10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

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

For the quarterly period ended March 31, 2010

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, CA	94403
(Address of principal executive offices)	(Zip Code)

(650) 312-2000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions 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 file   ¨  (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 Exchange Act).    ¨  YES    x  NO

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

    Outstanding: 227,338,845 shares of common stock, par value $0.10 per share, of Franklin Resources, Inc. as of April 30, 2010.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

FRANKLIN RESOURCES, INC.

Condensed Consolidated Statements of Income

Unaudited

(in thousands, except per share data)	Three Months Ended March 31,						Six Months Ended March 31,
	2010			2009			2010			2009
Operating Revenues
Investment management fees	$	836,077		$	552,936		$	1,642,741		$	1,153,210
Underwriting and distribution fees		496,781			304,655			984,834			609,584
Shareholder servicing fees		71,376			66,514			140,919			132,856
Consolidated sponsored investment products income, net		540			1,761			988			3,647
Other, net		8,339			(13,594	)		21,042			(17,695	)
Total operating revenues		1,413,113			912,272			2,790,524			1,881,602
Operating Expenses
Underwriting and distribution		487,023			293,534			954,050			583,063
Compensation and benefits		271,041			236,732			525,353			480,795
Information systems, technology and occupancy		69,608			65,398			138,218			133,996
Advertising and promotion		38,121			26,700			72,969			50,927
Amortization of deferred sales commissions		46,282			33,754			92,828			70,366
Other		39,903			32,832			78,994			70,769
Total operating expenses		951,978			688,950			1,862,412			1,389,916
Operating Income		461,135			223,322			928,112			491,686
Other Income (Expenses)
Consolidated sponsored investment products gains (losses), net		5,669			(11,106	)		20,741			(58,548	)
Investment and other income (losses), net		42,488			(33,893	)		75,466			(78,915	)
Interest expense		(936	)		(2,092	)		(1,678	)		(3,292	)
Other income (expenses), net		47,221			(47,091	)		94,529			(140,755	)
Income before taxes		508,356			176,231			1,022,641			350,931
Taxes on income		149,946			67,159			306,682			131,930
Net Income	$	358,410		$	109,072		$	715,959		$	219,001
Less: Net income (loss) attributable to noncontrolling interests		1,725			(1,734	)		3,671			(12,705	)
Net Income attributable to Franklin Resources, Inc.	$	356,685		$	110,806		$	712,288		$	231,706
Earnings per Share
Basic	$	1.56		$	0.48		$	3.11		$	0.99
Diluted		1.55			0.47			3.10			0.99
Dividends per Share	$	0.22		$	0.21		$	3.44		$	0.42

See Notes to Condensed Consolidated Financial Statements.

2

FRANKLIN RESOURCES, INC.

Condensed Consolidated Balance Sheets

Unaudited

(in thousands)	March 31, 2010		September 30, 2009
Assets
Current Assets
Cash and cash equivalents	$	2,860,991	$	2,982,539
Receivables		625,866		581,810
Investment securities, trading		460,385		502,609
Investment securities, available-for-sale		1,053,009		1,027,287
Other investments		15,907		51,950
Deferred taxes		75,307		67,773
Prepaid expenses and other		31,538		30,452
Total current assets		5,123,003		5,244,420
Banking/Finance Assets
Cash and cash equivalents		162,629		121,912
Investment securities, trading		72,919		110,600
Investment securities, available-for-sale		440,998		472,055
Loans held for sale		10,757		15,711
Loans receivable, net		368,154		310,504
Other		8,438		8,383
Total banking/finance assets		1,063,895		1,039,165
Non-Current Assets
Investment securities, available-for-sale		102,517		108,838
Investments in equity method investees and other		547,893		398,995
Deferred sales commissions		101,052		103,993
Property and equipment, net		534,785		535,459
Goodwill		1,445,139		1,436,626
Other intangible assets, net		567,562		567,974
Other		34,736		32,993
Total non-current assets		3,333,684		3,184,878
Total Assets	$	9,520,582	$	9,468,463

[Table continued on next page]

See Notes to Condensed Consolidated Financial Statements.

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FRANKLIN RESOURCES, INC.

Condensed Consolidated Balance Sheets

Unaudited

[Table continued from previous page]

(in thousands, except share data)	March 31, 2010		September 30, 2009
Liabilities and Stockholders’ Equity
Current Liabilities
Compensation and benefits	$	201,448	$	210,789
Commercial paper		285,970		64,156
Accounts payable and accrued expenses		173,036		174,525
Commissions		260,266		219,356
Income taxes		41,634		28,363
Other		27,284		28,351
Total current liabilities		989,638		725,540
Banking/Finance Liabilities
Deposits		709,136		664,580
Federal Home Loan Bank advances		66,000		57,000
Other		23,916		24,653
Total banking/finance liabilities		799,052		746,233
Non-Current Liabilities
Deferred taxes		228,770		218,845
Other		86,556		78,284
Total non-current liabilities		315,326		297,129
Total liabilities		2,104,016		1,768,902
Commitments and Contingencies (Note 11)
Redeemable Noncontrolling Interests		29,074		65,126
Stockholders’ Equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none issued		0		0
Common stock, $0.10 par value, 1,000,000,000 shares authorized; 227,391,266 and 229,324,345 shares issued and outstanding, at March 31, 2010 and September 30, 2009		22,739		22,932
Retained earnings		7,217,850		7,505,890
Accumulated other comprehensive income		143,687		103,351
Total Franklin Resources, Inc. stockholders’ equity		7,384,276		7,632,173
Nonredeemable noncontrolling interests		3,216		2,262
Total stockholders’ equity		7,387,492		7,634,435
Total Liabilities and Stockholders’ Equity	$	9,520,582	$	9,468,463

See Notes to Condensed Consolidated Financial Statements.

4

FRANKLIN RESOURCES, INC.

Condensed Consolidated Statements of Cash Flows

Unaudited

	Six Months Ended March 31,
(in thousands)	2010			2009
Net Income	$	715,959		$	219,001
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		131,194			89,143
Stock-based compensation		40,368			39,772
Excess tax benefits from stock-based compensation arrangements		(10,415	)		(3,157	)
Net (gains) losses on sale of assets		(2,122	)		12,344
Equity in net (income) losses of affiliated companies		(17,290	)		36,475
Provision for loan losses		2,460			5,197
Other-than-temporary impairment of investments		1,463			57,652
Deferred income taxes		(2,092	)		(15,499	)
Changes in operating assets and liabilities:
(Increase) decrease in receivables, prepaid expenses and other		(56,845	)		76,172
Principal collected on loans held for sale, net		2,976			11,354
Increase in trading securities, net		(100,580	)		(3,814	)
Advances of deferred sales commissions		(89,184	)		(33,086	)
Increase (decrease) in income taxes payable		31,177			(49,816	)
Increase (decrease) in commissions payable		40,911			(69,024	)
Increase in other liabilities		2,047			19,322
Increase (decrease) in accrued compensation and benefits		6,370			(145,427	)
Net cash provided by operating activities		696,397			246,609
Purchase of investments		(420,686	)		(1,320,217	)
Liquidation of investments		388,308			1,243,277
Purchase of banking/finance investments		0			(118,618	)
Liquidation of banking/finance investments		87,400			23,725
(Increase) decrease in loans receivable		(58,133	)		16,906
Additions of property and equipment, net		(27,862	)		(27,631	)
Acquisitions of subsidiaries, net of cash acquired		0			533
Net cash used in investing activities		(30,973	)		(182,025	)
Increase in bank deposits, net		44,556			75,720
Exercise of common stock options		12,936			9,928
Dividends paid on common stock		(783,832	)		(95,475	)
Purchase of common stock		(291,491	)		(108,971	)
Excess tax benefits from stock-based compensation arrangements		10,415			3,157
Proceeds from issuance of commercial paper, net		221,612			11,601
Proceeds from issuance of debt		9,000			77,750
Payments on debt		0			(104,551	)
Noncontrolling interests, net		42,844			38,798
Net cash used in financing activities		(733,960	)		(92,043	)
Effect of exchange rate changes on cash and cash equivalents		(12,295	)		(55,757	)
Decrease in cash and cash equivalents		(80,831	)		(83,216	)
Cash and cash equivalents, beginning of period		3,104,451			2,527,552
Cash and Cash Equivalents, End of Period	$	3,023,620		$	2,444,336

[Table continued on next page]

See Notes to Condensed Consolidated Financial Statements.

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FRANKLIN RESOURCES, INC.

Condensed Consolidated Statements of Cash Flows

Unaudited

[Table continued from previous page]

	Six Months Ended March 31,
(in thousands)	2010			2009
Components of Cash and Cash Equivalents
Cash and cash equivalents, beginning of period:
Current assets	$	2,982,539		$	2,314,818
Banking/finance assets		121,912			212,734
Total	$	3,104,451		$	2,527,552
Cash and cash equivalents, end of period:
Current assets	$	2,860,991		$	2,282,021
Banking/finance assets		162,629			162,315
Total	$	3,023,620		$	2,444,336
Supplemental Disclosure of Non-Cash Information
Change in assets related to the net deconsolidation of certain sponsored investment products	$	(90,710	)	$	(95,084	)
Change in liabilities related to the net deconsolidation of certain sponsored investment products		(7,999	)		(53,822	)
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	$	273,548		$	243,558
Cash paid for interest		3,589			5,240

See Notes to Condensed Consolidated Financial Statements.

6

FRANKLIN RESOURCES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2010

(Unaudited)

Note 1 - Basis of Presentation

The unaudited interim financial statements of Franklin Resources, Inc. (“Franklin”) and its consolidated subsidiaries (collectively, the “Company”) included herein have been prepared by the Company in accordance with the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Under these rules and regulations, some information and footnote disclosures normally included in financial statements prepared under accounting principles generally accepted in the United States of America have been shortened or omitted. Management believes that all adjustments necessary for a fair statement of the financial position and the results of operations for the periods shown have been made. All adjustments are normal and recurring. These financial statements should be read together with the Company’s audited financial statements included in its Form 10-K for the fiscal year ended September 30, 2009 (“fiscal year 2009”). Certain amounts for the comparative prior fiscal year periods have been reclassified to conform to the financial statement presentation as of and for the period ended March 31, 2010, including those required by the retrospective adoption of new accounting guidance relating to noncontrolling interests and the computation of earnings per share (see Note 2 – New Accounting Standards).

Note 2 - New Accounting Standards

Recently Adopted Accounting Standards

In the first quarter, the Company adopted a new Financial Accounting Standards Board (“FASB”) 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 adoption of the standard had no impact on the Company’s consolidated financial statements.

In the first quarter, the Company adopted a new FASB standard that establishes accounting and reporting standards for noncontrolling interests in a subsidiary (previously referred to as minority interests) and for the deconsolidation of a subsidiary. The standard clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as a component of equity, separate from the parent’s equity, in the consolidated financial statements. In addition, it modifies the presentation of consolidated net income to include the amount attributable to noncontrolling interests. The standard requires retrospective adoption of the presentation and disclosure requirements for existing noncontrolling interests. All other requirements of the standard are applied prospectively. The adoption of the standard did not have a material effect on the Company’s consolidated financial position or results of operations, but resulted in changes in financial statement presentation and disclosure for all periods presented. Minority interests have been recharacterized as redeemable noncontrolling interests and classified as temporary equity, if currently redeemable or convertible for cash or other assets at the option of the holder, or otherwise as nonredeemable noncontrolling interests and classified as a component of equity. Additionally, the presentation of consolidated net income was modified to include the amount attributable to noncontrolling interests.

In the first quarter, the Company adopted a new FASB standard that specifies that nonvested share-based payment awards containing nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. All prior period earnings per share data presented must be adjusted retrospectively. The adoption of the standard did not have a material impact on basic or diluted earnings per share.

New Accounting Standards Not Yet Adopted

In February 2010, the FASB issued an amendment to a standard relating to the consolidation of variable interest entities. For certain investments held by a reporting entity, the amendment indefinitely defers a requirement to perform a qualitative analysis to determine whether its variable interests give it a controlling financial interest in a variable interest entity (“VIE”). The deferral generally applies to the reporting entity’s interests in entities that have the attributes of an investment company or that apply the specialized industry accounting guidance for investment companies. The amendment is effective for fiscal years beginning after November 15, 2009.

The adoption of the standard on October 1, 2010 may result in the consolidation of certain qualifying special purpose entities and VIEs that are not currently consolidated. The Company is currently evaluating certain automobile loan securitization trusts and collateralized loan obligations which hold aggregate assets of approximately $1.5 billion as of March 31, 2010. The Company may be required to consolidate some or all of these assets. The Company is also currently evaluating other VIEs with which it is involved to determine the ultimate impact that the adoption of the standard will have on its consolidated financial statements.

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Note 3 - Stockholders’ Equity and Comprehensive Income

The changes in stockholders’ equity and redeemable noncontrolling interests for the six months ended March 31, 2010 and 2009 were as follows:

(in thousands)	Franklin Resources, Inc. Stockholders’ Equity			Nonredeemable Noncontrolling Interests		Total Stockholders’ Equity			Redeemable Noncontrolling Interests
Balance at October 1, 2009	$	7,632,173		$	2,262	$	7,634,435		$	65,126
Net income		712,288			420		712,708			3,251
Other comprehensive income
Net unrealized gains on investments, net of tax		35,154			0		35,154			0
Currency translation adjustments		4,937			0		4,937			0
Net unrealized gains on defined benefit plans, net of tax		245			0		245			0
Cash dividends on common stock		(787,048	)		0		(787,048	)		0
Repurchase of common stock		(291,491	)		0		(291,491	)		0
Other		78,018			534		78,552			(39,303	)
Balance at March 31, 2010	$	7,384,276		$	3,216	$	7,387,492		$	29,074

(in thousands)	Franklin Resources, Inc. Stockholders’ Equity			Nonredeemable Noncontrolling Interests			Total Stockholders’ Equity			Redeemable Noncontrolling Interests
Balance at October 1, 2008	$	7,074,364		$	29,608		$	7,103,972		$	47,554
Net income (loss)		231,706			(3,886	)		227,820			(8,819	)
Other comprehensive income
Net unrealized gains on investments, net of tax		4,777			0			4,777			0
Currency translation adjustments		(119,876	)		0			(119,876	)		0
Net unrealized losses on defined benefit plans, net of tax		(84	)		0			(84	)		0
Cash dividends on common stock		(97,691	)		0			(97,691	)		0
Repurchase of common stock		(108,971	)		0			(108,971	)		0
Other		64,600			(23,220	)		41,380			(1,317	)
Balance at March 31, 2009	$	7,048,825		$	2,502		$	7,051,327		$	37,418

The components of comprehensive income, including amounts attributable to redeemable noncontrolling interests, were as follows:

	Three Months Ended March 31,						Six Months Ended March 31,
(in thousands)	2010			2009			2010		2009
Net income	$	358,410		$	109,072		$	715,959	$	219,001
Net unrealized gains on investments, net of tax		22,716			12,609			35,154		4,777
Currency translation adjustments		(4,510	)		(37,877	)		4,937		(119,876	)
Net unrealized gains (losses) on defined benefit plans, net of tax		82			(84	)		245		(84	)
Total Comprehensive Income		376,698			83,720			756,295		103,818
Less: Comprehensive income (loss) attributable to noncontrolling interests		1,725			(1,734	)		3,671		(12,705	)
Total Comprehensive Income attributable to Franklin Resources, Inc.	$	374,973		$	85,454		$	752,624	$	116,523

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Note 4 - Earnings per Share

Basic earnings per share is computed by dividing net income available to the Company’s common shareholders, which exclude participating securities, by the weighted average number of shares of common stock outstanding during the period. The Company’s participating securities consist of its nonvested stock and stock unit awards that contain nonforfeitable rights to dividends or dividend equivalents. 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 two-class method.

