the Directive”). The Company takes the position that the unvested Shares are not “transferable securities” as defined in Article 2(1)(a) of the Directive. Further, the employee pays no consideration to acquire the shares of common stock of the Company under the Award. Accordingly, no prospectus or other document has been prepared and filed with the UK Financial Services Authority or any other regulator in the European Union in relation to the offer of the Award and the unvested Shares under the Award.

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FRANKLIN RESOURCES, INC.

2002 UNIVERSAL STOCK INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT

This Restricted Stock Award Agreement, together with any Appendix(es) attached hereto (hereinafter, collectively, the “Agreement”), is made as of the Award Date set forth in the Notice of Restricted Stock Award (the “Notice of Award”) between Franklin Resources, Inc. (the “Company”) and the Participant named therein (“Participant”).

WITNESSETH:

WHEREAS, the Board of Directors and stockholders of the Company have adopted the Franklin Resources, Inc. 2002 Universal Stock Incentive Plan (the “2002 Plan”), authorizing the grant of common stock of the Company (“Stock”) to eligible individuals as an incentive in connection with the performance of services for the Company and its Subsidiaries, as defined in the 2002 Plan, which is incorporated herein by this reference (capitalized terms used but not defined in this Agreement have the same meaning as set forth in the 2002 Plan or the Notice of Award, as applicable); and

WHEREAS, the Company recognizes the efforts of Participant on behalf of the Company and its Subsidiaries and desires to motivate Participant in Participant’s work and provide an inducement to remain in the service of the Company and its Subsidiaries; and

WHEREAS, the Company has determined that it would be to the advantage and in the interest of the Company and its stockholders to award the Stock provided for in this Agreement and the Notice of Award to Participant, subject to certain restrictions, as an incentive for increased efforts and successful achievements;

NOW, THEREFORE, in consideration of the foregoing premises and of the mutual covenants herein contained, the parties hereto hereby agree as follows:

1. Restricted Stock Award. The Company is issuing to Participant shares of Stock as set forth in the Notice of Award, subject to the rights of and limitations on Participant as owner thereof as set forth in this Agreement. Such shares are being issued in book entry form and maintained on the books of the Bank of New York, the Company’s transfer agent, or any successor thereto. All shares of Stock issued hereunder shall be deemed issued to Participant as fully paid and non assessable shares, and, subject to the restrictions set forth in the 2002 Plan and this Agreement, Participant shall have all rights of a stockholder with respect thereto, including the right to vote, to receive dividends (including stock dividends), to participate in stock splits or other recapitalizations, and to exchange such shares in a tender offer, merger, consolidation or other reorganization. The Company shall pay any applicable stock transfer taxes. Participant hereby acknowledges that Participant is acquiring the Stock issued hereunder for investment and not with a view to the distribution thereof, and that Participant does not intend to subdivide Participant’s interest in the Stock with any other person.

2. Transfer Restriction.

(a) No Stock issued to Participant hereunder shall be sold, transferred by gift, pledged, hypothecated, or otherwise transferred or disposed of by Participant prior to the date on which it becomes vested under paragraph 3, except by will or the laws of descent and distribution. This paragraph shall not preclude Participant from exchanging the Stock awarded hereunder pursuant to a cash or stock tender

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offer, merger, reorganization or consolidation. Notwithstanding the foregoing, any securities (including stock dividends and stock splits) received with respect to shares of Stock which are not yet vested under paragraph 3 shall be subject to the provisions of this Agreement in the same manner and shall become fully vested at the same time as the Stock with respect to which such additional securities were issued.

(b) Participant acknowledges that, from time to time, the Company may be in a “Blackout Period” and/or subject to applicable securities laws that could subject Participant to liability for engaging in any transaction involving the sale of the Company’s shares. Participant further acknowledges and agrees that, prior to the sale of any shares acquired under this Award, it is Participant’s responsibility to determine whether or not such sale of shares will subject Participant to liability under insider trading rules or other applicable securities laws.

3. Vesting.

(a) Participant’s interest in the Stock awarded under paragraph 1 shall become vested and nonforfeitable in accordance with the Vesting Schedule in the Notice of Award so long as Participant maintains a Continuous Status as an Employee of the Company or a Subsidiary. Upon vesting, the Company shall, within thirty (30) days of such vesting, deliver to Participant the certificates evidencing the nonforfeitable shares (free of restrictive legends on such stock certificates), provided the withholding requirements of paragraph 4 have been satisfied. Alternatively, provided the withholding requirements of paragraph 4 have been satisfied, the Committee may permit or require that such nonforfeitable shares of Stock (free of the restrictive notations on shares of Stock issued in book-entry form) be deposited directly with a brokerage firm determined acceptable to the Company for such purpose or to a designated agent of the Company, and the Committee may utilize electronic or automated methods of share transfer.

(b) If Participant ceases to maintain a Continuous Status as an Employee of the Company or any of its Subsidiaries for any reason other than death or disability (as described in subparagraph (c)), all shares of Stock to the extent not yet vested under subparagraph (a) on the date Participant ceases to be an employee shall be forfeited by Participant without payment of any consideration to Participant therefor. Any shares of Stock so forfeited shall be canceled and returned to the status of authorized but unissued shares, to be held for future distributions under the Company’s 2002 Plan.

(c) If Participant dies or in the event of termination of Participant’s Continuous Status as an Employee as a result of disability (as determined by the Board in accordance with the policies of the Company) while an employee of the Company or any of its Subsidiaries, Participant’s interest in all shares of Stock awarded hereunder shall become fully vested and nonforfeitable as of the date of death or termination of employment on account of such disability. Unless changed by the Board, “disability” means that Participant ceases to be an employee on account of disability as a result of which Participant shall be eligible for payments under the Company’s long-term disability policy.

4. Withholding of Taxes.

(a) General. Participant is ultimately liable and responsible for all taxes owed by Participant in connection with the Stock awarded, regardless of any action the Company or any of its Subsidiaries takes with respect to any tax withholding obligations that arise in connection with the Stock awarded. Neither the Company nor any of its Subsidiaries makes any representation or undertaking regarding the treatment of any tax withholding in connection with the grant or vesting of the Stock awarded or the subsequent sale of any of the shares of Stock. The Company and its Subsidiaries do not commit and are under no obligation to structure the Award to reduce or eliminate Participant’s tax liability.

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(b) Payment of Withholding Taxes. Prior to any event in connection with the Stock awarded (e.g., vesting) that the Company determines may result in any tax withholding obligation, whether United States federal, state or local taxes and including any employment tax obligation (the “Tax Withholding Obligation”), Participant must arrange for the satisfaction of such Tax Withholding Obligation in a manner acceptable to the Company, including by means of one of the following methods:

(i) By Share Withholding. Unless the Company permits Participant to satisfy the Tax Withholding Obligation by some other means in accordance with clause (iii) below, Participant authorizes the Company (in the exercise of its sole discretion) to withhold from those unrestricted shares of Stock to be delivered to Participant upon vesting under paragraph 3 above the whole number of shares sufficient to satisfy the Tax Withholding Obligation, provided that the Company shall withhold only the amount of shares necessary to satisfy the minimum applicable Tax Withholding Obligation. Share withholding will result in the delivery of a lower number of unrestricted shares of Stock to Participant. Share withholding will generally be used to satisfy the tax liability of individuals subject to the short-swing profit restrictions of Section 16(b) of the Securities Exchange Act of 1934, as amended.

(ii) By Sale of Shares. Unless the Company permits Participant to satisfy the Tax Withholding Obligation by some other means in accordance with clause (iii) below, and provided that the terms of this clause (ii) do not violate Section 13(k) of the Securities Exchange Act of 1934, as amended, Participant’s acceptance of the Stock awarded constitutes Participant’s instruction and authorization to the Company and any brokerage firm determined acceptable to the Company for such purpose to sell on Participant’s behalf a whole number of shares from those unrestricted shares of Stock to be delivered to Participant upon vesting under paragraph 3 above as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the applicable Tax Withholding Obligation. Such shares will be sold on the day such Tax Withholding Obligation arises (e.g., a vesting date) or as soon thereafter as practicable. Participant will be responsible for all brokers’ fees and other costs of sale, and Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale. To the extent the proceeds of such sale exceed the Tax Withholding Obligation, the Company agrees to pay such excess in cash to Participant. Participant acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the Tax Withholding Obligation. Accordingly, Participant agrees to pay to the Company or any of its Subsidiaries as soon as practicable, including through additional payroll withholding, any amount of the Tax Withholding Obligation that is not satisfied by the sale of shares described above.