The components of basic and diluted earnings per share were as follows:

	Three Months Ended March 31,				Six Months Ended March 31,
(in thousands, except per share data)	2010		2009		2010		2009
Net Income attributable to Franklin Resources, Inc.	$	356,685	$	110,806	$	712,288	$	231,706
Less: Allocation of earnings to participating nonvested stock and stock unit awards		1,976		922		4,061		1,772
Net Income Available to Common Stockholders	$	354,709	$	109,884	$	708,227	$	229,934
Weighted-average shares outstanding – basic		227,046		231,178		227,474		231,405
Effect of dilutive common stock options and non-participating nonvested stock unit awards		1,254		712		1,312		912
Weighted-Average Shares Outstanding – Diluted		228,300		231,890		228,786		232,317
Earnings per Share
Basic	$	1.56	$	0.48	$	3.11	$	0.99
Diluted		1.55		0.47		3.10		0.99

For the three and six months ended March 31, 2010, the Company excluded approximately 0.4 million shares of non-participating nonvested stock unit awards from the calculation of diluted earnings per share because their effect would have been anti-dilutive. There were no anti-dilutive potential common shares outstanding during the three and six months ended March 31, 2009.

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 condensed consolidated balance sheets. Cash and cash equivalents consisted of the following:

(in thousands)	March 31, 2010		September 30, 2009
Cash on hand and non-interest-bearing deposits with financial institutions	$	24,649	$	134,508
Interest-bearing deposits with financial institutions		497,248		350,483
Federal funds sold		1,191		5,242
Sponsored money market funds		1,054,456		1,407,801
Time deposits, U.S. government-sponsored enterprise obligations, securities of the U.S. Treasury and federal agencies and other		1,446,076		1,206,417
Total	$	3,023,620	$	3,104,451

Federal Reserve Board regulations require certain of the Company’s banking subsidiaries to maintain reserve and clearing balances on deposits with the Federal Reserve Banks. The required reserve balances were $7.8 million at March 31, 2010 and $7.0 million at September 30, 2009. The required clearing balance was $1.2 million at March 31, 2010 and September 30, 2009.

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 creditworthiness of the financial institutions with which it does business.

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Note 6 - Investments

Investments consisted of the following:

(in thousands)	March 31, 2010		September 30, 2009
Current
Investment securities, trading	$	460,385	$	502,609
Investment securities, available-for-sale
Sponsored investment products		954,428		943,824
U.S. government-sponsored enterprise obligations1		0		5,200
Securities of U.S. states and political subdivisions		14,034		15,118
Securities of the U.S. Treasury and federal agencies		75,590		50,616
Other equity securities		8,957		12,529
Total investment securities, available-for-sale		1,053,009		1,027,287
Other investments2		15,907		51,950
Total Current	$	1,529,301	$	1,581,846
Banking/Finance
Investment securities, trading	$	72,919	$	110,600
Investment securities, available-for-sale
U.S. government-sponsored enterprise obligations1		334,685		365,655
Securities of U.S. states and political subdivisions		842		852
Securities of the U.S. Treasury and federal agencies		3,378		3,566
Corporate debt securities3		101,913		101,774
Other equity securities		180		208
Total investment securities, available-for-sale		440,998		472,055
Total Banking/Finance	$	513,917	$	582,655
Non-Current
Investment securities, available-for-sale
Sponsored investment products	$	29,316	$	23,947
Securities of U.S. states and political subdivisions		72,376		83,838
Other equity securities		825		1,053
Total investment securities, available-for-sale		102,517		108,838
Investments in equity method investees and other		547,893		398,995
Total Non-Current	$	650,410	$	507,833

¹ At March 31, 2010 and September 30, 2009, U.S. government-sponsored enterprise obligations consisted of $283.0 million and $313.0 million of residential mortgage-backed securities and $51.7 million and $57.9 million of debentures.

² 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.

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

At March 31, 2010 and September 30, 2009, current investment securities, trading included $224.4 million and $277.6 million of securities held by sponsored investment products that were consolidated in the Company’s condensed consolidated financial statements.

At March 31, 2010 and September 30, 2009, banking/finance segment investment securities with aggregate carrying values of $232.8 million and $245.9 million were pledged as collateral for the ability to borrow from the Federal Reserve Bank, $94.4 million and $99.6 million were pledged as collateral for outstanding Federal Home Loan Bank (“FHLB”) borrowings and amounts available in secured FHLB short-term borrowing capacity, and $1.9 million were pledged as collateral as required by federal and state regulators (see Note 10 – Debt). In addition, investment management and related services segment securities with aggregate carrying values of $5.1 million and $5.0 million were pledged as collateral, primarily related to a credit facility for a sponsored investment product, at March 31, 2010 and September 30, 2009.

10

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

(in thousands) as of March 31, 2010	Cost Basis		Gross Unrealized					Fair Value
			Gains		Losses
Sponsored investment products	$	870,026	$	137,128	$	(23,410	)	$	983,744
U.S. government-sponsored enterprise obligations		326,836		7,898		(49	)		334,685
Securities of U.S. states and political subdivisions		85,023		2,350		(121	)		87,252
Securities of the U.S. Treasury and federal agencies		78,969		18		(19	)		78,968
Corporate debt securities		100,215		1,698		0			101,913
Other equity securities		8,314		1,652		(4	)		9,962
Total	$	1,469,383	$	150,744	$	(23,603	)	$	1,596,524
(in thousands) as of September 30, 2009			Gross Unrealized
	Cost Basis		Gains		Losses			Fair Value
Sponsored investment products	$	890,745	$	94,829	$	(17,803	)	$	967,771
U.S. government-sponsored enterprise obligations		366,540		6,566		(2,251	)		370,855
Securities of U.S. states and political subdivisions		96,647		3,265		(104	)		99,808
Securities of the U.S. Treasury and federal agencies		54,228		20		(66	)		54,182
Corporate debt securities		100,272		1,502		0			101,774
Other equity securities		11,136		2,786		(132	)		13,790
Total	$	1,519,568	$	108,968	$	(20,356	)	$	1,608,180

The net unrealized holding gains (losses) on investment securities, available-for-sale included in accumulated other comprehensive income were $24.6 million and $38.8 million for the three and six months ended March 31, 2010, and $0.7 million and $(59.0) million for the three and six months ended March 31, 2009. The tax effects of the net unrealized gains (losses) included in accumulated other comprehensive income were $(1.8) million and $(3.4) million for the three and six months ended March 31, 2010, and $(12.1) million and $(6.3) million for the three and six months ended March 31, 2009.

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:

	Less Than 12 Months					12 Months or Greater					Total
(in thousands) as of March 31, 2010	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Current
Investment securities, available-for-sale
Sponsored investment products	$	40,623	$	(21,674	)	$	7,837	$	(534	)	$	48,460	$	(22,208	)
Other equity securities		4		0			27		(4	)		31		(4	)
Total Current	$	40,627	$	(21,674	)	$	7,864	$	(538	)	$	48,491	$	(22,212	)
Banking/Finance
Investment securities, available-for-sale
U.S. government-sponsored enterprise obligations	$	4,317	$	(14	)	$	32,810	$	(35	)	$	37,127	$	(49	)
Securities of the U.S. Treasury and federal agencies		0		0			2,093		(19	)		2,093		(19	)
Total Banking/Finance	$	4,317	$	(14	)	$	34,903	$	(54	)	$	39,220	$	(68	)
Non-Current
Investment securities, available-for-sale
Sponsored investment products	$	9,550	$	(703	)	$	34,190	$	(499	)	$	43,740	$	(1,202	)
Securities of U.S. states and political subdivisions		0		0			3,110		(121	)		3,110		(121	)
Total Non-Current	$	9,550	$	(703	)	$	37,300	$	(620	)	$	46,850	$	(1,323	)

11

	Less Than 12 Months					12 Months or Greater					Total
(in thousands) 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		0		0			8,618		(104	)		8,618		(104	)
Other equity securities		0		0			165		(9	)		165		(9	)
Total Non-Current	$	15,460	$	(2,038	)	$	46,436	$	(202	)	$	61,896	$	(2,240	)

Other-than-temporary impairment of available-for-sale investments, primarily related to sponsored investment products, was de minimus and $1.5 million for the three and six months ended March 31, 2010, and $23.8 million and $57.7 million for the three and six months ended March 31, 2009. The Company did not recognize any other-than-temporary impairment of available-for-sale debt securities during the six months ended March 31, 2010 and 2009.

12

At March 31, 2010, maturities of available-for-sale debt securities were as follows:

(in thousands)	Cost Basis		Fair Value
U.S. government-sponsored enterprise obligations
Due in one year or less	$	49,777	$	51,666
Due after one year through five years		0		0
Due after five years through ten years		13,811		14,698
Due after ten years		263,248		268,321
Total	$	326,836	$	334,685
Securities of U.S. states and political subdivisions
Due in one year or less	$	13,909	$	14,034
Due after one year through five years		51,305		53,215
Due after five years through ten years		16,512		16,826
Due after ten years		3,297		3,177
Total	$	85,023	$	87,252
Securities of the U.S. Treasury and federal agencies
Due in one year or less	$	75,581	$	75,590
Due after ten years		3,388		3,378
Total	$	78,969	$	78,968
Corporate debt securities
Due after one year through five years	$	100,215	$	101,913
Total	$	100,215	$	101,913

Note 7 - Fair Value Measurements

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.

The Company records substantially all of its investments at fair value or amounts that approximate fair value. Trading securities and securities available-for-sale are financial instruments recorded at fair value on a recurring basis. The Company recognizes transfers between levels at the end of each quarter. There were no material transfers between Level 1 and Level 2 during the six months ended March 31, 2010.

13

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

(in thousands)

as of March 31, 2010	Level 1		Level 2		Level 3		Total
Current Assets
Investment securities, trading	$	339,026	$	118,589	$	2,770	$	460,385
Investment securities, available-for-sale
Sponsored investment products		954,423		5		0		954,428
Securities of U.S. states and political subdivisions		0		14,034		0		14,034
Securities of the U.S. Treasury and federal agencies		24,994		50,596		0		75,590
Other equity securities		4,861		0		4,096		8,957
Banking/Finance Assets
Investment securities, trading		0		41,415		31,504		72,919
Investment securities, available-for-sale
U.S. government-sponsored enterprise obligations		0		334,685		0		334,685
Securities of U.S. states and political subdivisions		0		842		0		842
Securities of the U.S. Treasury and federal agencies		0		3,378		0		3,378
Corporate debt securities		0		101,913		0		101,913
Other equity securities		0		0		180		180
Non-Current Assets
Investment securities, available-for-sale
Sponsored investment products		24,221		0		5,095		29,316
Securities of U.S. states and political subdivisions		0		72,376		0		72,376
Other equity securities		157		0		668		825
Life settlement contracts		0		0		7,837		7,837
Total Assets Measured at Fair Value	$	1,347,682	$	737,833	$	52,150	$	2,137,665

(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		0		0		943,824
U.S. government-sponsored enterprise obligations		0		5,200		0		5,200
Securities of U.S. states and political subdivisions		0		15,118		0		15,118
Securities of the U.S. Treasury and federal agencies		0		50,616		0		50,616
Other equity securities		8,403		0		4,126		12,529
Banking/Finance Assets
Investment securities, trading		0		81,886		28,714		110,600
Investment securities, available-for-sale
U.S. government-sponsored enterprise obligations		0		365,655		0		365,655
Securities of U.S. states and political subdivisions		0		852		0		852
Securities of the U.S. Treasury and federal agencies		0		3,566		0		3,566
Corporate debt securities		0		101,774		0		101,774
Other equity securities		0		0		208		208
Non-Current Assets
Investment securities, available-for-sale
Sponsored investment products		19,837		0		4,110		23,947
Securities of U.S. states and political subdivisions		0		83,838		0		83,838
Other equity securities		321		0		732		1,053
Life settlement contracts		0		0		6,162		6,162
Total Assets Measured at Fair Value	$	1,367,139	$	814,307	$	46,105	$	2,227,551

14

The valuation inputs and techniques for the Company’s assets measured at fair value on a recurring basis are described below.

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.

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. If events occur after the close of the primary market for any security, the quoted market prices may be adjusted for the observable price movements within country specific market proxies. Consolidated sponsored investment products may also hold securities that are classified as Level 3 because their fair value is determined using unobservable inputs. In these instances, the Company primarily employs a market-based approach, which may use prices of recent transactions, various market multiples, book values and other relevant information for the investment, related assets or liabilities or other comparable assets or liabilities to determine the fair value of the investment. In developing this fair value, the Company may also give consideration to an income-based approach valuation, which considers anticipated future cash flows of the investment and converts those amounts into a net present value. A discount may also be applied due to the nature or duration of any restrictions on the disposition of the asset or liability. 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 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 is estimated using discounted cash flow analyses using unobservable inputs and they are classified as Level 3. Key inputs to the analysis include the excess cash flow discount rate, cumulative life loss rate, expected weighted-average life and prepayment speed assumption. The Company develops the key inputs using actual portfolio experience and recent market activity for similar transactions.

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, corporate debt securities and other equity securities. 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.

The fair value of other equity securities, which consist primarily of non-sponsored investment products, is generally determined based on the published net asset values of the investment products and they are classified as Level 1. The Company may also hold other equity securities that are classified as Level 3 because their fair value is determined using unobservable inputs. In these instances the Company primarily employs the market-based approach described above for Level 3 securities held by consolidated sponsored investment products.

Life settlement contracts. The fair value of life settlement contracts is determined based on discounted cash flows using unobservable inputs and they are classified as Level 3. Inputs used to determine fair value include life expectancy assumptions and internal rates of return.

15

The changes in Level 3 assets measured at fair value on a recurring basis for the three and six months ended March 31, 2010 and 2009 were as follows.

(in thousands)	Securities Held by Consolidated Sponsored Investment Products			Residual Interests from Securitization Transactions			Other1			Total
Balance at January 1, 2010	$	1,768		$	30,505		$	16,738		$	49,011
Total realized and unrealized gains (losses):
Included in other, net revenue		0			(605	)		0			(605	)
Included in consolidated sponsored investment products gains (losses), net		15			0			0			15
Included in investments and other income (losses), net		0			0			1,251			1,251
Included in accumulated other comprehensive income		0			0			(105	)		(105	)
Purchases, sales and settlements, net		987			1,604			(8	)		2,583
Balance at March 31, 2010	$	2,770		$	31,504		$	17,876		$	52,150
Change in unrealized gains (losses) included in net income relating to assets still held at March 31, 2010	$	90	2	$	(605	)3	$	956		$	441
(in thousands)	Securities Held by Consolidated Sponsored Investment Products			Residual Interests from Securitization Transactions			Other1			Total
Balance at October 1, 2009	$	2,053		$	28,714		$	15,338		$	46,105
Total realized and unrealized gains (losses):
Included in other, net revenue		0			(400	)		0			(400	)
Included in consolidated sponsored investment products gains (losses), net		(274	)		0			0			(274	)
Included in investments and other income (losses), net		0			0			1,372			1,372
Included in accumulated other comprehensive income		0			0			891			891
Purchases, sales and settlements, net		991			3,190			275			4,456
Balance at March 31, 2010	$	2,770		$	31,504		$	17,876		$	52,150
Change in unrealized (losses) gains included in net income relating to assets still held at March 31, 2010	$	(198	)2	$	(400	)3	$	956		$	358
(in thousands)	Securities Held by Consolidated Sponsored Investment Products			Residual Interests from Securitization Transactions			Other1			Total
Balance at January 1, 2009	$	3,189		$	17,482		$	12,156		$	32,827
Total realized and unrealized gains (losses):
Included in other, net revenue		0			(25,962	)		0			(25,962	)
Included in consolidated sponsored investment products gains (losses), net		(116	)		0			0			(116	)
Included in investments and other income (losses), net		0			0			(2,073	)		(2,073	)
Included in accumulated other comprehensive income		0			0			(492	)		(492	)
Purchases, sales and settlements, net		(37	)		34,792			689			35,444
Transfers into Level 3		66			0			1,973			2,039
Balance at March 31, 2009	$	3,102		$	26,312		$	12,253		$	41,667
Change in unrealized losses included in net income relating to assets still held at March 31, 2009	$	(118	)2	$	(25,962	)3	$	0		$	(26,080	)

16

(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		0			(43,665	)		0			(43,665	)
Included in consolidated sponsored investment products gains (losses), net		(1,077	)		0			0			(1,077	)
Included in investments and other income (losses), net		0			0			(2,073	)		(2,073	)
Included in accumulated other comprehensive income		0			0			(355	)		(355	)
Purchases, sales and settlements, net		(31	)		40,195			596			40,760
Transfers into Level 3		121			0			1,973			2,094
Balance at March 31, 2009	$	3,102		$	26,312		$	12,253		$	41,667
Change in unrealized losses included in net income relating to assets still held at March 31, 2009	$	(1,080	)2	$	(43,665	)3	$	0		$	(44,745	)

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 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.

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

	March 31, 2010				September 30, 2009
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets
Cash and cash equivalents	$	3,023,620	$	3,023,620	$	3,104,451	$	3,104,451
Other investments		15,907		15,907		51,950		51,950
Loans held for sale		10,757		11,824		15,711		16,621
Loans receivable, net		368,154		380,438		310,504		323,672
Financial Liabilities
Commercial paper	$	285,970	$	285,970	$	64,156	$	64,156
Deposits		709,136		712,686		664,580		667,793
FHLB advances		66,000		65,012		57,000		57,026

The valuation inputs and techniques for these financial instruments are described below.

Cash and cash equivalents. Due to the short-term nature and liquidity of these financial instruments, the carrying values of cash and cash equivalents approximate fair value.

Other investments 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.

Loans held for sale. 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. In the event of illiquid markets the fair value is determined using discounted cash flow analyses with estimated discount rates for loans with similar terms and collateral.

Loans receivable, net. 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.

17

Commercial paper. Due to the short-term nature and liquidity of these financial instruments, the carrying values of these liabilities approximate fair value.

Deposits. The fair value of deposits with no stated maturities is considered to approximate their carrying value because they are payable on demand. 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.

FHLB advances. The fair value is estimated using discounted cash flow models using rates available to the Company for FHLB advances with similar terms and remaining maturities.

Note 8 - 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 March 31, 2010 and September 30, 2009, the amounts of cash on deposit were $42.8 million and $46.9 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, are recognized as banking/finance trading securities in the condensed consolidated balance sheets. Changes in the fair value of the retained interests are recognized in earnings.

The Company did not enter into any automobile loan securitization transactions during the six months ended March 31, 2010 or fiscal year 2009. The securitization transactions in which the Company entered into through September 30, 2008 were similar 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. The remaining retained subordinated securities held by the Company at March 31, 2010 had a BBB- credit rating from Standard & Poor’s.

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 7 – 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)	March 31, 2010			September 30, 2009
Fair value of retained interests
Retained subordinated securities	$	41,415		$	81,886
Residual interests		31,504			28,714
Total	$	72,919		$	110,600
Excess cash flow discount rate (annual rate)		6.7%-10.9	%		12.2%-14.4	%
Impact on fair value of 10% adverse change	$	(1,378	)	$	(4,133	)
Impact on fair value of 20% adverse change		(2,735	)		(8,225	)
Cumulative life loss rate		7.4	%		7.4	%
Impact on fair value of 10% adverse change	$	(2,684	)	$	(2,376	)
Impact on fair value of 20% adverse change		(5,312	)		(4,763	)
Expected weighted-average life (years)		1.9			2.2
Prepayment speed (average monthly rate)		1.1	%		1.2	%
Impact on fair value of 10% adverse change	$	(2,624	)	$	(2,737	)
Impact on fair value of 20% adverse change		(4,642	)		(5,241	)

18

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 March 31, 2010, the Company sold the balance of its retained subordinated securities for $41.6 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 condensed 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.

	Three Months Ended March 31,						Six Months Ended March 31,
(in thousands)	2010			2009			2010			2009
Servicing fees received	$	2,463		$	3,634		$	5,044		$	7,420
Cash flows received related to retained subordinated securities		820			1,698			1,933			3,395
Cash flows received related to residual interests		0			83			0			1,554
Cash paid related to residual interests		(736	)		(32,479	)		(1,286	)		(38,208	)

Amounts payable to the trustee related to loan principal and interest collected on behalf of the securitization trusts of $25.1 million at March 31, 2010 and $24.1 million at September 30, 2009 were included in other banking/finance liabilities in the condensed 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 March 31, 2010 and September 30, 2009, the maximum potential amounts of future payments related to these guarantees were $6.2 million and $7.4 million. The fair value of the guarantees was recognized as banking/finance liabilities in the condensed consolidated balance sheets and was not significant.

During the three and six months ended March 31, 2010 and 2009, the Company did not provide any financial or other support to the securitization trusts or the holders of the asset-backed securities, other than as described above.

The original amount of loans serviced for the securitization trusts that were still in existence at March 31, 2010 and September 30, 2009 totaled $1.8 billion. At March 31, 2010 and September 30, 2009, the securitization trusts had 37,686 and 44,221 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 $6.9 million and $15.9 million for the three and six months ended March 31, 2010, and $13.7 million and $26.4 million for the three and six months ended March 31, 2009.

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)	March 31, 2010			September 30, 2009
Principal amount of loans
Securitized loans	$	427,722		$	551,369
Loans held for sale		11,319			16,274
Loans receivable		77,133			85,520
Total	$	516,174		$	653,163
Principal amount of loans 30 days or more past due1	$	16,232		$	29,238
Credit quality as a percentage of aggregate outstanding principal balance
Prime		46.9	%		47.4	%
Non-prime		49.0	%		49.4	%
Sub-prime		4.1	%		3.2	%

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

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Note 9 - 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, 2009	$	1,436,626	$	200,952	$	507,737
Foreign currency movements		8,513		395		4,677
Balance at March 31, 2010	$	1,445,139	$	201,347	$	512,414

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 March 31, 2010	Gross Carrying Value		Accumulated    Amortization			Net Carrying Value
Amortized intangible assets
Customer base	$	166,310	$	(113,729	)	$	52,581
Other		35,037		(32,470	)		2,567
		201,347		(146,199	)		55,148
Non-amortized intangible assets
Management contracts		512,414		0			512,414
Total	$	713,761	$	(146,199	)	$	567,562
(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		0			507,737
Total	$	708,689	$	(140,715	)	$	567,974

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 the six months ended March 31, 2010 and 2009. No impairment loss in the value of intangible assets subject to amortization was recognized during the six months ended March 31, 2010 and 2009 as the estimates of the undiscounted expected cash flows from these assets or their fair values exceeded the asset carrying values.

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Amortization expense related to definite-lived intangible assets was $2.6 million for the three months ended March 31, 2010 and 2009, and $5.2 million for the six months ended March 31, 2010 and 2009. The estimated remaining amortization expense related to definite-lived intangible assets as of March 31, 2010 was as follows:

(in thousands)

For the fiscal years ending September 30,	Amount
2010 (remaining six months)	$	5,219
2011		10,412
2012		8,930
2013		8,807
2014		8,807
Thereafter		12,973
Total	$	55,148

Note 10 - Debt

Outstanding debt consisted of the following:

(in thousands)	March 31, 2010		September 30, 2009
Current
Commercial paper	$	285,970	$	64,156
Banking/Finance
Federal Home Loan Bank advances		66,000		57,000
Total Debt	$	351,970	$	121,156

At March 31, 2010, current debt consisted of commercial paper with a total face value of $286.0 million that was issued at a weighted-average annualized interest rate of 0.23% and matures during the quarter ending June 30, 2010.

The banking/finance segment secures advances from the FHLB to fund its retail banking and consumer lending services. At March 31, 2010, the Company had $66.0 million of FHLB advances outstanding, of which approximately $15.0 million matured in April 2010 and the remaining $51.0 million will mature between June 2011 and January 2039. These advances had a weighted-average interest rate of 2.93% at March 31, 2010 and are subject to collateralization requirements.

At March 31, 2010, the Company had $420.0 million in short-term revolving credit available under a five-year credit facility with certain banks and financial institutions expiring on June 9, 2010, $214.0 million of short-term commercial paper available for issuance under an uncommitted $500.0 million private placement program, and $14.8 million available in uncommitted short-term bank lines of credit. The revolving credit facility is available for general corporate purposes, including the support of the Company’s commercial paper program. It is subject to various financial covenants, including, but not limited to, minimum requirements related to the Company’s 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 and the Company’s ratings at the time. As of March 31, 2010, there were no amounts outstanding under the revolving credit facility and the Company was in compliance with the financial covenants related to this facility. The Company currently intends to replace the revolving credit facility in the third quarter.

In addition, at March 31, 2010, the banking/finance segment had $295.0 million available in uncommitted short-term bank lines of credit under the Federal Reserve system, $227.9 million available in secured Federal Reserve Bank short-term discount window and $52.6 million available in secured FHLB short-term borrowing capacity (see Note 6 – Investments). At March 31, 2010 and September 30, 2009, loans receivable with aggregate carrying values of $42.5 million and $30.6 million were pledged as collateral for the ability to obtain FHLB advances.

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Note 11 - Commitments and Contingencies

Guarantees

The Company is obligated to cover shortfalls for the automobile loan securitization trusts in amounts due to the holders of the asset-backed securities up to certain levels (see Note 8 – Securitization of Loans Held for Sale).

At March 31, 2010, 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 $10.0 million as of March 31, 2010.

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 the following: 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 January 12, 2010, lead plaintiff in the consolidated class action filed a second consolidated amended class action complaint. Defendants filed a motion for partial summary judgment in the consolidated class action on March 24, 2010. 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 seek, among other forms of relief, one or more of the following: 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 concluded in early December 2009, and the court denied plaintiffs’ motion on January 12, 2010. Plaintiffs are appealing that ruling.

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

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attorneys’ fees and costs. Defendants filed a motion to dismiss the complaint on January 22, 2010. The court heard oral argument on defendants’ motion on April 14, 2010, and the matter is under submission.

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 March 31, 2010, 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 variable interest entities (“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 periods ended March 31, 2010 and 2009.

Total assets under management of investment products in which the Company held a variable interest, but was not the primary beneficiary, were approximately $40.8 billion at March 31, 2010 and $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 sheets at March 31, 2010 and 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)	March 31, 2010		September 30, 2009
Current Assets
Receivables	$	53,754	$	50,088
Investment securities, available-for-sale		103,339		112,853
Total Current		157,093		162,941
Non-Current Assets
Investment securities, available-for-sale		25,535		20,208
Investments in equity method investees and other		476,097		305,024
Total Non-Current		501,632		325,232
Total	$	658,725	$	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.

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 sheets related to these VIEs were $4.1 million at March 31, 2010 and $14.9 million at September 30, 2009. These amounts represent the Company’s maximum exposure to loss. The Company did not provide financial or other support to its other VIEs during the six months ended March 31, 2010.

The joint venture VIEs previously included Lightning Finance Company Limited (“LFL”) and Lightning Asset Finance Limited (“LAFL”), in which the Company held 49% ownership interests at September 30, 2009. The Company liquidated its ownership interests in LFL and LAFL during the three months ended December 31, 2009.

Other Commitments and Contingencies

At March 31, 2010, the banking/finance segment had commitments to extend credit in an aggregate amount of $161.0 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,

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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 March 31, 2010 and September 30, 2009, the Company held cash of approximately $266.2 million and $214.5 million off-balance sheet in agency or trust for investors and the affiliated mutual funds.

At March 31, 2010, there were no changes in other commitments and contingencies that would have a material effect on commitments and contingencies reported in the Company’s Form 10-K for fiscal year 2009.

Note 12 - 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 March 31, 2010, approximately 3.5 million shares were available for grant under the USIP. In addition to stock 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.

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, 2009	2,737		$	37.86
Exercised	(339	)		37.91
Outstanding and Exercisable at March 31, 2010	2,398		$	37.85	2.3	$	175,142

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.

Cash received from stock option exercises for the three and six months ended March 31, 2010 was $4.6 million and $12.9 million, and $6.8 million and $9.9 million for the three and six months ended March 31, 2009. Income tax benefits from stock option exercises were $0.4 million and $9.1 million for the three and six months ended March 31, 2010, and $0.3 million and $3.7 million for the three and six months ended March 31, 2009.

Stock and Stock Unit Awards

The fair value of stock 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 and stock unit awards expected to vest is adjusted for estimated forfeitures.

Total unrecognized compensation cost related to nonvested stock and stock unit awards, net of estimated forfeitures, was $108.9 million at March 31, 2010. This cost is expected to be recognized over a remaining weighted-average vesting period of 1.7 years.

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

(shares in thousands)	Shares		Weighted- Average Grant- Date Fair Value per Share
Nonvested balance at September 30, 2009	954		$	85.21
Granted	809			107.16
Vested	(1	)		108.94
Forfeited/cancelled	(71	)		95.86
Nonvested Balance at March 31, 2010	1,691		$	95.25

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.

Certain performance-based long-term stock and stock unit awards have been granted to the Company’s executive officers and other employees. These awards generally vest over a three-year period based on the achievement of predetermined Company financial performance goals. In the event a performance measure is not achieved at or above a specified threshold level, the portion of the award tied to such performance measure will be forfeited. At March 31, 2010, the balance of nonvested awards was 401.9 thousand and had a weighted-average grant-date fair value of $107.62 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 179.0 thousand shares were issued under the ESIP during the three and six months ended March 31, 2010. At March 31, 2010, approximately 2.9 million shares were reserved for future issuance under this plan.

All Stock-Based Plan Arrangements

Total stock-based compensation costs of $20.8 million and $40.4 million were recognized in the condensed consolidated statements of income for the three and six months ended March 31, 2010, and $21.1 million and $39.8 million for the three and six months ended March 31, 2009. The income tax benefits realized from all stock-based arrangements totaled $0.5 million and $9.8 million for the three and six months ended March 31, 2010, and $0.4 million and $2.7 million for three and six months ended March 31, 2009.