(iii) By Check, Wire Transfer or Other Means. At any time not less than five (5) business days (or such fewer number of days as determined by the Committee or its designee) before any Tax Withholding Obligation arises (e.g., a vesting date), Participant may request permission to satisfy the Tax Withholding Obligation by check, wire transfer or other means, by submitting such request, in writing, to the Company. If the Company approves Participant’s request, within five (5) business days of the vesting date (or such fewer number of days as determined by the Committee or its designee) Participant must deliver to the Company the amount that the Company determines is sufficient to satisfy the Tax Withholding Obligation by (x) wire transfer to such account as the Company may direct, (y) delivery of a certified check payable to the Company, or (z) such other means as specified from time to time by the Committee or its designee.

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5. Successors. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and assigns. Nothing contained in the 2002 Plan, the Notice of Award or this Agreement shall be interpreted as imposing any liability on the Company or the Committee in favor of Participant or any purchaser or other transferee of Stock with respect to any loss, cost or expense which such Participant, purchaser or other transferee may incur in connection with, or arising out of any transaction involving, any shares of Stock subject to the 2002 Plan, the Notice of Award or this Agreement.

6. Integration. The terms of the 2002 Plan, the Notice of Award and this Agreement are intended by the Company and Participant to be the final expression of their agreement with respect to the shares of Stock and may not be contradicted by evidence of any prior or contemporaneous agreement. The Company and Participant further intend that the 2002 Plan, the Notice of Award and this Agreement shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any arbitration, judicial, administrative or other legal proceeding involving the 2002 Plan, the Notice of Award or this Agreement. Accordingly, the 2002 Plan, the Notice of Award and this Agreement contain the entire understanding between the parties and supersede all prior oral, written and implied agreements, understandings, commitments and practices among the parties.

7. Waivers. Any failure to enforce any terms or conditions of the 2002 Plan, the Notice of Award or this Agreement by the Company or by Participant shall not be deemed a waiver of that term or condition, nor shall any waiver or relinquishment of any right or power for all or any other times.

8. Severability of Provisions. If any provision of the 2002 Plan, the Notice of Award or this Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision thereof; and the 2002 Plan, the Notice of Award and this Agreement shall be construed and enforced as if none of them included such provision.

9. Committee Decisions Conclusive. All decisions of the Committee arising under the 2002 Plan, the Notice of Award or this Agreement shall be conclusive.

10. Mandatory Arbitration. To the extent permitted by law, any dispute arising out of or relating to the 2002 Plan, the Notice of Award and this Agreement, including the meaning or interpretation thereof, shall be resolved solely by arbitration before an arbitrator selected in accordance with the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association. The location for the arbitration shall be in the county or comparable jurisdiction of Participant’s employment. Judgment on the award rendered may be entered in any court having jurisdiction. Each party shall pay an equal share of the arbitrator’s fees, unless applicable law requires the Company to pay all or a greater share of the fees and costs. All statutes of limitation which would otherwise be applicable shall apply to any arbitration proceeding under this paragraph. Neither Participant nor the Company will have the right to participate in a class, representative or collective action, as a class representative, class member or an opt-in party, act as a private attorney general, or join or consolidate claims with claims of any other person or entity, with respect to any dispute arising out of or relating to the 2002 Plan, the Notice of Award and this Agreement. The provisions of this paragraph are intended by Participant and the Company to be exclusive for all purposes and applicable to any and all disputes arising out of or relating to the 2002 Plan, the Notice of Award and this Agreement. The arbitrator who hears and decides any dispute shall have jurisdiction and authority only to award compensatory damages to make whole a person or entity sustaining foreseeable economic damages, and shall not have jurisdiction and authority to make any other award of any type, including, without limitation, punitive damages, unforeseeable economic damage, damages for pain, suffering or emotional

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distress, or any other kind or form of damages, unless such other award is available as a matter of law. The remedy, if any, awarded by the arbitrator shall be the sole and exclusive remedy for any dispute which is subject to arbitration under this paragraph.

11. Delaware Law. The 2002 Plan, the Notice of Award and this Agreement shall be construed and enforced according to the laws of the State of Delaware, without regard to its conflict of law provisions, to the extent not preempted by the federal laws of the United States of America.

12. Country Appendices. If Participant relocates to a country outside the United States: (i) any special terms and conditions that may apply to Restricted Stock Awards granted to Participants in such country under Appendices to this Agreement will apply to Participant; or (ii) if Restricted Stock Awards have not been granted to Employees in such country under this Agreement, any other special terms and conditions will apply to Participant, in each case to the extent the Company determines that the application of such terms and conditions is necessary or advisable to comply with local law or facilitate the administration of the 2002 Plan, and provided the imposition of the term or condition will not result in any adverse accounting expense with respect to the Restricted Stock Award (unless the Company specifically determines to incur such expense).

13. Forfeiture Pursuant to Restatement of Financial Results. Notwithstanding anything in the Award to the contrary, in the event that (i) the Company issues a restatement of financial results to correct a material error, (ii) the Committee determines, in good faith, that fraud or willful misconduct by the Participant was a significant contributing factor to the need to issue such restatement, and (iii) some or all of the Shares that were granted and/or earned prior to such restatement by the Participant would not have been granted and/or earned, as applicable, based upon the restated financial results, the Participant shall immediately return to the Company those Shares, including any pre-tax income derived from ownership and any gross proceeds from disposition of such Shares, that would not have been granted and/or earned based upon the restated financial results (the “Repayment Obligation”). The Company shall be able to enforce the Repayment Obligation by all legal means available, including, without limitation, by withholding such amount from other sums and property owed by the Company to the Participant.

END OF AGREEMENT

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EX-10.27

EXHIBIT 10.27

FRANKLIN RESOURCES, INC.

2002 UNIVERSAL STOCK INCENTIVE PLAN

NOTICE OF RESTRICTED STOCK UNIT AWARD

Name:

Address:

In accordance with the Franklin Resources, Inc. 2002 Universal Stock Incentive Plan (the “2002 Plan”), as an incentive for increased efforts and successful achievements, Franklin Resources, Inc. (the “Company”) has awarded Participant Restricted Stock Units (“Units”) (as defined in the 2002 Plan) over common stock of the Company subject to the terms and conditions of the accompanying Restricted Stock Unit Award Agreement (the “Award Agreement”), this Notice of Restricted Stock Unit Award (the “Notice of Award” and together with the Award Agreement, the “Award”) and the 2002 Plan, as follows:

Award Number

Award Date

Total Number of Units Awarded

Subject to Participant’s Continuous Status as an Employee (as defined in the 2002 Plan) of the Company or any of its Subsidiaries (as defined in the 2002 Plan) and other limitations set forth in the Award and the 2002 Plan, the Units shall vest in accordance with the following schedule:

Vesting Schedule Number of Units

Participant acknowledges and agrees that the Units subject to this Award shall vest only by Participant’s Continuous Status as an Employee of the Company or any of its Subsidiaries, and that such status is at the will of the Company or the applicable Subsidiary (not through the act of being hired, being granted this Award or acquiring Units hereunder). Participant further acknowledges and agrees that nothing in this Award nor in the 2002 Plan, which is incorporated herein by this reference, affects the Company’s, or a Subsidiary’s, right to terminate, or to change the terms of, Participant’s employment at any time, with or without cause.

Participant acknowledges that, from time to time, the Company may be in a “Blackout Period” and/or subject to applicable securities laws that could subject Participant to liability for engaging in any transaction involving the sale of the Company’s shares. Participant further acknowledges and agrees that, prior to the sale of any shares acquired under this Award, it is Participant’s responsibility to determine whether or not such sale of shares will subject Participant to liability under insider trading rules or other applicable securities laws.

Participant understands that the Award is subject to Participant’s consent to access, and acknowledgement of having accessed, the 2002 Plan prospectus in connection with the Form S-8 registration statement for the 2002 Plan, any updates thereto, the 2002 Plan, the Award Agreement and this Notice of Award (collectively, the “2002 Plan Documents”) in electronic form through Connected on

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the Company’s Intranet. By signing below, Participant hereby: (i) consents to access electronic copies (instead of receiving paper copies) of the 2002 Plan Documents via the Company’s Intranet; (ii) represents that Participant has access to the Company’s Intranet; (iii) acknowledges receipt of electronic copies, or that Participant is already in possession of paper copies, of the 2002 Plan Documents and the Company’s most recent annual report to stockholders; (iv) acknowledges that Participant is familiar with and has accepted the Award subject to the terms and provisions of the 2002 Plan Documents; and (v) consents to access and receive in the future electronic copies via the Company’s Intranet or otherwise of all documents made a part of, or incorporated by reference into, the 2002 Plan Documents in the future as well as any other reports, proxy statements and other communications distributed in the future to security holders of the Company generally.