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

Note 13 - Common Stock Repurchases

During the three and six months ended March 31, 2010, the Company repurchased 1.1 million and 2.7 million shares of its common stock at a cost of $117.5 million and $291.5 million. The common stock repurchases made as of March 31, 2010 reduced capital in excess of par value to nil and the excess amount was recognized as a reduction to retained earnings. At March 31, 2010, approximately 6.9 million shares of common stock remained available for repurchase under the stock repurchase program. During the three and six months ended March 31, 2009, the Company repurchased 1.4 million and 2.1 million shares of its common stock at a cost of $68.3 million and $109.0 million. The stock repurchase program is not subject to an expiration date.

Note 14 - 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 selected 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, home equity/mortgage lending, and other consumer lending.

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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)	Three Months Ended March 31,					Six Months Ended March 31,
	2010		2009			2010		2009
Operating Revenues
Investment management and related services	$	1,406,851	$	927,920		$	2,773,615	$	1,903,879
Banking/finance		6,262		(15,648	)		16,909		(22,277	)
Total	$	1,413,113	$	912,272		$	2,790,524	$	1,881,602
Income (Loss) Before Taxes
Investment management and related services	$	501,205	$	223,435		$	1,009,605	$	432,295
Banking/finance		7,151		(47,204	)		13,036		(81,364	)
Total	$	508,356	$	176,231		$	1,022,641	$	350,931

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

(in thousands)	Three Months Ended March 31,						Six Months Ended March 31,
	2010			2009			2010			2009
Interest and fees on loans	$	4,689		$	4,345		$	9,270		$	10,398
Interest and dividends on investment securities		3,644			3,469			7,285			10,445
Total interest income		8,333			7,814			16,555			20,843
Interest on deposits		(1,281	)		(1,567	)		(2,581	)		(3,325	)
Interest on short-term debt		(5	)		(100	)		(11	)		(871	)
Interest on long-term debt		(477	)		(419	)		(929	)		(829	)
Total interest expense		(1,763	)		(2,086	)		(3,521	)		(5,025	)
Net interest income		6,570			5,728			13,034			15,818
Unrealized losses on trading investments, net		(604	)		(25,962	)		(399	)		(43,665	)
Other income		1,703			5,681			6,734			10,767
Provision for loan losses		(1,407	)		(1,095	)		(2,460	)		(5,197	)
Total	$	6,262		$	(15,648	)	$	16,909		$	(22,277	)

Operating segment assets were as follows:

(in thousands)	March 31, 2010		September 30, 2009
Investment management and related services	$	8,456,687	$	8,429,298
Banking/finance		1,063,895		1,039,165
Total	$	9,520,582	$	9,468,463

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

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Note 15 - Other Income (Expenses)

Other income (expenses) consisted of the following:

(in thousands)	Three Months Ended March 31,						Six Months Ended March 31,
	2010			2009			2010			2009
Consolidated Sponsored Investment Products Gains (Losses), Net
Realized gains (losses), net	$	7,133		$	(9,139	)	$	12,188		$	(36,062	)
Unrealized (losses) gains, net		(1,464	)		(1,967	)		8,553			(22,486	)
Total		5,669			(11,106	)		20,741			(58,548	)
Investment and Other Income (Losses), Net
Dividend income		9,510			8,504			20,058			20,942
Interest income		3,446			8,468			7,027			20,071
Capital gain distributions		26			51			888			14,273
Other-than-temporary impairment of investment securities, available-for-sale		(2	)		(23,803	)		(1,463	)		(57,652	)
Realized gains on sale of investment securities, available-for-sale		103			118			2,225			1,950
Realized losses on sale of investment securities, available-for-sale		(1	)		(359	)		(479	)		(14,473	)
Gains (losses) on trading investment securities, net		10,008			(21,235	)		22,397			(47,791	)
Income (losses) from investments in equity method investees		13,140			(11,015	)		17,290			(36,475	)
Foreign currency exchange gains, net		5,991			3,751			4,569			16,296
Other, net		267			1,627			2,954			3,944
Total		42,488			(33,893	)		75,466			(78,915	)
Interest Expense		(936	)		(2,092	)		(1,678	)		(3,292	)
Other Income (Expenses), Net	$	47,221		$	(47,091	)	$	94,529		$	(140,755	)

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 $29.2 million and $134.8 million for the three and six months ended March 31, 2010, and $257.7 million and $338.0 million for the three and six months ended March 31, 2009.

The Company recognized net gains (losses) on trading investment securities, including securities held by consolidated sponsored investment products, that were still held at March 31, 2010 and 2009 in the amounts of $6.7 million and $15.7 million during the three and six months ended March 31, 2010, and $(23.6) million and $(63.2) million during the three and six months ended March 31, 2009.

Note 16 - 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.

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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 minimum Tier 1 and Total risk-based capital ratios (as defined in the regulations). Based on the Company’s calculations as of March 31, 2010 and September 30, 2009, it exceeded the applicable capital adequacy requirements as listed below.

(dollar amounts in thousands)	March 31, 2010		September 30, 2009		Capital Adequacy Minimum
Tier 1 capital	$	5,165,812	$	5,495,995	N/A
Total risk-based capital		5,172,512		5,503,022	N/A
Tier 1 leverage ratio		71%		75%	4%
Tier 1 risk-based capital ratio		98%		97%	4%
Total risk-based capital ratio		98%		97%	8%

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Item 2. 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 U.S. 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”, “plan”, “seek”, “estimate”, 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 actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance.

You should carefully review the “Risk Factors” section set forth below and in any more recent filings with the SEC, each of which describes 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. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. If a circumstance occurs after the date of this Form 10-Q that causes any of our forward-looking statements to be inaccurate, whether as a result of new information, future developments or otherwise, 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.

The following discussion should be read in conjunction with our Form 10-K for the fiscal year ended September 30, 2009 filed with the SEC, and the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q.

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 funds and accounts that meet a wide variety of specific investment needs of individual and institutional investors. Cash management funds consist of U.S.-registered money market funds and non-U.S. registered 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 below, 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 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, home equity/mortgage lending, and other consumer lending.

During the first half of fiscal year 2010 optimism grew as the global economy was emerging from recession and moving into recovery. Market conditions continued to improve during the three and six months ended March 31, 2010, as evidenced by 3% and 8% increases in the MSCI World index and 5% and 12% increases in the S&P 500 index. Our assets under management and fee revenues also improved during these periods consistent with the positive market performance.

Our total assets under management at March 31, 2010 were $586.8 billion, 6% higher than they were at December 31, 2009 and 50% higher than they were at March 31, 2009. Simple monthly average assets under management for the three and six months ended March 31, 2010 increased 42% and 31% from the same periods in the prior fiscal year. Positive net new flows of $17.4 billion and $31.7 billion, and market appreciation of $16.5 billion and $33.1 billion during the three and six months ended March 31, 2010 accounted for the increases in total assets under management for each period. Long-term sales activity for the quarter

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increased 134% from the same period in the prior year, mainly due to increases in sales of our global/international taxable fixed-income and global/international equity products.

Uncertainties regarding the economic recovery remain in the foreseeable future. As we confront the challenges of this economic environment, we 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 expense management, we will also seek to attract, retain and develop employees and invest strategically in systems and technology that will provide a secure and stable environment. We will 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 the “Risk Factors” section set forth below.

RESULTS OF OPERATIONS

(dollar amounts in millions, except per share data)	Three Months Ended March 31,				Percent Change	Six Months Ended March 31,				Percent Change
	2010		2009			2010		2009
Operating Income	$	461.1	$	223.3	106%	$	928.1	$	491.7	89%
Net Income attributable to Franklin Resources, Inc.		356.7		110.8	222%		712.3		231.7	207%
Earnings per Share
Basic	$	1.56	$	0.48	225%	$	3.11	$	0.99	214%
Diluted		1.55		0.47	230%		3.10		0.99	213%
Operating Margin 1		33%		24%			33%		26%

¹ Defined as operating income divided by total operating revenues.

Operating income increased for the three and six months ended March 31, 2010 as compared to the same periods in the prior fiscal year. The increases were primarily due to 51% and 42% increases in investment management revenue, which resulted from 42% and 31% increases in simple monthly average assets under management and higher effective management fee rates during the current year periods.

Net income attributable to Franklin Resources, Inc. increased for the three and six months ended March 31, 2010 primarily due to $237.8 million and $436.4 million increases in operating income and $94.3 million and $235.3 million increases in other income (expenses), net. Other income (expenses), net increased primarily due to higher investment valuations during both periods resulting from improved market conditions.

Diluted earnings per share increased in both periods consistent with the increases in net income as well as 2% decreases in diluted average common shares outstanding resulting primarily from the repurchase of shares of our common stock.

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ASSETS UNDER MANAGEMENT

Assets under management by investment objective were as follows:

(dollar amounts in billions)	March 31, 2010		March 31, 2009		Percent Change
Equity
Global/international	$	193.2	$	124.7	55%
Domestic (U.S.)		69.8		48.5	44%
Total equity		263.0		173.2	52%
Hybrid		107.3		75.0	43%
Fixed-Income
Tax-free		71.8		59.3	21%
Taxable
Global/international		97.0		43.0	126%
Domestic (U.S.)		41.9		32.5	29%
Total fixed-income		210.7		134.8	56%
Cash Management1		5.8		8.1	(28)%
Total	$	586.8	$	391.1	50%
Simple Monthly Average for the Three-Month Period2	$	561.2	$	396.6	42%
Simple Monthly Average for the Six-Month Period2	$	547.3	$	417.9	31%

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

² Investment management fees from approximately 55% of our assets under management at March 31, 2010 were calculated using daily average assets under management.

Assets under management at March 31, 2010 were 50% higher than they were at March 31, 2009, primarily due to market appreciation of $148.5 billion and positive net new flows of $49.9 billion during the twelve-month period. The increases occurred in both equity and fixed-income products as improved market conditions led to significant valuation increases, higher sales and lower redemptions. Simple monthly average assets under management, which are 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, increased 42% and 31% during the three and six months ended March 31, 2010, as compared to the same periods in the prior fiscal year.

The simple monthly average mix of assets under management is shown below. The change in mix for the six months ended March 31, 2010 as compared to the same period in the prior fiscal year reflects an investor shift to lower risk investments during the prior twelve months.

	Six Months Ended March 31,
	2010	2009
Equity	46%	47%
Hybrid	19%	19%
Fixed-income	34%	32%
Cash management	1%	2%
Total	100%	100%

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Assets under management by sales region were as follows:

(dollar amounts in billions)	March 31, 2010		Percent of Total	March 31, 2009		Percent of Total
United States1	$	425.2	72%	$	297.5	76%
Europe2		69.5	12%		37.2	9%
Asia-Pacific3		58.9	10%		34.2	9%
Canada		33.2	6%		22.2	6%
Total	$	586.8	100%	$	391.1	100%

¹ Approximately 67% and 70% of our operating revenues originated from U.S. operations in the six months ended March 31, 2010 and 2009.

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)	Three Months Ended March 31,						Percent Change	Six Months Ended March 31,						Percent Change
	2010			2009				2010			2009
Beginning assets under management	$	553.5		$	416.2		33%	$	523.4		$	507.3		3%
Long-term sales		46.4			19.8		134%		88.6			47.6		86%
Long-term redemptions		(29.3	)		(24.8	)	18%		(57.5	)		(69.9	)	(18)%
Net cash management		0.3			(0.5	)	NM		0.6			(1.4	)	NM
Net new flows		17.4			(5.5	)	NM		31.7			(23.7	)	NM
Reinvested distributions		2.1			1.9		11%		5.8			9.0		(36)%
Net flows		19.5			(3.6	)	NM		37.5			(14.7	)	NM
Distributions		(2.7	)		(2.5	)	8%		(7.2	)		(11.5	)	(37)%
Appreciation (depreciation) and other		16.5			(19.0	)	NM		33.1			(90.0	)	NM
Ending Assets Under Management	$	586.8		$	391.1		50%	$	586.8		$	391.1		50%

Assets under management increased during the three and six months ended March 31, 2010, resulting from $17.4 billion and $31.7 billion of positive net new flows, primarily in our fixed-income products, and $16.5 billion and $33.1 billion of appreciation, primarily in our equity products.

Investment Management Fee Rate

Our effective investment management fee rate (investment management fees divided by simple monthly average assets under management) increased to 0.600% for the six months ended March 31, 2010 from 0.552% for the same period in the prior fiscal year. The increase was primarily due to a higher level of global/international assets under management, partially offset by an overall shift in the mix of assets under management from equity products towards fixed-income products. Generally, investment management fees earned on global/international products are higher than fees earned on domestic (U.S.) products, and fees earned on equity products are higher than fees earned on fixed-income products.

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OPERATING REVENUES

The table below presents the percentage change in each revenue category.

(dollar amounts in millions)	Three Months Ended March 31,					Percent Change	Six Months Ended March 31,					Percent Change
	2010		2009				2010		2009
Investment management fees	$	836.1	$	552.9		51%	$	1,642.8	$	1,153.2		42%
Underwriting and distribution fees		496.8		304.7		63%		984.8		609.6		62%
Shareholder servicing fees		71.4		66.5		7%		140.9		132.9		6%
Consolidated sponsored investment products income, net		0.5		1.8		(72)%		1.0		3.6		(72)%
Other, net		8.3		(13.6	)	NM		21.0		(17.7	)	NM
Total Operating Revenues	$	1,413.1	$	912.3		55%	$	2,790.5	$	1,881.6		48%

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.

Investment management fees increased for the three and six months ended March 31, 2010 primarily due to 42% and 31% increases in simple monthly average assets under management. The increases were also impacted by higher effective management fee rates during both periods, which mainly resulted from higher levels of global/international products.

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 of 1940, as amended (“Rule 12b-1”). 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 increased for the three and six months ended March 31, 2010. Underwriting fees increased 93% and 109% primarily due to 119% and 132% increases in gross commissionable sales, partially offset by a shift in sales from equity products to fixed-income products, which typically generate lower underwriting fees. Distribution fees increased 50% and 43% primarily due to 42% and 31% increases in simple monthly average assets under management, combined with a shift in the mix of assets under management from institutional to retail products, which typically generate higher distribution fees.

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 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.

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Shareholder servicing fees increased for the three and six months ended March 31, 2010 primarily due to favorable currency impacts and 5% increases in simple monthly average billable shareholder accounts during both periods. The favorable currency impacts mainly resulted from 19% and 17% increases in the value of the Canadian dollar against the U.S. dollar during the three and six month periods. The account increases were predominantly related to shareholder accounts originated in the United States.

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 for the three and six months ended March 31, 2010, reflecting investment performance and net asset balances of the specific sponsored investment products that we consolidated during each period and the deconsolidation of certain sponsored investment products 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 increased for the three and six months ended March 31, 2010 primarily due to $26.0 million and $43.7 million losses recognized in the three and six months ended March 31, 2009 due to declines in the fair value of retained interests from securitization transactions, partially offset by $2.9 million and $4.1 million decreases in servicing fees from automobile loans.

OPERATING EXPENSES

The table below presents the percentage change in each expense category.