Participant may receive, without charge, upon written or oral request, paper copies of any or all of the 2002 Plan Documents, documents incorporated by reference in the Form S-8 registration statement for the 2002 Plan, and the Company’s most recent annual report to stockholders or any other documents described in the preceding paragraph by requesting them from Stock Administration at the Company, One Franklin Parkway, San Mateo, CA 94403-1906. Telephone (650) 312-2000. Participant may also withdraw Participant’s consent to receive any or all documents electronically by notifying Stock Administration at the above address in writing.

In the event of Participant’s death, Participant hereby designates the following as Participant’s beneficiary(ies) to receive all payments and shares due to Participant pursuant to this Award. Please note that this designation applies only to this Award and not to any prior awards or grants under the 2002 Plan. This designation shall be binding upon the executors, administrators, heirs, successors and transferees of Participant only in jurisdictions where such beneficiary designations are enforceable under local law.

NAME: (Please print):
	(First)                                                  (Middle)                                      (Last)
SSN/SIN/National Tax ID:
ADDRESS:
	(Please include Country and Zip/Postal Code)
TELEPHONE NO.:
	(Please include Country and/or Area Code)
RELATIONSHIP:
PERCENTAGE:
	(Enter the % Participant wishes the beneficiary(ies) to receive)

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By Participant’s electronic signature and by the signature of the Company’s representative below, Participant and the Company agree that the Award is granted under and governed by the terms and conditions of the 2002 Plan, this Notice of Award and the Award Agreement.

PARTICIPANT:	FRANKLIN RESOURCES, INC.
Participant’s Name	By:	Donna S. Ikeda
	Title:	Senior Vice President, Human Resources

Notice for residents of the EU: This Notice of Award and accompanying documents do not constitute a prospectus prepared in accordance with the EU Prospectus Directive 2003/71/EC (“the Directive”). The Company takes the position that the Units are not “transferable securities” as defined in Article 2(1)(a) of the Directive. Further, the employee pays no consideration to acquire the shares of common stock of the Company under the Award. Accordingly, no prospectus or other document has been prepared and filed with the UK Financial Services Authority or any other regulator in the European Union in relation to the offer of the Award and shares under the Award.

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FRANKLIN RESOURCES, INC.

2002 UNIVERSAL STOCK INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

This Restricted Stock Unit Award Agreement, together with any Appendix(es) attached hereto (hereinafter, collectively, the “Agreement”), is made as of the Award Date set forth in the Notice of Restricted Stock Unit Award (the “Notice of Award”) between Franklin Resources, Inc. (the “Company”) and the Participant named therein (“Participant”).

WITNESSETH:

WHEREAS, the Board of Directors and stockholders of the Company have adopted the Franklin Resources, Inc. 2002 Universal Stock Incentive Plan (the “2002 Plan”), authorizing the grant of Restricted Stock Units (as defined in the 2002 Plan) (“Units”) to eligible individuals as an incentive in connection with the performance of services for the Company and its Subsidiaries, as defined in the 2002 Plan, which is incorporated herein by this reference (capitalized terms used but not defined in this Agreement have the same meaning as set forth in the 2002 Plan or the Notice of Award, as applicable); and

WHEREAS, the Company recognizes the efforts of Participant on behalf of the Company and its Subsidiaries and desires to motivate Participant in Participant’s work and provide an inducement to remain in the service of the Company and its Subsidiaries; and

WHEREAS, the Company has determined that it would be to the advantage and in the interest of the Company and its stockholders to award Units provided for in this Agreement and the Notice of Award to Participant, subject to certain restrictions, as an incentive for increased efforts and successful achievements;

NOW, THEREFORE, in consideration of the foregoing premises and of the mutual covenants herein contained, the parties hereto hereby agree as follows:

1. Restricted Stock Unit Award. The Company is issuing to Participant Units as set forth in the Notice of Award, subject to the rights of and limitations on Participant as owner thereof as set forth in this Agreement.

2. Transfer Restriction.

(a) Units may not be transferred by Participant in any manner other than by will or by the laws of descent and distribution. Notwithstanding the foregoing, Participant may designate a beneficiary of Units in the event of Participant’s death on the beneficiary designation form included in the Notice of Award. The terms of this Agreement shall be binding upon the executors, administrators, heirs, successors and transferees of Participant.

(b) Participant acknowledges that, from time to time, the Company may be in a “Blackout Period” and/or subject to applicable securities laws that could subject Participant to liability for engaging in any transaction involving the sale of the Company’s shares. Participant further acknowledges and agrees that, prior to the sale of any shares acquired under this Award, it is Participant’s responsibility to determine whether or not such sale of shares will subject Participant to liability under insider trading rules or other applicable securities laws.

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3. Vesting.

(a) Units shall become vested in accordance with the Vesting Schedule in the Notice of Award so long as Participant maintains a Continuous Status as an Employee of the Company or a Subsidiary.

(b) If Participant ceases to maintain a Continuous Status as an Employee of the Company or any of its Subsidiaries for any reason other than death or disability (as described in subparagraph (c)), all Units to the extent not yet vested under subparagraph (a) on the date Participant ceases to be an employee shall be forfeited by Participant without payment of any consideration to Participant therefor. Any Units so forfeited shall be canceled and any shares considered issuable pursuant to such Units, if applicable, shall be returned to the status of authorized but unissued shares, to be held for future distributions under the Company’s 2002 Plan.

(c) If Participant dies or in the event of termination of Participant’s Continuous Status as an Employee as a result of disability (as determined by the Board in accordance with the policies of the Company) while an employee of the Company or any of its Subsidiaries, Units awarded hereunder shall become fully vested as of the date of death or termination of employment on account of such disability. Unless changed by the Board, “disability” means that Participant ceases to be an employee on account of disability as a result of which Participant shall be eligible for payments under the Company’s long-term disability policy.

4. Vesting of Units and Issuance of Shares. Upon each vesting date, one share of common stock (“Stock”) shall be issuable for each Unit that vests on such date, subject to the terms and provisions of the 2002 Plan, the Notice of Award and this Agreement. Upon satisfaction of any required tax or other withholding obligations as set forth in paragraph 6 of this Agreement, the shares of Stock will be issued to Participant (as evidenced by the appropriate entry in the books of the Company or a duly authorized transfer agent of the Company) as soon as practicable after the vesting date, but in any event, within the period ending on the later to occur of the date that is two and a half (2 ¹/2) months from the end of (i) Participant’s tax year that includes the applicable vesting date, or (ii) the Company’s tax year that includes the applicable vesting date. Any fractional Unit remaining after all Units under this Award are fully vested shall be discarded and a fractional share of Stock shall not be issued at vesting of the fractional Unit. Notwithstanding the above, the Company may, in its discretion, pay to Participant all or a portion of any vested Units in cash in an amount equal to the shares of Stock, less any tax or other withholding obligations set forth in paragraph 6 of this Agreement.

5. Right to Shares. Except as otherwise determined by the Committee, in its discretion, Participant shall not have any right in, to or with respect to any of the shares of Stock (including any voting rights or rights with respect to dividends paid on the Stock, including rights to dividend equivalent payments) issuable for a Unit under the Award until the Award is settled by the issuance of such shares of Stock to Participant.

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6. Withholding of Taxes.

(a) General. Participant is ultimately liable and responsible for all taxes owed by Participant in connection with Units awarded, regardless of any action the Company or any of its Subsidiaries takes with respect to any tax withholding obligations that arise in connection with Units awarded. Neither the Company nor any of its Subsidiaries makes any representation or undertaking regarding the treatment of any tax withholding in connection with the grant or vesting of Units awarded or the subsequent sale of any of the shares of Stock. The Company and its Subsidiaries do not commit and are under no obligation to structure the Award to reduce or eliminate Participant’s tax liability.

(b) Payment of Withholding Taxes. Prior to any event in connection with Units awarded (e.g., vesting) that the Company determines may result in any tax withholding obligation, whether United States federal, state or local taxes and including any employment tax obligation (the “Tax Withholding Obligation”), Participant must arrange for the satisfaction of such Tax Withholding Obligation in a manner acceptable to the Company, including by means of one of the following methods:

(i) By Share Withholding. Unless the Company permits Participant to satisfy the Tax Withholding Obligation by some other means in accordance with clause (iii) below, Participant authorizes the Company (in the exercise of its sole discretion) to withhold from those shares of Stock issuable to Participant the whole number of shares sufficient to satisfy the Tax Withholding Obligation, provided that the Company shall withhold only the amount of shares necessary to satisfy the minimum applicable Tax Withholding Obligation. Share withholding will result in issuance of a lower number of shares of Stock to Participant. Share withholding will generally be used to satisfy the tax liability of individuals subject to the short-swing profit restrictions of Section 16(b) of the Securities Exchange Act of 1934, as amended.