(dollar amounts in millions)	Three Months Ended March 31,				Percent Change		Six Months Ended March 31,				Percent Change
	2010		2009				2010		2009
Underwriting and distribution	$	487.0	$	293.5	66	%	$	954.1	$	583.1	64	%
Compensation and benefits		271.1		236.7	15	%		525.4		480.8	9	%
Information systems, technology and occupancy		69.6		65.4	6	%		138.2		134.0	3	%
Advertising and promotion		38.1		26.7	43	%		72.9		50.9	43	%
Amortization of deferred sales commissions		46.3		33.8	37	%		92.8		70.4	32	%
Other		39.9		32.9	21	%		79.0		70.7	12	%
Total Operating Expenses	$	952.0	$	689.0	38	%	$	1,862.4	$	1,389.9	34	%

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 increases in underwriting and distribution expenses for the three and six months ended March 31, 2010 were consistent with the 63% and 62% increases in underwriting and distribution revenues during the same periods.

Compensation and Benefits

Compensation and benefit expenses increased for the three and six months ended March 31, 2010 primarily due to increases in variable compensation and commissions, partially offset by decreases related to severance costs incurred in the prior year. Variable compensation increases of $51.1 million and $76.8 million were mainly due to higher bonus expense under the Amended and Restated Annual Incentive Compensation Plan (“AIP”), pursuant to which bonus awards are made based on our performance. Commissions increased $5.7 million and $11.8 million, reflecting higher levels of sponsored investment product sales.

Severance costs of $25.5 million and $36.7 million recognized in the three and six months ended March 31, 2009 related to reductions in our global workforce of approximately 10% announced during the first half of fiscal year 2009. Lower salaries, wages and benefits resulting from reduced staffing levels during the current fiscal year were nearly offset by unfavorable currency impacts, annual merit salary adjustments effective December 1, 2009, and higher payroll taxes. As of March 31, 2010, we had approximately 7,800 employees, a decrease from approximately 8,200 employees at March 31, 2009.

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

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have an impact on compensation and benefit expenses going forward. However, in order to attract and retain talented individuals, our level of compensation and benefit expenses may increase more quickly or decrease more slowly than our revenue.

Information Systems, Technology and Occupancy

Information systems, technology and occupancy costs increased for the three and six months ended March 31, 2010 primarily due to higher occupancy costs and external data services costs. The increase for the six month period was partially offset by lower technology consulting, technology supplies and telephone and data line expenses.

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

(in millions)	Three Months Ended March  31,						Six Months Ended March 31,
	2010			2009			2010			2009
Net carrying value at beginning of period	$	60.8		$	73.9		$	65.2		$	66.5
Additions during period, net of disposals		4.6			2.1			8.4			17.4
Amortization during period		(8.5	)		(8.1	)		(16.7	)		(16.0	)
Net Carrying Value at End of Period	$	56.9		$	67.9		$	56.9		$	67.9

Advertising and Promotion

Advertising and promotion expenses increased for the three and six months ended March 31, 2010 primarily due to $8.3 million and $20.1 million increases in marketing support payments to intermediaries resulting from higher product sales and assets under management.

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. Typically, our advertising expenses are lower in the first half of our fiscal year.

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.

We previously held 49% ownership interests in Lightning Finance Company Limited (“LFL”) and Lightning Asset Finance Limited (“LAFL”). Due to our significant interest in LAFL, we carried on our consolidated balance sheets 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 liquidated our ownership interests in LFL and LAFL during the three months ended December 31, 2009.

Amortization of deferred sales commissions increased for the three and six months ended March 31, 2010 mainly due to higher product sales with up-front commissions in fiscal year 2010, primarily related to U. S. funds. Accelerated amortization of the DCA repurchased from LAFL also contributed to the increase for the six month period.

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 increased for the three and six months ended March 31, 2010 primarily due to $4.0 million and $6.1 million increases in fund administration services and shareholder servicing fees payable to external parties, which resulted from higher average assets under management.

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Other Income (Expenses)

(in millions)	Three Months Ended March 31,						Six Months Ended March 31,
	2010			2009			2010			2009
Consolidated sponsored investment products gains (losses), net	$	5.7		$	(11.1	)	$	20.7		$	(58.6	)
Investment and other income (losses), net		42.5			(33.9	)		75.5			(78.9	)
Interest expense		(1.0	)		(2.1	)		(1.7	)		(3.3	)
Other income (expenses), net	$	47.2		$	(47.1	)	$	94.5		$	(140.8	)

Other income (expenses) includes net realized and unrealized investment gains (losses) on consolidated sponsored investment products, investment and other income (losses), net and interest expense from our investment management and related services business. Investment and other income (losses), 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, gains (losses) from trading investments, income (losses) from equity method investees, and foreign currency exchange gains and losses.

Other income (expenses) increased significantly for the three and six months ended March 31, 2010 primarily due to higher investment valuations resulting from improved market conditions, which resulted in net gains during the current fiscal year as compared to net losses in the prior fiscal year. Net gains from securities held by our consolidated sponsored investment products increased $16.8 million and $79.3 million, net gains on trading investments increased $31.2 million and $70.2 million and net income from equity method investees increased $24.2 million and $53.8 million. Also contributing to the increases were $23.8 million and $56.2 million reductions in other-than-temporary impairments on available-for-sale investment securities during the three and six month periods.

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 rates were 29.50% and 29.99% for the three and six months ended March 31, 2010, as compared to 38.11% and 37.59% for the same periods in the prior fiscal year. The decreases were primarily due to an overall increase of forecasted foreign earnings and a decrease in foreign income currently taxable in U.S., net of foreign tax credits.

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.

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LIQUIDITY AND CAPITAL RESOURCES

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

(in millions)	March 31, 2010			September 30, 2009
Balance Sheet Data
Assets
Liquid assets	$	5,663.0		$	5,832.6
Cash and cash equivalents		3,023.6			3,104.5
Liabilities
Debt
Commercial paper	$	286.0		$	64.2
Federal Home Loan Bank advances		66.0			57.0
Total debt	$	352.0		$	121.2
	Six Months Ended March 31,
(in millions)	2010			2009
Cash Flow Data
Operating cash flows	$	696.4		$	246.6
Investing cash flows		(31.0	)		(182.0	)
Financing cash flows		(734.0	)		(92.0	)

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, U.S. government-sponsored enterprise obligations, 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 March 31, 2010 decreased primarily due to net cash used in financing activities, partially offset by net cash provided by operating activities. At March 31, 2010, the percentages of cash and cash equivalents held by our U.S. and non-U.S. operations were approximately 40% and 60%, as compared to approximately 49% and 51% at September 30, 2009. The percentage of cash and cash equivalents held by our U.S. operations decreased primarily due to dividends paid to our shareholders.

The increase in total debt outstanding during the six months ended March 31, 2010 primarily relates to the issuance of commercial paper in March 2010. We periodically issue commercial paper to meet short-term operational needs.

We experienced an increase in net cash provided by operating activities during the six months ended March 31, 2010, as compared to the same period in the prior fiscal year, primarily due to an increase in net income. Net cash used in investing activities decreased mainly due to a decrease in purchases of investments, partially offset by an increase in liquidations of investments and an increase in loans receivable. Net cash used in financing activities increased during the six months ended March 31, 2010 primarily due to an increase in dividends paid on common stock and an increase in common stock repurchases, partially offset by proceeds from issuance of commercial paper, net.

Capital Resources

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 March 31, 2010, current debt consisted of commercial paper with a total face value of $286.0 million that was issued at a weighted-average annualized interest rate of 0.23% and matures during the quarter ending June 30, 2010.

The banking/finance segment secures advances from the Federal Home Loan Bank (“FHLB”) to fund its retail banking and consumer lending services. At March 31, 2010, we had $66.0 million of FHLB advances outstanding, of which approximately $15.0 million matured in April 2010 and the remaining $51.0 million will mature between June 2011 and January 2039. These advances had a weighted-average interest rate of 2.93% at March 31, 2010 and are subject to collateralization requirements.

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At March 31, 2010, we had $420.0 million in short-term revolving credit available under a five-year credit facility with certain banks and financial institutions expiring on June 9, 2010, $214.0 million of short-term commercial paper available for issuance under an uncommitted $500.0 million private placement program, and $14.8 million available in uncommitted short-term bank lines of credit. The revolving credit facility is available for general corporate purposes, including the support of our commercial paper program. It 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 and our ratings at the time. As of March 31, 2010, there were no amounts outstanding under the revolving credit facility and we were in compliance with the financial covenants related to this facility. We currently intend to replace the revolving credit facility in the third quarter. In addition, at March 31, 2010, our banking/finance segment had $295.0 million available in uncommitted short-term bank lines of credit under the Federal Reserve system, $227.9 million available in secured Federal Reserve Bank short-term discount window and $52.6 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 March 16, 2010, our Board of Directors declared a regular quarterly cash dividend of $0.22 per share which was payable on April 9, 2010 to stockholders of record on March 31, 2010.

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 the three and six months ended March 31, 2010, we repurchased 1.1 million and 2.7 million shares of our common stock at costs of $117.5 million and $291.5 million. The common stock repurchases made as of March 31, 2010 reduced our capital in excess of par value to nil and the excess amount was recognized as a reduction to retained earnings. At March 31, 2010, approximately 6.9 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.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

Our contractual obligations and commercial commitments are summarized in our Form 10-K for the fiscal year ended September 30, 2009. At March 31, 2010, there were no material changes outside the ordinary course in our contractual obligations and commercial commitments from September 30, 2009.

OFF-BALANCE SHEET ARRANGEMENTS

Our banking/finance operating segment periodically enters into automobile loan securitization transactions with qualified special purpose entities, which then issue asset-backed securities to private investors (see Note 8 – Securitization of Loans Held for Sale in the notes to the condensed consolidated financial statements in Item 1 of Part I of this Form 10-Q). 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 $427.7 million at March 31, 2010 and $551.4 million at September 30, 2009.

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

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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 March 31, 2010 and September 30, 2009, we held cash of approximately $266.2 million and $214.5 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. Actual results may differ from those estimates under different assumptions. Following are updates to our critical accounting policies disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended September 30, 2009.

Fair Value Measurements

We record substantially all of our investments in the financial statements at fair value or amounts that approximate fair value. 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.

Level 3 assets represented approximately 2.4% of total assets measured at fair value at March 31, 2010 and Level 3 liabilities measured at fair value were insignificant. There were no transfers into or out of Level 3 during the six months ended March 31, 2010.

Goodwill and Other Intangible Assets

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. 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.

We performed our annual impairment tests for goodwill and indefinite-lived intangible assets as of August 1, 2009. 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. As of March 31, 2010, approximately 90% of our definite-lived intangible assets related to investment management contracts of Fiduciary Trust Company International (“FTCI”). The undiscounted future cash flow projections for FTCI institutional and high net-worth management contracts exceeded their carrying values by approximately 58% and 7%, respectively. 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. The undiscounted future cash flow projections for the other definite-lived intangible assets exceeded their respective carrying values by more than 100%. The assumptions used in our impairment tests for definite-lived intangible assets were developed taking into consideration ongoing market conditions. As of March 31, 2010, a decline in our assets under management of approximately 7% could cause us to evaluate whether the fair value of our definite-lived intangible assets is below the asset carrying value.

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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.

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 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. 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 March 31, 2010 to provide for probable losses that may arise from these matters for which we could reasonably estimate an amount. See also Note 11 – Commitments and Contingencies in the notes to the condensed consolidated financial statements in Item 1 of Part I of this Form 10-Q.

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 recently experienced substantial volatility and disruption. 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 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

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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. Current legislative proposals regarding financial industry reform, if enacted, could impose additional restrictions and limitations on us. 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 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, the adoption of new laws or regulations and changes in the interpretation or enforcement of existing laws or regulations

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have directly affected, and may continue to affect, 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 and other new legal requirements have required us to expend additional time and resources, 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 recent proposals by the Obama administration, if enacted, could have a significant adverse impact on our future results of operations and profitability.

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 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, we recently revised our operations such that the majority of the services previously performed by a third party vendor with respect to the operation of our U.S. data centers are now performed by us and by a separate third-party vendor. The failure by us or the new third-party vendor to adequately perform the services performed by the prior 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

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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, 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

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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.

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 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, 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. Separately, management fees that we earn tend to be higher in connection with international assets under management than with U.S. assets under management. 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, 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,

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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 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,

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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 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.

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Item 3. 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.

We are exposed to changes in interest rates, primarily through our investment in debt securities, outstanding debt, and our banking/finance segment. 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 average maturity of interest earning assets and its funding sources. From time to time, we may enter into interest-rate swap agreements to mitigate interest rate exposure arising from the loans receivable portfolio.

At March 31, 2010, we have considered the potential impact of a 2% movement in market interest rates on our investment in debt securities, outstanding debt, and interest earning assets, net of interest-bearing liabilities of our banking/finance segment. Based on our analysis, we do not expect such a change to 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 condensed 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 and Canadian Dollar. These assets accounted for approximately 13% of the total cash and cash equivalents and investments at March 31, 2010. 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.

The following table summarizes the effect of a 10% increase or decrease in the carrying values of our financial instruments that are subject to market valuation risks at March 31, 2010.

(in thousands)	Carrying Value		Carrying Value Assuming a 10% Increase		Carrying Value Assuming a 10% Decrease
Current
Investment securities, trading	$	460,385	$	506,424	$	414,347
Investment securities, available-for-sale		1,053,009		1,158,310		947,708
Total Current	$	1,513,394	$	1,664,734	$	1,362,055
Banking/Finance
Investment securities, trading	$	72,919	$	80,211	$	65,627
Investment securities, available-for-sale		440,998		485,098		396,898
Total Banking/Finance	$	513,917	$	565,309	$	462,525
Non-Current
Investment securities, available-for-sale	$	102,517	$	112,769	$	92,265
Total	$	2,129,828	$	2,342,812	$	1,916,845

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).

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Our cash, cash equivalents and investments portfolio by investment objective at March 31, 2010 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	$	3,023,620	53%	$	0	0%
Investment Securities
Equity
Domestic (U.S.)		87,064	1%		44,105	8%
Global/international		332,958	6%		145,299	28%
Total equity		420,022	7%		189,404	36%
Hybrid		65,157	1%		29,323	5%
Fixed-Income
Tax-free		87,275	2%		0	0%
Taxable
Domestic (U.S.)		1,071,908	19%		178,844	34%
Global/international		485,466	8%		135,733	25%
Total fixed-income		1,644,649	29%		314,577	59%
Total Investment Securities		2,129,828	37%		533,304	100%
Other1		563,800	10%		0	0%
Total Cash and Cash Equivalents and Investments	$	5,717,248	100%	$	533,304	100%

¹ Includes investments in equity method investees and other investments.

Investments categorized as investment securities, trading in our condensed consolidated balance sheets include securities held by consolidated sponsored investment products. These securities, which amounted to $224.4 million at March 31, 2010, 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 $72.9 million at March 31, 2010.

Item 4. 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 March 31, 2010. Based on their evaluation, the Company’s principal executive and principal financial officers concluded that the Company’s disclosure controls and procedures as of March 31, 2010 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 required 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 March 31, 2010, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of our legal proceedings, please see the description of our legal proceedings set forth in the “Legal Proceedings” section in Note 11 – Commitments and Contingencies in the notes to the condensed consolidated financial statements in Item 1 of Part I of this Form 10-Q, which is incorporated herein by reference.

Item 1A. Risk Factors.