(ii) By Sale of Shares. Unless the Company permits Participant to satisfy the Tax Withholding Obligation by some other means in accordance with clause (iii) below, and provided that the terms of this clause (ii) do not violate Section 13(k) of the Securities Exchange Act of 1934, as amended, Participant’s acceptance of the Award constitutes Participant’s instruction and authorization to the Company and any brokerage firm determined acceptable to the Company for such purpose to sell on Participant’s behalf a whole number of shares from those shares of Stock issuable to Participant as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the applicable Tax Withholding Obligation. Such shares will be sold on the day such Tax Withholding Obligation arises (e.g., a vesting date) or as soon thereafter as practicable. Participant will be responsible for all brokers’ fees and other costs of sale, and Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale. To the extent the proceeds of such sale exceed the Tax Withholding Obligation, the Company agrees to pay such excess in cash to Participant. Participant acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the Tax Withholding Obligation. Accordingly, Participant agrees to pay to the Company or any of its Subsidiaries as soon as practicable, including through additional payroll withholding, any amount of the Tax Withholding Obligation that is not satisfied by the sale of shares described above.

(iii) By Check, Wire Transfer or Other Means. At any time not less than five (5) business days (or such fewer number of days as determined by the Committee or its designee) before any Tax Withholding Obligation arises (e.g., a vesting date), Participant may request permission to satisfy the Tax Withholding Obligation by check, wire transfer or other means, by submitting such request, in

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writing, to the Company. If the Company approves Participant’s request, within five (5) business days of the vesting date (or such fewer number of days as determined by the Committee or its designee) Participant must deliver to the Company the amount that the Company determines is sufficient to satisfy the Tax Withholding Obligation by (x) wire transfer to such account as the Company may direct, (y) delivery of a certified check payable to the Company, or (z) such other means as specified from time to time by the Committee or its designee.

7. Successors. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and assigns. Nothing contained in the 2002 Plan, the Notice of Award or this Agreement shall be interpreted as imposing any liability on the Company or the Committee in favor of Participant or any purchaser or other transferee of Units or shares of Stock with respect to any loss, cost or expense which such Participant, purchaser or other transferee may incur in connection with, or arising out of any transaction involving, any Units or shares of Stock subject to the 2002 Plan, the Notice of Award or this Agreement.

8. No Compensation Deferrals. None of the 2002 Plan, the Notice of Award and this Agreement are intended to provide for an elective deferral of compensation that would be subject to Section 409A (“Section 409A”) of the United States Internal Revenue Code of 1986, as amended. The Company reserves the right, to the extent the Company deems necessary or advisable in its sole discretion, to unilaterally amend or modify the 2002 Plan, the Notice of Award and/or this Agreement to ensure that no awards (including, without limitation, the Units) become subject to the requirements of Section 409A, provided, however, that the Company makes no representation that the Units are not subject to Section 409A nor makes any undertaking to preclude Section 409A from applying to the Units.

9. Integration. The terms of the 2002 Plan, the Notice of Award and this Agreement are intended by the Company and Participant to be the final expression of their agreement with respect to Units and may not be contradicted by evidence of any prior or contemporaneous agreement. The Company and Participant further intend that the 2002 Plan, the Notice of Award and this Agreement shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any arbitration, judicial, administrative or other legal proceeding involving the 2002 Plan, the Notice of Award or this Agreement. Accordingly, the 2002 Plan, the Notice of Award and this Agreement contain the entire understanding between the parties and supersede all prior oral, written and implied agreements, understandings, commitments and practices among the parties.

10. Waivers. Any failure to enforce any terms or conditions of the 2002 Plan, the Notice of Award or this Agreement by the Company or by Participant shall not be deemed a waiver of that term or condition, nor shall any waiver or relinquishment of any right or power for all or any other times.

11. Severability of Provisions. If any provision of the 2002 Plan, the Notice of Award or this Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision thereof; and the 2002 Plan, the Notice of Award and this Agreement shall be construed and enforced as if none of them included such provision.

12. Committee Decisions Conclusive. All decisions of the Committee arising under the 2002 Plan, the Notice of Award or this Agreement shall be conclusive.

13. Mandatory Arbitration. To the extent permitted by law, any dispute arising out of or relating to the 2002 Plan, the Notice of Award and this Agreement, including the meaning or

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interpretation thereof, shall be resolved solely by arbitration before an arbitrator selected in accordance with the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association. The location for the arbitration shall be in the county or comparable jurisdiction of Participant’s employment. Judgment on the award rendered may be entered in any court having jurisdiction. Each party shall pay an equal share of the arbitrator’s fees, unless applicable law requires the Company to pay all or a greater share of the fees and costs. All statutes of limitation which would otherwise be applicable shall apply to any arbitration proceeding under this paragraph. Neither Participant nor the Company will have the right to participate in a class, representative or collective action, as a class representative, class member or an opt-in party, act as a private attorney general, or join or consolidate claims with claims of any other person or entity, with respect to any dispute arising out of or relating to the 2002 Plan, the Notice of Award and this Agreement. The provisions of this paragraph are intended by Participant and the Company to be exclusive for all purposes and applicable to any and all disputes arising out of or relating to the 2002 Plan, the Notice of Award and this Agreement. The arbitrator who hears and decides any dispute shall have jurisdiction and authority only to award compensatory damages to make whole a person or entity sustaining foreseeable economic damages, and shall not have jurisdiction and authority to make any other award of any type, including, without limitation, punitive damages, unforeseeable economic damage, damages for pain, suffering or emotional distress, or any other kind or form of damages, unless such other award is available as a matter of law. The remedy, if any, awarded by the arbitrator shall be the sole and exclusive remedy for any dispute which is subject to arbitration under this paragraph.

14. Delaware Law. The 2002 Plan, the Notice of Award and this Agreement shall be construed and enforced according to the laws of the State of Delaware, without regard to its conflict of law provisions, to the extent not preempted by the federal laws of the United States of America.

15. Country Appendices. If Participant relocates to a country outside the United States: (i) any special terms and conditions that may apply to Units granted to Participants in such country under Appendices to this Agreement will apply to Participant; or (ii) if Units have not been granted to Employees in such country under this Agreement, any other special terms and conditions, will apply to Participant, in each case to the extent the Company determines that the application of such terms and conditions is necessary or advisable to comply with local law or facilitate the administration of the 2002 Plan, and provided the imposition of the term or condition will not result in any adverse accounting expense with respect to the Units (unless the Company specifically determines to incur such expense).

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16. Forfeiture Pursuant to Restatement of Financial Results. Notwithstanding anything in the Award to the contrary, in the event that (i) the Company issues a restatement of financial results to correct a material error, (ii) the Committee determines, in good faith, that fraud or willful misconduct by the Participant was a significant contributing factor to the need to issue such restatement, and (iii) some or all of the Units that were granted and/or earned prior to such restatement by the Participant would not have been granted and/or earned, as applicable, based upon the restated financial results, the Participant shall immediately return to the Company all shares of Stock or other property received with respect to those Units, including any pre-tax income derived from ownership and any gross proceeds from disposition of such Stock or property, that would not have been granted and/or earned based upon the restated financial results (the “Repayment Obligation”), and all such Units shall immediately be forfeited. The Company shall be able to enforce the Repayment Obligation by all legal means available, including, without limitation, by withholding such amount from other sums and property owed by the Company to the Participant.

END OF AGREEMENT

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EX-10.33

EXHIBIT 10.33

FRANKLIN RESOURCES, INC.

1998 EMPLOYEE STOCK INVESTMENT PLAN

As Amended and Restated effective as of February 1, 2010

The following constitute the provisions of the 1998 Employee Stock Investment Plan of Franklin Resources, Inc.

1. Purpose.

The purpose of the Plan is to provide employees of the Company (as hereinafter defined) and its Designated Parents or Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions (or direct contributions in certain circumstances). It is the intention of the Company to have the Plan qualify as an “Employee Stock Investment Plan” under Section 423 of the Code (as hereinafter defined). The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code.

2. Definitions.

As used herein, the following definitions shall apply:

(a) “Board” means the Board of Directors of the Company.