Our Form 10-K for the fiscal year ended September 30, 2009 includes a detailed discussion of the risk factors applicable to us, which are also set forth under the heading “Risk Factors” in Item 2 of Part I of this Form 10-Q. There are no material changes from the risk factors as previously disclosed in our Form 10-K for the fiscal year ended September 30, 2009.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information with respect to the shares of Franklin’s common stock we repurchased during the three months ended March 31, 2010.

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
January 1, 2010 through January 31, 2010	0		N/A	0	7,981,111
February 1, 2010 through February 28, 2010	380,487	$	98.71	380,487	7,600,624
March 1, 2010 through March 31, 2010	733,900	$	108.92	733,900	6,866,724
Total	1,114,387			1,114,387

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 and updates to the Company’s continuing policy of repurchasing shares of its common stock, including the most recent announcements made in January 2008 and March 2009. At March 31, 2010, approximately 6.9 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. There were no unregistered sales of equity securities during the period covered by this report.

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Item 6. Exhibits.

Exhibit No.	Description
Exhibit 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”).
Exhibit 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.
Exhibit 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.
Exhibit 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.
Exhibit 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).
Exhibit 3(ii)	Registrant’s Amended and Restated By-laws (as adopted and effective February 4, 2010), incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed with the SEC on February 5, 2010 (File No. 001-09318).
Exhibit 10.1	Registrant’s 2002 Universal Stock Incentive Plan (as amended and restated effective March 16, 2010) (filed herewith).
Exhibit 10.2	Registrant’s Amended and Restated Annual Incentive Compensation Plan (as amended and restated effective March 16, 2010) (filed herewith).
Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
Exhibit 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).
Exhibit 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).
Exhibit 101	The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, formatted in Extensible Business Reporting Language (XBRL), include: (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) related notes, tagged as blocks of text (furnished herewith).

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SIGNATURES

Pursuant to the requirements 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.
	(Registrant)
Date: May 6, 2010	By:	/s/ KENNETH A. LEWIS
		Kenneth A. Lewis
		Executive Vice President and Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)

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EXHIBIT INDEX

Exhibit No.	Description
Exhibit 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”).
Exhibit 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.
Exhibit 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.
Exhibit 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.
Exhibit 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).
Exhibit 3(ii)	Registrant’s Amended and Restated By-laws (as adopted and effective February 4, 2010), incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed with the SEC on February 5, 2010 (File No. 001-09318).
Exhibit 10.1	Registrant’s 2002 Universal Stock Incentive Plan (as amended and restated effective March 16, 2010) (filed herewith).
Exhibit 10.2	Registrant’s Amended and Restated Annual Incentive Compensation Plan (as amended and restated effective March 16, 2010) (filed herewith).
Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
Exhibit 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).
Exhibit 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).
Exhibit 101	The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, formatted in Extensible Business Reporting Language (XBRL), include: (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) related notes, tagged as blocks of text (furnished herewith).

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EX-10.1

Exhibit 10.1

FRANKLIN RESOURCES, INC.

2002 UNIVERSAL STOCK INCENTIVE PLAN

(as amended and restated effective March 16, 2010)

1. GENERAL

1.1 Purpose. The Franklin Resources, Inc. 2002 Universal Stock Incentive Plan (the “2002 Stock Plan”) has been established by Franklin Resources, Inc., a Delaware corporation (the “Company”) to (i) attract and retain persons eligible to participate in the 2002 Stock Plan; (ii) motivate employees, by means of appropriate incentives, to achieve long-range performance goals; (iii) provide incentive compensation opportunities that are competitive with those of other similar companies; and (iv) further identify employees’ interests with those of the Company’s other stockholders through compensation that is based on the Company’s common stock; and thereby promote the long-term financial interest of the Company and the Subsidiaries.

1.2 Participation. Subject to the terms and conditions of the 2002 Stock Plan, the Committee shall determine and designate, from time to time, from among the Participants, those persons who will be granted one or more Awards under the 2002 Stock Plan. In the discretion of the Committee, a Participant may be granted any Award permitted under the provisions of the 2002 Stock Plan, and more than one Award may be granted to a Participant. Awards may be granted as alternatives to or replacement of awards outstanding under the 2002 Stock Plan, or any other plan or arrangement of the Company or a Subsidiary (including a plan or arrangement of a business or entity, all or a portion of which is acquired by the Company or a Subsidiary).

1.3 Operation, Administration, and Definitions. The operation and administration of the 2002 Stock Plan, including the Awards made under the 2002 Stock Plan, shall be subject to the provisions of Section 4 (relating to operation and administration). Capitalized terms in the 2002 Stock Plan shall be defined as set forth in the 2002 Stock Plan (including the definition provisions of Section 8 of the 2002 Stock Plan).

1.4 Stock Subject to 2002 Stock Plan; Share Counting. Subject to the provisions of this Section 1.4 and Section 6.1 of the 2002 Stock Plan, the maximum aggregate number of shares which may be delivered pursuant to Awards, including without limitation, Options and SAR’s granted under the 2002 Stock Plan, is 30,000,000. The shares may be authorized, but unissued, or reacquired Common Stock.

(a) To the extent any Shares covered by an Award are not delivered to a Participant or beneficiary because the Award is forfeited or canceled, or the Shares are not delivered because the Award is settled in cash, such Shares shall not be deemed to have been delivered for purposes of determining the maximum number of Shares available for delivery pursuant to Awards granted under the 2002 Stock Plan. Notwithstanding the foregoing or anything to the contrary herein, all Shares covered by the portion of a SAR that is exercised (whether or not Shares are actually issued to the Participant upon exercise of the SAR) shall be considered issued pursuant to the 2002 Stock Plan.

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(b) If the exercise price of any Option granted under the 2002 Stock Plan is satisfied by tendering Shares to the Company (by either actual delivery or by attestation), only the number of Shares issued net of the Shares tendered shall be deemed delivered for purposes of determining the maximum number of Shares available for delivery pursuant to Awards (other than Options) granted under the 2002 Stock Plan.

(c) Subject to adjustment under Section 6.1, (i) the maximum number of shares that may be granted to any one individual pursuant to Section 2 (relating to Options and SARs) shall be 400,000 Shares during any one-calendar-year period and (ii) the maximum number of Shares that may be granted to any one individual subject to Section 3 (relating to Stock Unit Awards, Restricted Stock Awards, Restricted Stock Unit Awards and Performance Share Awards) shall be 1,000,000 Shares during any one-calendar-year period (regardless of when such Shares are deliverable).

2. OPTIONS AND SARS

2.1 Options.

(a) An Option is a grant of rights to purchase Shares at an exercise price established by the Committee, subject to Section 2.3. Options granted under this Section 2 may be either Incentive Stock Options (“ISO”) or Nonstatutory Stock Options (“NSO”), as determined in the discretion of the Committee.

(b) Each Option shall be designated in the written option agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designations, to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Optionee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall be automatically treated as Nonstatutory Stock Options. For purposes of this paragraph 2.1(b), Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the original date the Option with respect to such Shares is granted. In the event that the Code or the regulations promulgated thereunder are amended after the date the 2002 Stock Plan becomes effective to provide for a different limit on the Fair Market Value of Shares permitted to be subject to Incentive Stock Options, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.

(c) The term of each Option shall be the term stated in the Option Agreement; provided, however, that in the case of any Incentive Stock Option, the term shall be no more than ten (10) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement. However, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement.

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(d) The date of grant of an Option shall, for all purposes, be the date on which the Committee makes the determination granting such Option, or such other date as is determined by the Committee. Notice of the determination shall be given to each Participant to whom an Option is so granted within a reasonable time after the date of such grant.

2.2 Stock Appreciation Rights. A “Stock Appreciation Right” (“SAR”) is a grant of rights to receive, in cash or Stock (as determined by the Committee), value equal to (or otherwise based on) the excess of: (a) the Fair Market Value of a specified number of Shares at the time of exercise; over (b) a base appreciation amount established by the Committee, subject to Section 2.3.

2.3 Exercise Price. The exercise price or base appreciation amount (as applicable) of each Option and SAR shall be established by the Committee or shall be determined by a method established by the Committee at the time the Option or SAR is granted; provided that:

(a) In the case of an ISO,

(i) granted to an employee who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant;

(ii) granted to any other employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

(b) In the case of a NSO, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

(c) In the case of a SAR, the base appreciation amount shall be no less than 100% of the Fair Market Value per Share on the date of grant.

2.4 Time and Manner of Exercise. Options and SARs shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee; subject to the following terms regarding Options:

(a) Termination of Employment. In the event of termination of an Optionee’s Continuous Status as an employee with the Company, such Optionee may, but only within ninety (90) days after the date of such termination (or such other period as is set out by the Committee in the Option Agreement, but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent that Optionee was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of such termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.

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(b) Disability of Optionee. Notwithstanding the provisions of paragraph 2.4(a) above, in the event of termination of an Optionee’s Continuous Status as an employee as a result of disability (as determined by the Committee in accordance with the policies of the Company), Optionee may, but only within six (6) months from the date of such termination (or such other period as is set out by the Committee in the Option Agreement, but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.

(c) Death of Optionee. In the event of the death of an Optionee, the Option may be exercised, at any time within twelve (12) months following the date of death (or such other period as is set out by the Committee in the Option Agreement, but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), by the Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee was entitled to exercise the Option at the date of death. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.

2.5 Payment of Exercise Price. Payment of the exercise price of an Option shall be subject to the following:

(a) The full exercise price for Shares purchased upon the exercise of any Option shall be paid at the time of such exercise (except that, in the case of an exercise arrangement approved by the Committee and described in paragraph 2.5(b), payment may be made as soon as practicable after the exercise).

(b) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Committee (and, in the case of an Incentive Stock Option, shall be determined at the time of grant) and may, in the discretion of the Committee, consist entirely of (i) cash, (ii) check, (iii) delivery of authorization for the Company to retain from the total number of Shares as to which the Option is exercised that number of Shares having a Fair Market Value on the date of exercise equal to the exercise price for the total number of Shares as to which the Option is exercised, (iv) delivery of a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale or loan proceeds required to pay the exercise price, (v) irrevocably authorizing a third party to sell Shares (or a sufficient portion of the shares) acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise, (vi) any combination of the foregoing methods of payment, or (vii) such other consideration and method of payment for the issuance of Shares to the extent permitted under Applicable Laws.

2.6 Settlement of Award. Shares delivered pursuant to the exercise of an Option or SAR shall be subject to such conditions, restrictions and contingencies as the Committee may

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establish in the applicable Award Agreement at the time of grant. Settlement of SARs may be made in Shares (valued at their Fair Market Value at the time of exercise), in cash, or in a combination thereof, as determined in the discretion of the Committee. The Committee, in its discretion, may impose such conditions, restrictions and contingencies with respect to Shares acquired pursuant to the exercise of an Option or an SAR as the Committee determines to be desirable.

3. OTHER STOCK AWARDS

3.1 Definitions.

(a) A “Stock Unit” Award is the grant of a right to receive Shares in the future.

(b) A “Performance Share” Award is a grant of a right to receive Shares or Stock Units which is contingent on the achievement of performance or other objectives during a specified period.

(c) A “Restricted Stock” Award is a grant of Shares, and a “Restricted Stock Unit” Award is the grant of a right to receive Shares in the future, with such Shares or right to future delivery of such Shares subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to completion of service by the Participant, or achievement of performance or other objectives, as determined by the Committee.

3.2 Restrictions on Stock Awards. Each Stock Unit Award, Restricted Stock Award, Restricted Stock Unit Award and Performance Share Award shall be subject to the following:

(a) Any such Awards shall be subject to such conditions, restrictions and contingencies as the Committee shall determine.

(b) The Committee may designate whether any such Awards being granted to any Participant are intended to be “performance-based compensation” as that term is used in Section 162(m) of the Code. Any such Awards designated as intended to be “performance-based compensation” shall be conditioned on the achievement of one or more Performance Measures. The Performance Measures that may be used by the Committee for such Awards shall be based on any one or more of the criteria attached hereto on Attachment I, as selected and further defined by the Committee. The Performance Measures may be applicable to the Company and/or any of its individual business units and may differ from Participant to Participant. For Awards intended to be “performance-based compensation,” the grant of the Awards and the establishment of the Performance Measures shall be made during the period required under Section 162(m) of the Code and shall be subject to the individual share limit set out in Section 1.4(c) above.

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4. OPERATION AND ADMINISTRATION

4.1 Effective Date. The 2002 Stock Plan became effective as of October 10, 2002. The 2002 Stock Plan shall be unlimited in duration and, in the event of the 2002 Stock Plan termination, shall remain in effect as long as any Awards under it are outstanding; provided, however, that, to the extent required by the Code, no ISO may be granted under the 2002 Stock Plan after October 9, 2012.

4.2 Term of Awards. Subject to the limitations of Section 2.1(c), the term of each Award under the 2002 Stock Plan shall be the term stated in the applicable Award Agreement, provided, however, that the term shall be no more than ten (10) years from the date of grant thereof. Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Participant has elected to defer the receipt of the Shares or cash issuable pursuant to the Award.

4.3 General Restrictions. Delivery of Shares or other amounts under the 2002 Stock Plan shall be subject to the following:

(a) Notwithstanding any other provision of the 2002 Stock Plan, the Company shall have no liability to deliver any Shares under the 2002 Stock Plan or make any other distribution of benefits under the 2002 Stock Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933), and the applicable requirements of any securities exchange or similar entity.

(b) Shares issued under the 2002 Stock Plan may be certificated or, to the extent not prohibited by applicable law or the applicable rules of any stock exchange, non-certificated.

4.4 Tax Withholding. All distributions under the 2002 Stock Plan are subject to withholding of all applicable taxes, and the Committee may condition the delivery of any Shares or other benefits under the 2002 Stock Plan on satisfaction of the applicable withholding obligations. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the Participant, through the surrender of Shares which the Participant already owns, or through the surrender of Shares to which the Participant is otherwise entitled under the 2002 Stock Plan, provided; however, that in either case only the number of Shares sufficient to satisfy the Company’s minimum required tax withholding obligations may be surrendered to the Company.

4.5 Use of Shares. Subject to the overall limitation on the number of Shares that may be delivered under the 2002 Stock Plan, the Committee may use available Shares as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company or a Subsidiary, including the plans and arrangements of the Company or a Subsidiary assumed in business combinations.

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4.6 Dividends and Dividend Equivalents. An Award (including without limitation an Option or SAR Award) may provide the Participant with the right to receive dividend payments or dividend equivalent payments with respect to Stock subject to the Award (both before and after the Stock subject to the Award is earned, vested, or acquired), which payments may be either made currently or credited to an account for the Participant, and may be settled in cash or Stock as determined by the Committee. Any such settlements, and any such crediting of dividends or dividend equivalents or reinvestment in Shares, may be subject to such conditions, restrictions and contingencies as the Committee shall establish, including the reinvestment of such credited amounts in Stock equivalents.

4.7 Payments. Awards may be settled through cash payments, the delivery of Shares, the granting of replacement Awards, or combination thereof as the Committee shall determine. Any Award settlement, including payment deferrals, may be subject to such conditions, restrictions and contingencies as the Committee shall determine. The Committee may permit or require the deferral of any Award payment, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest, or dividend equivalents, including converting such credits into deferred Stock equivalents. Each Subsidiary shall be liable for payment of cash due under the 2002 Stock Plan with respect to any Participant to the extent that such benefits are attributable to the services rendered for that Subsidiary by the Participant. Any disputes relating to liability of a Subsidiary for cash payments shall be resolved by the Committee.