(b) “Code” means the Internal Revenue Code of 1986, as amended.

(c) “Common Stock” means the common stock of the Company.

(d) “Company” means Franklin Resources, Inc., a Delaware corporation.

(e) “Compensation” means an Employee’s base salary (whether such amount is reflected by one amount or several separate components making up an aggregate amount) and commissions from the Company including paid time off and overtime or one or more Designated Parents or Subsidiaries, including such amounts of base salary and commissions as are deferred by the Employee (i) under a qualified cash or deferred arrangement described in Section 401(k) of the Code, or (ii) to a plan qualified under Section 125 of the Code. Compensation does not include bonuses, restricted stock awards, other annual awards, other incentive payments, reimbursements or other expense allowances, fringe benefits (cash or noncash), moving expenses, deferred compensation, profit sharing or other employer matching contributions (other than employee deferral contributions described in the first sentence) made on the Employee’s behalf by the Company or one (1) or more Designated Parents or Subsidiaries under any employee benefit or welfare plan now or hereafter established, and any other payments not specifically referenced in the first sentence.

(f) “Corporate Transaction” means any of the following stockholder-approved transactions to which the Company is a party:

(i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

(ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company (including the capital stock of the Company’s subsidiary corporations) in connection with complete liquidation or dissolution of the Company; or

(iii) any reverse merger in which the Company is the surviving entity, but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger.

(g) “Designated Parents or Subsidiaries” means the Parents or Subsidiaries which have been designated by the Plan Administrator from time to time as eligible to participate in the Plan.

(h) “Employee” means any individual, including an officer or director, who is an employee of the Company or a Designated Parent or Subsidiary for purposes of Section 423 of the Code. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on a Leave of Absence. Where the period of leave exceeds three (3) months and the individual’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship will be deemed to have terminated on the day that is three (3) months and one (1) day of such leave for purposes of determining eligibility to participate in the Plan.

(i) “Enrollment Date” means the first Market Trading Day of each Purchase Period.

(j) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(k) “Exercise Date” means the last day of each Purchase Period, or, if such date is not a Market Trading Day, the next Market Trading Day.

(l) “Fair Market Value” means, as of any date, the closing price of the Common Stock on the New York Stock Exchange Composite Tape on such date. In the event such date is not a Market Trading Day, then such closing price for the last Market Trading Day immediately prior to such date shall be used.

(m) “Leave of Absence” means the following types of unpaid or reduced pay leaves of absence authorized by the Participant’s employer: pregnancy leave and/or parental leave, bereavement leave, compassionate care leave, family responsibility or family medical leave, emergency leave, sick or medical leave, or any other similar leave of absence as approved by the Company.

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(n) “Market Trading Day” means a day on which the New York Stock Exchange is open for trading and the Company’s Common Stock was traded on such date.

(o) “Parent” means any company during any period in which it is a “parent corporation” (as that term is defined in Code section 424(f)) with respect to the Company.

(p) “Participant” means an Employee of the Company or Designated Parent or Subsidiary who is actively participating in the Plan.

(q) “Plan” means the Franklin Resources, Inc. 1998 Employee Stock Investment Plan.

(r) “Plan Administrator” means either the Board or a Committee of the Board that is responsible for the administration of the Plan as is designated from time to time by resolution of the Board.

(s) “Purchase Period” means a purchase period established pursuant to Section 4 hereof.

(t) “Purchase Price” shall mean an amount equal to Eighty-Five Percent (85%) of the Fair Market Value of a share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower.

(u) “Reserves” means the sum of the number of shares of Common Stock covered by each option under the Plan which have not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but not yet placed under option.

(v) “Subsidiary” means any company during any period in which it is a “subsidiary corporation” (as that term is defined in Code section 424(f)) with respect to the Company.

3. Eligibility.

(a) Any individual who is an Employee for the ten (10) business day period prior to and including a given Enrollment Date, shall be eligible to participate in the Plan for the Purchase Period commencing with such Enrollment Date.

(b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) if, immediately after the grant, such Employee (taking into account stock owned by any other person which would be attributed to such Employee pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Parent or Subsidiary, or (ii) which permits such person’s rights to purchase stock under all employee stock purchase plans of the Company and its Parents or Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the Fair Market Value of the shares at the time such option is granted prior to any discounts provided for in such plan) for each calendar year in which such option is outstanding at any time. The determination of the accrual of the right to purchase stock shall be made in accordance with Section 423(b)(8) of the Code and the regulations thereunder, as in effect from time to time.

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(c) Notwithstanding subsection (a) above, Employees who are subject to rules or laws of a foreign jurisdiction (x) that prohibit the participation of such Employees in the Plan, or (y) compliance with which would cause the Plan to be in violation of any requirement of Section 423 of the Code or the regulations thereunder, shall not be eligible to participate in the Plan for any relevant Purchase Period.

4. Purchase Periods.

(a) The Plan shall be implemented through consecutive Purchase Periods until such time as (i) the maximum number of shares of Common Stock available for issuance under the Plan shall have been purchased or (ii) the Plan shall have been sooner terminated in accordance with Section 19 hereof. Purchase Periods shall commence each February 1 and August 1, except that if such date falls on a date other than a Market Trading Day, the Purchase Period shall commence on the next Market Trading Day. The maximum duration of Purchase Periods shall be approximately six (6) months. The Plan Administrator shall have the authority to change the length and commencement date of any Purchase Period by announcement at least ten (10) days prior to the commencement of the Purchase Period. Notwithstanding the foregoing, in the event the Company determines it is inadvisable to issue and/or purchase shares of Common Stock under the Plan as of any Exercise Date, issuances and/or purchases under the Plan shall be delayed until a date specified by the Plan Administrator.

(b) A Participant will be granted a separate option for each Purchase Period in which such individual participates. The option shall be granted on the Enrollment Date and will be automatically exercised on the Exercise Date for the Purchase Period.

(c) Except as otherwise specifically provided herein, the acquisition of Common Stock through participation in the Plan for any Purchase Period shall neither limit nor require the acquisition of Common Stock by a Participant in any subsequent Purchase Period.

5. Participation.

(a) An eligible Employee may become a Participant in the Plan by completing a subscription agreement, in a form designated by the Plan Administrator from time to time, whether in hard copy or in electronic form, authorizing payroll deductions and submitting it with the designated payroll office of the Company prior to the Enrollment Date for the Purchase Period in which such participation will commence. In the event an Employee is on a Leave of Absence, such Employee may participate in the Plan by making direct contributions to the Plan in the form and manner as authorized by the Plan Administrator.

(b) Payroll deductions for a Participant shall commence with the first payroll period following the Enrollment Date and shall end on the last complete payroll period during the Purchase Period, unless sooner terminated by the Participant as provided in Section 10. A Participant who is on a Leave of Absence may make direct contributions to the Plan in the form and manner as authorized by the Plan Administrator.

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6. Payroll Deductions.

(a) At the time a Participant files a subscription agreement, such Participant shall elect to have payroll deductions made during the Purchase Period in amounts between one percent (1%) and not exceeding ten percent (10%) of the Compensation which such Participant receives during the Purchase Period. Subject to Section 6(c), if a Participant has been participating in the Plan prior to taking a Leave of Absence, any direct contributions to the Plan made by such Participant during a Leave of Absence together with any payroll deductions continuing during such Leave of Absence shall in combination be at the same rate as in effect prior to such Leave of Absence. A Participant may commence participation in the Plan even if on a Leave of Absence by filing a subscription agreement as provided in this Section 6(a) and by making direct contributions, along with any payroll deductions which, either individually or together, as the case may be, total between one percent (1%) and ten percent (10%) of the Compensation which such Participant received immediately preceding the commencement of such Leave of Absence.

(b) A Participant may not make any additional payments into such Participant’s account under the Plan except as provided above for a Participant on a Leave of Absence and except as may be required to comply with the laws of certain non-U.S. jurisdictions where payroll deductions may be prohibited by law or to conform to local practice in such non-U.S. jurisdictions. All payroll deductions made for a Participant (and/or any direct contributions, as permitted under the Plan) shall be credited to such Participant’s account under the Plan and will be withheld in whole percentages only.