4.8 Non-alienation of Awards. Unless specifically provided by the Committee in the Award Agreement, Awards under the 2002 Stock Plan may not be sold, assigned, conveyed, hypothecated, encumbered, anticipated, or otherwise disposed of, and are nontransferable except as designated by the Participant by will or by the laws of descent and distribution; provided, however, that an Award Agreement shall not provide that an Award is transferable during the lifetime of the Participant, except to the extent that such Award Agreement permits transfers made to family members, to family trusts, to family controlled entities, to charitable organizations, and/or pursuant to domestic relations orders or agreements, in all cases without payment for such transfers to the Participant. Any attempt to sell, assign, convey, hypothecate, encumber, anticipate, transfer, or otherwise dispose of any Award under the 2002 Stock Plan in violation of this Section 4.8 shall be void, and no Shares or cash subject to any Award shall, prior to receipt thereof by a Participant, be in any manner subject to the debts, contracts, liabilities, engagements, or torts of such Participant.

4.9 Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the 2002 Stock Plan, and any permitted modification, or revocation thereof, shall be in writing filed with the Committee at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the 2002 Stock Plan, as the Committee shall require.

4.10 Agreement With Company. An Award under the 2002 Stock Plan shall be subject to such terms and conditions, not inconsistent with the 2002 Stock Plan, as the Committee shall, in its sole discretion, prescribe. The terms and conditions of any Award to any Participant shall be reflected in such form of written document as is determined by the Committee. A copy of

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such document shall be provided to the Participant, and the Committee may, but need not require that the Participant shall sign a copy of such document. Such document is referred to in the 2002 Stock Plan as an “Award Agreement” regardless of whether any Participant signature is required.

4.11 Action by Company or Subsidiary. Any action required or permitted to be taken by the Company or any Parent or Subsidiary shall be by resolution of: (i) in the case of a corporation, its board of directors, or by action of one or more members of the board (including a committee of the board) who are duly authorized to act for the board, or (except to the extent prohibited by applicable law or applicable rules of any stock exchange) by a duly authorized officer of the Company, (ii) in the case of a limited liability company, its member(s), and (iii) in the case of a partnership, its general partner.

4.12 Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.

4.13 Limitation of Implied Rights.

(a) Neither a Participant nor any other person shall, by reason of participation in the 2002 Stock Plan, acquire any right in or title to any assets, funds or property of the Company or any Parent or Subsidiary whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Parent or Subsidiary, in their sole discretion, may set aside in anticipation of a liability under the 2002 Stock Plan. A Participant shall have only a contractual right to the Stock or amounts, if any, payable under the 2002 Stock Plan, unsecured by any assets of the Company or any Parent or Subsidiary, and nothing contained in the 2002 Stock Plan shall constitute a guarantee that the assets of the Company or any Parent or Subsidiary shall be sufficient to pay any benefits to any person.

(b) The 2002 Stock Plan does not constitute a contract of employment, and selection as a Participant will not give any Participant the right to be retained in the employ of the Company or any Subsidiary, nor any right or claim to any benefit under the 2002 Stock Plan, unless such right or claim has specifically accrued under the terms of the 2002 Stock Plan. Except as otherwise provided in the 2002 Stock Plan, no Award under the 2002 Stock Plan shall confer upon the holder thereof any rights as a stockholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights.

5. COMMITTEE

5.1 Committee. The authority to control and manage the operation and administration of the 2002 Stock Plan shall be vested in a committee (the “Committee”) in accordance with this Section 5. The Committee shall be selected by the Board, and shall be comprised, unless otherwise determined by the Board, solely of not less than two members of the Board who shall be “outside” directors within the meaning of Treasury Regulation Section 1.162-27(e)(3) under Section 162(m) of the Code. With respect to Awards granted under the 2002 Stock Plan that are not intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Committee shall be composed of two or more members of the Board who are not employees

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of the Company. If the Committee does not exist, or for any other reason determined by the Board, the Board may take any action under the 2002 Stock Plan that would otherwise be the responsibility of the Committee.

5.2 Powers of Committee. The Committee’s administration of the 2002 Stock Plan shall be subject to the following:

(a) Subject to the provisions of the 2002 Stock Plan, the Committee will have the authority and discretion to select from among the Participants those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, to establish the terms, conditions, performance criteria (provided that, for purposes of Section 162(m) of the Code, performance measures shall be based on one or more of the criteria set out on Attachment I hereto), restrictions, and other provisions of such Awards, and (subject to Section 7) to cancel or suspend Awards.

(b) To the extent that the Committee determines that the restrictions imposed by the 2002 Stock Plan preclude the achievement of the material purposes of the Awards in jurisdictions outside the United States, the Committee will have the authority and discretion to modify those restrictions as the Committee determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States.

(c) The Committee may grant Awards to Participants who are subject to the tax laws of nations other than the United States, which Awards may have terms and conditions as determined by the Committee as necessary to comply with applicable foreign laws. The Committee may take any action which it deems advisable to obtain approval of such Awards by the appropriate foreign government entity; provided however that no such Awards may be granted under this 2002 Stock Plan and no action may be taken which would result in a violation of the Exchange Act, the Code or any other applicable law.

(d) The Committee will have the authority and discretion to interpret the 2002 Stock Plan, to establish, amend, and rescind any rules and regulations relating to the 2002 Stock Plan, to determine the terms and provisions of any Award Agreement made pursuant to the 2002 Stock Plan, and to make all other determinations that may be necessary or advisable for the administration of the 2002 Stock Plan.

(e) Any interpretation of the 2002 Stock Plan by the Committee and any decision made by it under the 2002 Stock Plan is final and binding on all persons.

(f) In controlling and managing the operation and administration of the 2002 Stock Plan, the Committee shall take action in a manner that conforms to the articles and by-laws of the Company, and applicable state corporate law.

(g) Notwithstanding anything in the 2002 Stock Plan to the contrary, (i) the reduction of the exercise price of any Option awarded under the 2002 Stock Plan and the base appreciation amount of any SAR awarded under the 2002 Stock Plan shall be subject to stockholder approval and (ii) canceling an Option or SAR at a time when its exercise price or

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base appreciation amount (as applicable) exceeds the Fair Market Value of the underlying Shares, in exchange for another Option, SAR, Restricted Stock Award, or other Award shall be subject to stockholder approval, unless the cancellation and exchange occurs in connection with a Transaction. Notwithstanding the foregoing, canceling an Option or SAR in exchange for another Option, SAR, Restricted Stock Award, or other Award with an exercise price, purchase price or base appreciation amount (as applicable) that is equal to or greater than the exercise price or base appreciation amount (as applicable) of the original Option or SAR shall not be subject to stockholder approval.

5.3 Delegation by Committee. Except to the extent prohibited by Applicable Law or the applicable rules of a stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its ministerial duties to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time.

5.4 Information to be Furnished to Committee. The Company and its Subsidiaries shall furnish the Committee with such data and information as the Committee determines may be required for it to discharge its duties. The records of the Company and its Subsidiaries as to a Participant’s employment, termination of employment, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect. Participants must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the 2002 Stock Plan in order to be entitled to benefits under the 2002 Stock Plan.

6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR CORPORATE TRANSACTION

6.1 Changes in Capitalization. Subject to any required action by the stockholders of the Company, (a) the number and/or class of securities covered by each outstanding Award, (b) the price per share covered by each such outstanding Award, (c) the number and/or class of securities which have been authorized for issuance under the 2002 Stock Plan but as to which no Awards have yet been granted or which have been returned to the 2002 Stock Plan upon cancellation or expiration of an Award, and (d) the maximum number of Options, SARs, Stock Unit Awards, Restricted Stock Awards, Restricted Stock Units Awards and Performance Share Awards which may be granted to any Participant in any one-calendar-year period 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 Committee. The Committee shall also make adjustments described in (a)-(d) of this Section 6.1 in the event of any distribution of cash or other assets to stockholders other than an ordinary cash dividend. In determining adjustments to be made under this Section 6.1, the Committee may take into account such factors as it deems appropriate, including (i) the restrictions of applicable law, (ii) the potential tax, accounting or other consequences of an adjustment and (iii) the

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possibility that some Participants might receive an adjustment and a distribution or other unintended benefit, and in light of such factors or circumstances may make adjustments that are not uniform or proportionate among outstanding Awards, modify vesting dates, defer the delivery of stock certificates or make other equitable adjustments. Any such adjustments to outstanding Awards will be effected in a manner that precludes the enlargement of rights and benefits under such Awards. Adjustments, if any, and any determinations or interpretations, including any determination of whether a distribution is other than an ordinary cash dividend, made by the Committee shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Award.

6.2 Transactions. In the event of the proposed dissolution or liquidation of the Company or of a merger or corporate combination (a “Transaction”) in which the successor corporation does not agree to assume the Award or substitute an equivalent Award, the Committee shall make a determination (subject to Section 7) as to the equitable treatment of outstanding Awards under the 2002 Stock Plan and shall notify Participants of such treatment no later than ten (10) days prior to such proposed Transaction. To the extent it has not been previously exercised, an Award that is not assumed will terminate immediately prior to the consummation of such proposed Transaction.

7. AMENDMENT AND TERMINATION

The Board may, at any time, amend or terminate the 2002 Stock Plan, provided that (i) no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under any Award granted under the 2002 Stock Plan prior to the date such amendment is adopted by the Board; provided that modifications or adjustments pursuant to Sections 6.1 or 6.2 or that may cause an Incentive Stock Option to become a Nonstatutory Stock Option shall in no event be deemed to have an adverse effect on any Award, and (ii) no such amendment shall be made without the approval of the Company’s stockholders to the extent such approval is required by Applicable Laws, or if such amendment would lessen the stockholder approval requirements of Section 5.2(g) or this Section 7.

8. DEFINED TERMS

In addition to the other definitions contained herein, the following definitions shall apply:

(a) Applicable Law means the corporate, securities and tax laws (including, without limitation, the Delaware corporate law, the Exchange Act, the Securities Act of 1933 and the Code) applicable to the establishment and administration of employee stock incentive plans and the grant of awards thereunder.

(b) Award. The term “Award” shall mean any award or benefit granted under the 2002 Stock Plan, including, without limitation, the grant of Options, SARs, Stock Unit Awards, Restricted Stock Awards, Restricted Stock Unit Awards and Performance Share Awards.

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(c) Board. The term “Board” shall mean the Board of Directors of the Company.

(d) Code. The term “Code” means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code shall include reference to any successor provision of the Code.

(e) Common Stock shall mean the common stock, par value, $.10 per share, of the Company.

(f) Continuous Status as an Employee means the absence of any interruption or termination of the employment relationship by the Company or any Subsidiary. Continuous Status as an employee shall not be considered interrupted in the case of: (i) sick leave, military leave or any other leave of absence approved by the Board, provided that such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (ii) in the case of transfers between locations of the Company or between the Company, its Subsidiaries or its successor.

(g) Exchange Act means the Securities Exchange Act of 1934, as amended.

(h) Fair Market Value. For purposes of determining the “Fair Market Value” of a share of Stock granted pursuant to the 2002 Stock Plan as of any date, the following rules shall apply:

(i) If the principal market for the Stock is the New York Stock Exchange (“NYSE”), then the “Fair Market Value” as of that date shall be the closing price of the stock on the NYSE composite tape on that date as reported in the Wall Street Journal for such date;

(ii) If the principal market for the Stock is the another national securities exchange or the NASDAQ stock market, then the “Fair Market Value” as of that date shall be the mean between the lowest and highest reported composite sale prices of the Stock on that date on such exchange for such date;

(iii) If sale prices are not available or if the principal market for the Stock is not the NYSE or another national securities exchange and the Stock is not quoted on the NASDAQ stock market, then the “Fair Market Value” as of that date shall be the average between the highest bid and lowest asked prices for the Stock on such day as reported on the NASDAQ OTC Bulletin Board Service or by the National Quotation Bureau, Incorporated or a comparable service.

(iv) If the day is not a business day or a day in which the Stock is traded, and as a result, paragraphs (i), (ii) and (iii) next above are inapplicable, the Fair Market Value of the Stock shall be determined as of the last preceding day in which the Stock is traded. If paragraphs (i), (ii) and (iii) next above are otherwise inapplicable, then the Fair Market Value of the Stock shall be determined in good faith by the Committee.

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(i) Incentive Stock Option means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

(j) Nonstatutory Stock Option means an Option not intended to qualify as an Incentive Stock Option.

(k) Optionee means a Participant who receives an Option.

(l) Parent means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.

(m) Participants. The term “Participant” shall mean any executive, employee or director of the Company, or its Subsidiary. An Award may be granted to an employee, in connection with hiring, retention or otherwise, prior to the date the employee first performs services for the Company or its Subsidiaries, provided that such Awards shall not become vested prior to the date the employee first performs such services. The term “Participant” also includes any non-employee director of the Company, or its Subsidiary.

(n) Performance Measures means the business criteria applicable to the grant of Awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code.

(o) Share means a share of the Common Stock, as adjusted in accordance with Section 6 of the 2002 Stock Plan.

(p) Stock. The term “Stock” shall mean shares of Common Stock of the Company.

(q) Subsidiary or Subsidiaries. The term “Subsidiary” or “Subsidiaries” mean 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.

9. PLAN HISTORY

The 2002 Stock Plan became effective as of October 10, 2002. The 2002 Stock Plan was originally approved by the stockholders of the Company on January 30, 2003. The Board approved an amendment and restatement of the 2002 Stock Plan on December 16, 2004 to (a) include additional Performance Measures and (b) amend Section 6.1 to increase the scope of adjustments that may be made as a result of changes in capitalization of the Company, which amendment and restatement is subject to the approval of the stockholders of the Company. The Board approved a further amendment and restatement of the 2002 Stock Plan on December 18, 2009 to (a) revise the Performance Measures such that they conform to the Performance Goals under the Franklin Resources, Inc. 2004 Key Executive Incentive Compensation Plan and (b) make certain administrative updates, which amendment and restatement is subject to the approval of the stockholders of the Company and shall only be effective upon the date stockholders approve the amendment and restatement.

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ATTACHMENT I

PERFORMANCE MEASURES

The Committee shall grant performance-based compensation Awards tied to one or more of the following business criteria:

(a) annual revenue,

(b) budget comparisons,

(c) controllable profits,

(d) Company earnings per share,

(e) expense management,

(f) improvements in capital structure,

(g) net income,

(h) net or gross sales,

(i) operating income (pre- or post-tax),

(j) profit margins,

(k) operating or gross margin,

(l) profitability of an identifiable business unit or product,

(m) return on investments,

(n) return on sales,

(o) return on stockholders’ equity,

(p) total return to stockholders,

(q) assets under management,

(r) investment management performance,

(s) mutual and other investment fund performance,

(t) institutional account performance,

(u) high net worth and other separate account performance,

(v) cash flow, operating cash flow, or cash flow or operating cash flow per share (before or after dividends),

(w) price of the shares or any other publicly traded securities of the Company,

(x) reduction in costs,

(y) return on capital, including return on total capital or return on invested capital,

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(z) improvement in or attainment of expense levels or working capital levels, and

(aa) performance of the Company relative to a peer group of companies and/or relevant indexes on any of the foregoing measures.