(c) A Participant may discontinue participation in the Plan as provided in Section 10, or may decrease the rate of payroll deductions (and/or direct contributions, if applicable), during the Purchase Period by completing and filing with the Company a new subscription agreement authorizing a decrease in the payroll deduction rate (and/or rate of direct contribution, if applicable). The decrease in rate shall be effective with the first full payroll period commencing fifteen (15) days after the Company’s receipt of the new subscription agreement unless the Company elects to process a given change in participation more quickly. A Participant may increase the rate of payroll deductions (and/or direct contributions, if applicable), for a future Purchase Period by filing with the Company a new subscription agreement authorizing an increase in the payroll deduction rate within fifteen (15) days (unless the Company elects to process a given change in participation more quickly) before the commencement of the upcoming Purchase Period. A Participant’s subscription agreement shall remain in effect for successive Purchase Periods unless terminated as provided in Section 10. The Plan Administrator shall be authorized to limit the number of payroll deduction rate changes during any Purchase Period.

(d) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) herein, a Participant’s payroll deductions (and/or direct contributions for a Participant on a Leave of Absence or in non-U.S. jurisdictions, as applicable and as provided in Sections 6(a) and (b) hereof) shall be decreased to 0%. Payroll deductions (and/or direct contributions, if applicable) shall recommence at the rate provided in such Participant’s subscription agreement at the beginning of the first Purchase Period which is scheduled to end in the following calendar year, unless terminated by the Participant as provided in Section 10.

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7. Grant of Option.

On the Enrollment Date, each Participant in such Purchase Period shall be granted an option to purchase on each Exercise Date of such Purchase Period (at the applicable Purchase Price) up to a number of shares of the Common Stock determined by dividing such Participant’s payroll deductions (and/or direct contributions, if applicable) accumulated prior to such Exercise Date by the applicable Purchase Price; provided (i) that such purchase shall be subject to the limitations set forth in Sections 3(b) and 12 hereof, and (ii) the maximum number of shares of Common Stock a Participant will be permitted to purchase in any Purchase Period will be two thousand (2,000) shares, subject to adjustment as provided in Section 18 hereof. Exercise of the option shall occur as provided in Section 8, unless the Participant has withdrawn pursuant to Section 10, and the option, to the extent not exercised, shall expire on the last day of the Purchase Period.

8. Exercise of Option.

Unless a Participant withdraws from the Plan as provided in Section 10 below, such Participant’s option for the purchase of shares will be exercised automatically on each Exercise Date, and the maximum number of shares (including fractional shares) subject to the option shall be purchased for such Participant at the applicable Purchase Price with the accumulated payroll deductions (and direct contributions) in such Participant’s account. The Plan Administrator shall be authorized to establish procedures for the handling of fractional shares, including the distribution of cash in lieu thereof. Notwithstanding the foregoing, any amount remaining in the Participant’s account following the purchase of shares on the Exercise Date due to the application of Section 423(b)(8) of the Code, shall be returned to the Participant. During a Participant’s lifetime, a Participant’s option to purchase shares hereunder is exercisable only by such Participant.

9. Delivery.

Upon receipt of a request from a Participant after each Exercise Date on which a purchase of shares occurs, the Company shall arrange the delivery to such Participant, as promptly as practicable, of a certificate representing the shares purchased upon exercise of such Participant’s option. The shares purchased under the Plan may also be delivered in uncertificated form by way of an electronic transfer to the brokerage account of a Participant.

10. Withdrawal; Termination of Employment.

(a) A Participant (i) may withdraw all, but not less than all of the payroll deductions (and/or direct contributions, if applicable) credited to such Participant’s account and not yet used to exercise such Participant’s option under the Plan at any time or (ii) terminate future payroll deductions(and/or direct contributions, if applicable), but allow accumulated payroll deductions (and/or direct contributions, if applicable) to be used to exercise the Participant’s option under the Plan at any time by giving at least fifteen (15) days prior written notice to the Company, in a form designated by the Plan Administrator from time to time, whether in hard copy or electronic

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form. If the Participant elects withdrawal alternative (i) described above, all of the Participant’s payroll deductions (and/or direct contributions, if applicable) credited to the Participant’s account will be paid to such Participant as promptly as practicable after receipt of the notice of withdrawal, such Participant’s option for the Purchase Period will be automatically terminated, and no further payroll deductions (and/or direct contributions, if applicable) for the purchase of shares will be made during the Purchase Period. If the Participant elects withdrawal alternative (ii) described above, no further payroll deductions (and/or direct contributions, if applicable) for the purchase of shares will be made during the Purchase Period, all of the Participant’s payroll deductions (and/or direct contributions, if applicable) credited to the Participant’s account will be applied to the exercise of the Participant’s option on the Exercise Date and after such Exercise Date, such Participant’s option for the Purchase Period will be automatically terminated and all remaining accumulated payroll deduction amounts (and/or direct contributions, if applicable) shall be returned to the Participant. If a Participant withdraws from a Purchase Period, payroll deductions (and/or direct contributions, if applicable) will not resume at the beginning of the succeeding Purchase Period unless the Participant delivers a new subscription agreement to the Company.

(b) Upon a Participant’s ceasing to be an Employee for any reason or upon termination of a Participant’s employment relationship (as described in Section 2(j)), the payroll deductions (and/or direct contributions, if applicable) credited to such Participant’s account during the Purchase Period, but not yet used to purchase shares will be returned to such Participant or, in the case of such Participant’s death, to the person or persons entitled thereto under Section 14, and such Participant’s option will be automatically terminated.

11. Interest.

No interest shall accrue on the payroll deductions (and/or direct contributions, if applicable) credited to a Participant’s account under the Plan under any circumstances or at any time.

12. Stock.

(a) The maximum number of shares of Common Stock which shall be made available for sale or as a matching grant under the Plan shall be eight million (8,000,000) shares, subject to adjustment upon changes in capitalization of the Company as provided for in Section 18. If on a given Exercise Date, the number of shares with respect to which options are to be exercised exceeds the number of shares then available under the Plan, the Plan Administrator shall make a pro rata allocation of the shares remaining available for purchase among the Participants in as uniform a manner as shall be practicable and as it shall determine to be equitable.

(b) A Participant will have no interest or voting right in shares covered by such Participant’s option until such shares are actually purchased on such Participant’s behalf in accordance with the applicable provisions of the Plan. No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date of such purchase.

7

(c) Shares to be delivered to a Participant under the Plan will be registered in the name of the Participant or in the name of the Participant and such Participant’s spouse.

13. Administration.

The Plan shall be administered by the Board or a committee of members of the Board appointed by the Board. The Board or its committee shall have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Every finding, decision and determination made by the Board or its committee shall, to the full extent permitted by law, be final and binding upon all persons.

14. Designation of Beneficiary.

(a) Each Participant will file a written designation of a beneficiary who is to receive any shares and cash, if any, from the Participant’s account under the Plan in the event of such Participant’s death. If a Participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective.

(b) Such designation of beneficiary may be changed by the Participant (and such Participant’s spouse, if any) at any time by written notice. In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant’s death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Plan Administrator), the Plan Administrator, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Plan Administrator, then to such other person as the Plan Administrator may designate.

15. Transferability.

Neither payroll deductions (and/or direct contributions, if applicable) credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 14 hereof) by the Participant, nor shall it be subject to attachment or other legal process of whatever nature. Any such attempt at assignment, attachment, transfer, pledge or other disposition shall be without effect, except that the Plan Administrator may treat such act as an election to withdraw funds from a Purchase Period in accordance with Section 10; provided, however, that the shares purchased under the Plan may also be delivered in uncertificated form by way of an electronic transfer to the brokerage account of participant.

16. Use of Funds.

All payroll deductions (and/or direct contributions, if applicable) received along with any other funds held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions or other funds or hold them exclusively for the benefit of Participants. All payroll deductions received or

8

held by the Company may be subject to the claims of the Company’s general creditors. Participants shall have the status of general unsecured creditors of the Company. Any amounts payable to Participants pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Designated Parent or Subsidiary and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of the Company or a Designated Parent or Subsidiary. The Participants shall have no claim against the Company or any Designated Parent or Subsidiary for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.

17. Reports.

Individual accounts will be maintained for each Participant in the Plan. Statements of account will be given to Participants at least annually, which statements will set forth the amounts of payroll deductions (and/or direct contributions, if applicable), the Purchase Price, the number of shares purchased and the remaining cash balance, if any.

18. Changes in Capitalization; Corporate Transactions.

(a) Subject to any required action by the stockholders of the Company, the Reserves, the Purchase Price, the maximum number of shares that may be purchased in any Purchase Period, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator and its determination shall be final, binding and conclusive. Except as the Administrator determines, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the Reserves and the Purchase Price.

(b) Corporate Transactions. In the event of a proposed Corporate Transaction, each option under the Plan shall be assumed by such successor corporation or a parent or subsidiary of such successor corporation, unless the Plan Administrator, in the exercise of its sole discretion and in lieu of such assumption, determines to shorten the Purchase Period then in progress by setting a new Exercise Date (the “New Exercise Date”). If the Plan Administrator shortens the Purchase Period then in progress in lieu of assumption in the event of a Corporate Transaction, the Plan Administrator shall notify each Participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the Participant’s option has been changed to the New Exercise Date and that either:

(1) the Participant’s option will be exercised automatically on the New Exercise Date, unless prior to such date the Participant has withdrawn from the Purchase Period as provided in Section 10; or

9

(2) the Company shall pay to the Participant on the New Exercise Date an amount in cash, cash equivalents, or property as determined by the Plan Administrator that is equal to the excess, if any, of (i) the Fair Market Value of the shares subject to the option over (ii) the Purchase Price due had the Participant’s option been exercised automatically under Subsection (b)(1) above. In addition, all remaining accumulated payroll deduction (and/or direct contributions, if applicable) amounts shall be returned to the Participant.

(c) For purposes of this Section 18, an option granted under the Plan shall be deemed to be assumed if, in connection with the Corporate Transaction, the option is replaced with a comparable option with respect to shares of capital stock of the successor corporation or Parent thereof. The determination of option comparability shall be made by the Plan Administrator prior to the Corporate Transaction and its determination shall be final, binding and conclusive on all persons.

19. Amendment or Termination of the Plan.

(a) The Plan Administrator may at any time and for any reason terminate or amend the Plan. Except as provided in Section 18 or this Section 19, no such termination can affect options previously granted. Except as provided in Section 18 or this Section 19, no amendment may make any change in any option theretofore granted which adversely affects the rights of any Participant. The Company shall obtain stockholder approval in such a manner and to such a degree as necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law or regulation).

(b) Without stockholder consent and without regard to whether any Participant rights may be considered to have been “adversely affected,” the Plan Administrator shall be entitled to change the Purchase Periods, limit the frequency and/or number of changes in the amount withheld during Purchase Periods, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable foreign jurisdictions, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participant’s Compensation, and establish such other limitations or procedures as the Plan Administrator determines in its sole discretion advisable and which are consistent with the Plan.

(c) On December 13, 2006, the Board approved an amendment and restatement of the Plan to (i) increase the maximum number of shares available for sale or as a matching grant under the Plan to eight million (8,000,000) shares, (ii) extend the term of the Plan to January 31, 2018, and (iii) remove, for Purchase Periods occurring on and after the date the Board approved such amendment and restatement, the provision that Employees will not be eligible to participate

10

in the Plan for any relevant Purchase Period if such Employee’s customary employment is less than 20 hours per week. The increase in the maximum number of shares available under the Plan required the approval of the Company’s stockholders, which was obtained on January 25, 2007. On June 19, 2007, the Plan was amended to allow direct contributions to the Plan for Participants on Leaves of Absence. On July 9, 2007, the Plan was amended to (A) provide that the term “Accrual Period” shall refer to a “Purchase Period” effective for Purchase Periods commencing on and after August 1, 2007; and (B) provide that the duration of Purchase Periods commencing on and after August 1, 2007 shall be shortened from twenty-four (24) months to six (6) months. The 2007 Plan amendments do not require the approval of the Company’s stockholders. On June 17, 2008, the Plan was amended to change the definition of “Purchase Price” so that it referred to an amount equal to 85% (rather than 90%) of the Fair Market Value of a share of Common Stock, and to eliminate the provision regarding Company discretionary matching grants under the Plan for Purchase Periods commencing on or after August 1, 2008. The June 2008 amendments do not require the approval of the Company’s stockholders. On October 12, 2009, the Plan was amended, effective as of February 1, 2010 (such amendments not subject to stockholder approval) to (A) bring the Plan in to compliance with proposed changes to the regulations promulgated under Section 423 of the Code, (B) modify the definitions of “Exercise Date” and “Purchase Price” to clarify treatment in the event a Purchase Period ends on a date other than a Market Trading Day, and (C) make certain other clarifying and administrative changes.

20. Notices.

All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Plan Administrator at the location, or by the person, designated by the Plan Administrator for the receipt thereof.

21. Conditions Upon Issuance of Shares.

Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an option, the Company may require the Participant to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.

22. Term of Plan.

The Plan became effective upon January 1, 1998. It shall continue until January 31, 2018 unless sooner terminated under Section 19.

11

23. No Employment Rights.

The Plan does not, directly or indirectly, create any right for the benefit of any employee or class of employees to purchase any shares under the Plan, or create in any employee or class of employees any right with respect to continuation of employment by the Company or a Designated Parent or Subsidiary, and it shall not be deemed to interfere in any way with such employer’s right to terminate, or otherwise modify, an employee’s employment at any time.

24. Effect of Plan.

The provisions of the Plan shall, in accordance with its terms, be binding upon, and inure to the benefit of, all successors of each Participant, including, without limitation, such Participant’s estate and the executors, administrators or trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy or representative of creditors of such Participant.

25. Applicable Law.

The laws of the State of Delaware (excluding that body of law pertaining to its conflicts of law) will govern all matters relating to this Plan except to the extent it is superseded by the laws of the United States.

12

EX-10.36

EXHIBIT 10.36

DIRECTOR COMPENSATION

(NON-EMPLOYEE DIRECTOR FEES)

The following sets forth the fees and other payments that directors who are not employees of Franklin Resources, Inc. (“Franklin”) are entitled to receive as members of the Board of Directors (the “Board”), and the fees and other payments that such non-employee Franklin directors who are also members of the Board of Directors of Fiduciary Trust Company International (“Fiduciary”) receive from Fiduciary. With respect to service on the Franklin Board, the Franklin Board last approved a change in such compensation structure in December 2005. With respect to service on the Fiduciary Board, the Fiduciary Board last approved a change in such compensation structure in December 2006 (effective October 1, 2006).

Directors who are not Franklin employees are entitled to receive $17,500 per quarter, plus $3,000 per Board meeting, and an annual stock grant valued at $75,000 (rounded up to the nearest whole share). Non-employee directors who serve on Board committees are paid $1,500 per committee meeting attended. Additionally, Chairpersons of the Compensation Committee and the Corporate Governance Committee receive $1,250 per quarter and the Chairperson of the Audit Committee receives $2,500 per quarter. Non-employee directors who are also members of the Board of Directors of Fiduciary receive from Fiduciary an annual board retainer fee of $35,000 (one-fourth of which is paid quarterly), and an annual committee retainer fee of $5,000 (one-fourth of which is paid quarterly) for service on a Fiduciary board committee.

In addition, Franklin reimburses directors for certain expenses incurred in connection with attending Board and committee meetings as well as other Franklin-related events, including travel, hotel accommodations, meals and other incidental expenses for the director and his or her spouse accompanying the director in connection with such events. Franklin may also, from time to time, provide directors and their spouses token gifts of nominal value.

Franklin also allows directors to defer payment of their directors’ fees, and to treat the deferred amounts as hypothetical investments in Franklin common stock or Franklin Templeton mutual funds, as applicable. The terms of any such deferred payment arrangements are set forth in separate documentation between Franklin and the particular directors in accordance with the Corporation’s 2006 Directors Deferred Compensation Plan, as amended and restated.

EX-12

EXHIBIT 12

COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES

(dollars in thousands) for the fiscal years ended September 30,	2009			2008			2007		2006		2005
Income before taxes excluding equity in income of investees, minority interest in earnings of consolidated subsidiaries and capitalized interest	$	1,270,789		$	2,219,602		$	2,406,424	$	1,824,729	$	1,397,275
Additions:
Dividends received from equity method investees		7,187			10,863			19,537		22,486		—
Interest on uncertain tax positions included in income before taxes		3,507			4,252			—		—		—
Fixed charges
Interest expense-excluding interest on deposits		6,396			29,991			23,595		30,155		34,563
Interest expense-deposits		6,153			8,893			14,344		14,391		7,651
Interest on uncertain tax positions not related to third party		(3,507	)		(4,252	)		—		—		—
Interest factor on rent1		19,577			19,271			17,318		16,736		15,717
Total fixed charges		28,619			53,903			55,257		61,282		57,931
Adjusted earnings	$	1,310,102		$	2,288,620		$	2,481,218	$	1,908,497	$	1,455,206
Ratio of adjusted earnings to fixed charges -including interest on deposits		45.8			42.5			44.9		31.1		25.1
Ratio of adjusted earnings to fixed charges -excluding interest on deposits		58.0			50.6			60.3		40.4		28.8

¹ Interest factor on rent represents one-third of rental expense (the approximate portion of rental expense representing interest).

EX-21

EXHIBIT 21

FRANKLIN RESOURCES, INC.

LIST OF SUBSIDIARIES

(as of October 20, 2009)

Name	State or Nation of Incorporation or Organization
Asia Infrastructure Mezzanine Capital Management Co., Ltd.	Cayman Islands
C&EE General Partners Ltd.	Delaware
C&EE Private Equity Partners, L.P.	Delaware
Darby Asia Founder Partner, L.P.	Cayman Islands
Darby Asia Investors (HK), Ltd.	Hong Kong
Darby Asia Investors (India) Private Ltd.	India
Darby Asia Investors, Ltd.	British Virgin Islands
Darby Asia Mezzanine Fund II Management Co., Ltd.	Cayman Islands
Darby Brazil Mezzanine Management LLC	Delaware
Darby CEE Founder Partner II, LLC	Delaware
Darby Converging Europe Founder Partner, L.P.	Delaware
Darby Emerging Markets Income Investments, Ltd.	Cayman Islands
Darby Emerging Markets Investments, Ltd.	Delaware
Darby Europe Mezzanine Management	Cayman Islands
Darby Holdings, Inc.	Delaware
Darby Latin American Investors, Ltd.	Cayman Islands
Darby Latin American Mezzanine Investments	Cayman Islands
Darby Latin American Mezzanine Management II, LLC	Delaware
Darby Overseas Investments, Ltd.	Delaware
Darby Overseas Partners, L.P.	Delaware
Darby Private Equity Korea Ltd.	Korea
Darby Stratus Administracao de Investímentos Ltda.	Brazil
Darby-Hana Infrastructure Fund Management Co., Ltd.	Korea
Darby-ProBanco Investors, LLC	Delaware
FCC Receivables Corp.	Delaware
Fiduciary International Holding, Inc.	New York
Fiduciary International Ireland Limited	Ireland
Fiduciary International, Inc.	New York
Fiduciary Investment Corporation	New York
Fiduciary Investment Management International, Inc.	Delaware
Fiduciary Trust (International) S.A.	Switzerland
Fiduciary Trust Company International	New York
Fiduciary Trust Company of Canada	Canada
Fiduciary Trust International Limited	England
Fiduciary Trust International of California	California
Fiduciary Trust International of Delaware	Delaware
Fiduciary Trust International of the South	Florida
Franklin Advisers, GP, LLC	Delaware
Franklin Advisers, Inc.	California
Franklin Advisory Services, LLC	Delaware
Franklin Capital Corporation	Utah
Franklin Investment Advisory Services, LLC	Delaware
Franklin Mutual Advisers, LLC	Delaware
Franklin Receivables LLC	Delaware

Name	State or Nation of Incorporation or Organization
Franklin SPE, LLC	Delaware
Franklin Templeton Asset Management (India) Private Limited	India
Franklin Templeton Asset Management (Malaysia) Sdn Bhd	Malaysia
Franklin Templeton Asset Management Mexico, S.A de C.V.	Mexico
Franklin Templeton Asset Management S.A.	France
Franklin Templeton Austria GmbH	Austria
Franklin Templeton Bank & Trust, F.S.B.	Utah
Franklin Templeton Capital Holdings Private Limited.	Singapore
Franklin Templeton Companies, LLC	Delaware
Franklin Templeton Financial Services Corp.	New York
Franklin Templeton France S.A.	France
Franklin Templeton Global Investors Limited	United Kingdom
Franklin Templeton Holding Limited	Mauritius
Franklin Templeton Institutional, LLC	Delaware
Franklin Templeton Institutional GP, LLC	Delaware
Franklin Templeton Institutional Suisse SA	Switzerland
Franklin Templeton International Services (India) Private Limited	India
Franklin Templeton International Services S.A.	Luxembourg
Franklin Templeton Investímentos (Brasil) Ltda.	Brazil
Franklin Templeton Investment Management GmbH	Germany
Franklin Templeton Investment Management Limited	United Kingdom
Franklin Templeton Investment Services GmbH	Germany
Franklin Templeton Investment Services Mexico S de R.L.	Mexico
Franklin Templeton Investment Trust Management Co., Ltd.	Korea
Franklin Templeton Investments (Asia) Limited	Hong Kong
Franklin Templeton Investments Australia Limited	Australia
Franklin Templeton Investments Corp.	Canada
Franklin Templeton Investments Japan Limited	Japan
Franklin Templeton Investments Poland sp zo.o.	Poland
Franklin Templeton Investor Services, LLC	Delaware
Franklin Templeton Italia SIM S.p.A.	Italy
Franklin Templeton Luxembourg Holding SA.	Luxembourg
Franklin Templeton Magyarorszag Kft.	Hungary
Franklin Templeton Management Luxembourg SA.	Luxembourg
Franklin Templeton Portfolio Advisors, Inc.	California
Franklin Templeton Services Limited	Ireland
Franklin Templeton Services, LLC	Delaware
Franklin Templeton Strategic Investments Ltd.	Cayman Islands
Franklin Templeton Switzerland Ltd.	Switzerland
Franklin Templeton Trustee Services Private Limited	India
Franklin/Templeton Distributors, Inc.	New York
Franklin/Templeton Travel, Inc.	California
F S Capital Group	California
F S Properties, Inc.	California
FT Opportunistic Distressed Fund Ltd.	Cayman Islands
FTC Investor Services Inc.	Canada
FTCI (Cayman) Ltd.	Cayman Islands
ITI Capital Markets Limited	India
LSIMC, LLC	Delaware
Riva Financial Systems Limited	Isle of Man

Name	State or Nation of Incorporation or Organization
Templeton Asset Management (Labuan) Limited	Malaysia
Templeton Asset Management Ltd.	Singapore
Templeton China Research Limited	Hong Kong
Templeton do Brasil Ltda.	Brazil
Templeton Franklin Global Distributors, Ltd.	Bermuda
Templeton Global Advisors Limited	The Bahamas
Templeton Global Holdings Ltd.	The Bahamas
Templeton Heritage Limited	Canada
Templeton International, Inc.	Delaware
Templeton Investment Counsel, LLC	Delaware
Templeton Restructured Investments, L.L.C.	Delaware
Templeton Restructured Investments, Ltd.	Cayman Islands
Templeton Restructured Investments III, Ltd.	Cayman Islands
Templeton Worldwide, Inc.	Delaware
Templeton/Franklin Investment Services, Inc.	Delaware
TSEMF III (Jersey) Limited	Jersey

* All subsidiaries currently do business principally under their respective corporate names except as follows: Franklin Templeton Portfolio Advisors, Inc. operates through its Franklin Portfolio Advisors and Templeton Portfolio Advisors divisions; and some Templeton subsidiaries also occasionally use the name Templeton Worldwide.

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in:

• the Registration Statements on Form S-3 (Nos. 333-149573; 333-51462; and 333-55721);

• the Registration Statements on Form S-4 (No. 333-52722);

• the Registration Statements on Form S-8 (Nos. 333-143402; 333-128691; 333-103869; 333-100801; 333-57682; 333-89517; 333-83377; 333-70035; 333-48171; 033-62593; and 033-53397); and

• the Post-Effective Amendments on Form S-8 (Nos. 333-57682 and 333-89517)

of Franklin Resources, Inc. of our report dated November 24, 2009 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

November 24, 2009

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Gregory E. Johnson, certify that:

1. I have reviewed this annual report on Form 10-K of Franklin Resources, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 24, 2009	/s/    GREGORY E. JOHNSON
	Gregory E. Johnson President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Kenneth A. Lewis, certify that:

1. I have reviewed this annual report on Form 10-K of Franklin Resources, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 24, 2009	/s/    KENNETH A. LEWIS
	Kenneth A. Lewis Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002 (FURNISHED HEREWITH)

I, Gregory E. Johnson, President and Chief Executive Officer of Franklin Resources, Inc. (the “Company”), certify, as of the date hereof and solely for purposes of and pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The Annual Report on Form 10-K of the Company for the fiscal year ended September 30, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Dated: November 24, 2009	/s/    GREGORY E. JOHNSON
	Gregory E. Johnson President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002 (FURNISHED HEREWITH)

I, Kenneth A. Lewis, Executive Vice President and Chief Financial Officer of Franklin Resources, Inc. (the “Company”), certify, as of the date hereof and solely for purposes of and pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The Annual Report on Form 10-K of the Company for the fiscal year ended September 30, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Dated: November 24, 2009	/s/    KENNETH A. LEWIS
	Kenneth A. Lewis Executive Vice President and Chief Financial Officer