The Performance Measures may be applicable to the Company and/or any of its individual business units and may differ from Participant to Participant. In addition, the Performance Measures shall be calculated in accordance with generally accepted accounting principles, but excluding the effect (whether positive or negative) of any change in accounting standards and any extraordinary, unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of the Performance Measures applicable to an Award intended to be performance-based compensation. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the Participant’s rights with respect to an Award intended to be performance-based compensation; provided, however, that certain categories or types of such adjustments can be specifically included (rather than excluded) at the time the Performance Measures are established if so determined by the Committee.

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EX-10.2

Exhibit 10.2

FRANKLIN RESOURCES, INC.

AMENDED AND RESTATED ANNUAL INCENTIVE COMPENSATION PLAN

(amended and restated March 16, 2010)

(amended and restated December 13, 2006)

(amended and restated December 16, 2005)

(amended and restated September 22, 2005)

(amended and restated December 16, 2004)

(amended and restated December 11, 2003)

I. PURPOSE

Franklin Resources, Inc. has established this Amended and Restated Annual Incentive Compensation Plan to reward employees for contributions to the Company (as hereinafter defined) by providing them an opportunity to share in the organization’s annual performance results. Through these incentives, the Company intends to attract, retain, and motivate eligible employees to achieve the highest levels of performance results in the financial services business.

II. DEFINITIONS

When used in this plan document, the following words and phrases shall have the following meanings:

2.1 “Award Pool” means the total dollars available for funding Incentive Awards under the Plan for an applicable Plan Year.

2.2 “Bonus Opportunity” means a potential bonus target for a Participant.

2.3 “Committee” means the Compensation Committee of the Board of Directors of Franklin Resources, Inc. as described in Section 9.1 below.

2.4 “Company” means Franklin Resources, Inc., a Delaware corporation, and its direct and indirect subsidiaries.

2.5 “Equity Award” means a grant of Stock, Options, SARs, Stock Unit Awards, Restricted Stock Awards or Restricted Stock Unit Awards under the 2002 Universal Stock Incentive Plan or successor equity compensation plan, or Mutual Fund Unit Awards.

2.6 “Incentive Award” means the actual current value of an award to a Participant, regardless of the form of the award, determined by the Committee or Management during or following the end of the Plan Year, as applicable.

2.7 “Management” means the executive officers of the Company.

2.8 “Mutual Fund Unit Award” means the grant of a right to receive shares in mutual funds sponsored by the Company upon the vesting of the units in recognition of and as a reward for the past efforts and contributions of the Participant on behalf of the Company, with such right to receive shares in such mutual funds subject to a risk of forfeiture or other restrictions that will

1

lapse based on the completion of service or achievement of performance objectives by the Participant, as determined by the Committee.

2.9 “Option” means the grant of a right to purchase Stock at a specified exercise price in recognition of and as a reward for the past efforts and contributions of the Participant on behalf of the Company, with the right to purchase such shares of Stock subject to the completion of service or achievement of performance objectives by the Participant, as determined by the Committee.

2.10 “Participant” means all employees who have been determined by the Committee or Management to be Participants pursuant to Section 3.1.

2.11 “Plan” means the Amended and Restated Annual Incentive Compensation Plan as set forth in this document, as amended from time to time.

2.12 “Pre-Bonus Operating Income” (hereafter “PBOI”) means the net operating income of the Company, exclusive of passive income and calculated before non-operating interest, taxes, extraordinary items, and certain special items (such as special compensation payouts on account of a merger) and before the accrual of Incentive Awards under the Plan and awards under the Company’s 2004 Key Executive Incentive Compensation Plan or any successor plan.

2.13 “Plan Year” means the 12-month period beginning on the first day of each fiscal year of the Company.

2.14 “Restricted Stock Award” means the grant of shares of Stock in recognition of and as a reward for the past efforts and contributions of the Participant on behalf of the Company, with such shares of Stock subject to a risk of forfeiture or other restrictions that will lapse based on the completion of service or achievement of performance objectives by the Participant, as determined by the Committee.

2.15 “Restricted Stock Unit Award” means the grant of a right to receive Stock upon the vesting of the units in recognition of and as a reward for the past efforts and contributions of the Participant on behalf of the Company, with such right to receive Stock subject to a risk of forfeiture or other restrictions that will lapse based on the completion of service or achievement of performance objectives by the Participant, as determined by the Committee.

2.16 “SAR” means the grant of a right to receive, in cash or Stock (as determined by the Committee), value equal to (or otherwise based on) the excess of (a) the fair market value of a specified number of shares of Stock at the time of exercise over (b) a specified exercise price, in recognition of and as a reward for the past efforts and contributions of the Participant on behalf of the Company, with the right to receive such value in cash or Stock subject to the completion of service or achievement of performance objectives by the Participant, as determined by the Committee.

2.17 “Stock” means Franklin Resources, Inc. common stock reserved for issuance under the Franklin Resources, Inc. 2002 Universal Stock Incentive Plan or successor equity compensation plan.

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2.18 “Stock Unit Award” means the grant of a right to receive Stock in the future.

III. PARTICIPATION

3.1 All individuals who are employees at the beginning of the Plan Year, except employees who participate in commission-based incentive plans or other incentive arrangements determined by the Committee or Management, are eligible to be designated by the Committee or Management as Participants during that Plan Year. Employees hired during a Plan Year may be added to the Plan as Participants in the discretion of the Committee or Management.

3.2 A Participant’s Incentive Award will be based upon an evaluation of a Participant’s overall performance, including the successful accomplishment of annual goals and objectives, as well as other performance factors.

IV. AWARD POOL FUNDING AND INDIVIDUAL AWARDS

4.1 For each Plan Year, the Committee shall determine the amount to be allocated to the Award Pool, not to exceed Twenty Percent (20%) of PBOI.

4.2 The Committee or Management may generally determine the amount of Bonus Opportunities under the Plan. The Committee or Management may advise Participants of particular Bonus Opportunities or ranges of Bonus Opportunities at any time during the Plan Year.

4.3 The actual amounts allocated to the Award Pool may be determined and/or revised by the Committee at any time during or after the end of each Plan Year, based upon actual or projected Company performance and PBOI.

4.4 Actual Incentive Awards may be determined during or following the end of each Plan Year. The amount of any Incentive Awards determined and paid prior to the end of a Plan Year shall be credited against the Award Pool for such Plan Year so that the net amount remaining in the Award Pool is available for Incentive Awards determined and paid after the end of such Plan Year. Actual Incentive Awards may vary from the Bonus Opportunities depending on the PBOI allocated or projected to be allocated to the Award Pool and a Participant’s individual performance.

4.5 To promote the highest levels of individual performance, there is no minimum or maximum which applies to individual Incentive Awards of any Participant. Amounts not allocated as Incentive Awards do not carry over to the next Plan Year, and may be used for distribution as incentive compensation to employees who are not Participants in the Plan.

4.6 Notwithstanding a Participant’s individual performance and anything to the contrary in this Plan, Management or the Committee may decrease (even to zero) or increase the Incentive Award payable to a Participant; provided however, that only the Committee may increase or decrease an Incentive Award payable to a member of Management.

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V. PAYMENT OF ANNUAL AWARDS

5.1 Incentive Awards may, in the Committee’s discretion, be paid in the following time and manner:

(a) Incentive Awards may be paid in cash or in a combination of cash and Equity Awards subject to restrictions and vesting, if any, determined by the Committee to be appropriate. Incentive Awards paid in Equity Awards granted under the 2002 Universal Stock Incentive Plan or successor equity compensation plan shall also be subject to the limit on the maximum number of shares that may be issued under such plan and any additional limitations on the maximum number of shares that may be awarded to any individual in any fiscal or calendar year under such plan.

(b) Any Equity Awards granted as part of an Incentive Award shall be governed by the terms of the applicable award agreement evidencing such Equity Award grant and, in the case of Equity Awards other than Mutual Fund Units, the 2002 Universal Stock Incentive Plan or any successor plan, and shall not be governed by or subject to the terms of this Plan.

(c) The cash portion of an Incentive Award shall be paid at such time and in such manner as the Committee determines. Participants shall be notified in writing as to the date and time of payment of any deferred portion of the Incentive Award.

(d) Equity Awards awarded as part of an Incentive Award shall be distributed at such time during or after the end of the Plan Year as determined by the Committee. Notwithstanding anything in the Plan to the contrary, Equity Awards and any modifications thereto shall be made by the Committee only, and, if applicable, in accordance with the 2002 Universal Stock Incentive Plan or successor equity compensation plan.

(e) Notwithstanding the foregoing, the payment of any Incentive Awards determined by the Company to provide for a “deferral of compensation” (within the meaning of Section 1.409A-1(b) of the Treasury regulations under the Internal Revenue Code of 1986, as amended (the “Code”), and any successor thereto) shall be completed no later than two and one-half (2 ¹/ 2) months following the end of the calendar year in which such Incentive Awards are earned.

5.2 Application of Code Section 409A.

Notwithstanding any other provision of this Plan to the contrary, the Company, in its sole discretion and without Participant consent, may amend or modify the Plan in any manner to provide for the application and effects of Section 409A of the Code (relating to deferred compensation arrangements) and any related regulatory or administrative guidance issued by the Internal Revenue Service, or any successors thereto. The Company shall have the authority to delay the payment of any benefits described under the Plan to the extent it deems necessary or appropriate to comply with Section 409A(a)(2)(B)(i) of the Code (relating to payments made to certain “key employees” of certain publicly-traded companies) and in such event, any such payments to which a Participant would otherwise be entitled during the six (6) month period

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immediately following his or her separation from service will be paid on the first business day following the expiration of such six (6) month period.

VI. PAYMENT IN EVENT OF DEATH, DISABILITY, LEAVE OF ABSENCE OR RETIREMENT

6.1 Death of Participant.

A Participant who dies is entitled to a pro-rated Incentive Award based on performance up to the last day worked. Payment shall be made in cash in a single payment during or as soon as practical following the end of the Plan Year in which death occurred. If the Participant dies following the end of a Plan Year but before an Incentive Award for that year has been paid, the Participant’s full Incentive Award shall be paid in cash in a single payment when it would otherwise have been paid. Payment of Incentive Awards on account of death shall be paid to the person designated by the Participant as beneficiary under this Plan. If there is no such designation or the designated beneficiary fails to survive the Participant, payment shall be made to the Participant’s spouse or if there is none, the Participant’s estate. Notwithstanding the foregoing provisions of this Section 6.1 with respect to the payment of Incentive Awards, a Participant’s full Incentive Award, a portion of his full Incentive Award, or no portion thereof may be payable to the persons specified above. Such determination shall be made by Management or by the Committee.

6.2 Disability.

A Participant who ceases to be an employee on account of disability, as a result of which the Participant shall be eligible for payments under Company long-term disability insurance policies, shall be entitled to receive a pro-rated Incentive Award based on performance up to the last day worked. Payment shall be made in cash in a single installment during or as soon as practical following the end of the Plan Year in which employment terminated. If the Participant ceases to be an employee on account of disability following the end of a Plan Year but before an Incentive Award for that Plan Year has been paid, the Participant’s full Incentive Award shall be paid in cash in a single payment when it would otherwise have been paid. Notwithstanding the foregoing provisions of this Section 6.2 with respect to the payment of Incentive Awards, a Participant may receive his full Incentive Award, a portion of his full Incentive Award, or no portion thereof. Such determination shall be made by Management or by the Committee.

6.3 Leave of Absence.

A Participant on leave of absence for any portion of the Plan Year may receive his full Incentive Award, a portion of his full Incentive Award, or no portion thereof. Such determination shall be made by Management or by the Committee.

6.4 Retirement.

A Participant who retires during the Plan Year is eligible to receive a pro-rated Incentive Award based on performance to the date of retirement in cash in a single payment during or as soon as practical following the end of the fiscal year in which the Participant retires. A Participant has “retired” for purposes of this Plan if he terminates employment with the

5

Company after reaching age 55 with at least 10 years of service to the Company, including service to any entity that is acquired by the Company, provided that the Company may modify this provision as necessary to comply with applicable requirements or practices of relevant non-U.S. jurisdictions. Notwithstanding the foregoing provisions of this Section 6.4 with respect to the payment of Incentive Awards, a Participant may receive his full Incentive Award, a portion of his full Incentive Award, or no portion thereof. Such determination shall be made by Management or by the Committee.

VII. PAYMENT IN EVENT OF TERMINATION OF EMPLOYMENT

7.1 Involuntary Termination of Employment.

(a) If a Participant’s employment is terminated by the Company as a result of the Company’s dissatisfaction with the job related activities of the Participant or conviction of the Participant of a felony, the Participant shall forfeit any rights to any unpaid Incentive Awards under the Plan. Notwithstanding the foregoing, the Committee, in its sole discretion, may (x) pay the Participant a pro-rated Incentive Award based upon performance during the Plan Year to the date of termination or (y) pay the Participant’s full Incentive Award (or any greater amount).

(b) If a Participant’s employment is terminated for reasons other than those described in Sections 6 and 7.1(a) above, Management or the Committee shall have discretion to pay any or no portion of the Participant’s Incentive Award (or any greater amount) following such termination.

7.2 Voluntary Termination of Employment.

If a Participant voluntarily resigns from employment at the Company prior to the payment of an Incentive Award with respect to a Plan Year, no Incentive Award with respect to such Plan Year will be paid. The Participant shall forfeit the right to any Incentive Awards for such Plan Year and any subsequent Plan Year. Notwithstanding the foregoing, the Committee may (a) pay the Participant a pro-rated Incentive Award based upon performance during the Plan Year to the date of termination or (b) pay the Participant’s full Incentive Award (or any greater amount).

VIII. AMENDMENT OR TERMINATION

8.1 Amendment.

The Committee reserves the right, in its sole discretion to amend this Plan at any time in whole or in part; provided, however, that no amendment shall result in the forfeiture or cancellation of any Participant’s Incentive Award(s) earned as of the end of the fiscal year immediately preceding the date the Committee adopts the amendment, unless otherwise agreed to by the affected Participant(s).

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8.2 Termination.

The Committee may terminate the Plan at any time. Termination shall not result in the forfeiture or cancellation of any Participant’s Incentive Award(s) which have been determined but not yet paid, unless otherwise agreed to by the affected Participant(s).

IX. ADMINISTRATION

9.1 Administration of the Plan.

This Plan has been adopted by the stockholders of Franklin Resources, Inc. and shall be administered by the Committee.

(a) The Committee shall meet at such times and places and upon such notice as the chairperson determines in consultation with the other Committee members. A majority of the Committee shall constitute a quorum. Any acts by the Committee may be taken at any meeting at which a quorum is present and shall be by majority vote of those members entitled to vote. Additionally, any acts reduced to writing or approved in writing by all the members of the Committee shall be valid acts of the Committee.

(b) The Committee shall have the sole authority, in its absolute discretion, to adopt, amend, and rescind such policies and procedures as, in its opinion, may be advisable in the administration of the Plan, to construe and interpret the Plan, the policies and procedures, and any instruments evidencing Incentive Awards and to make all other determinations deemed necessary or advisable for the administration of the Plan. All decisions, determinations, and interpretations of the Committee shall be binding on all Participants.

(c) The Plan is intended to meet the requirements of the rules promulgated by the Securities and Exchange Commission under Section 16(b) of the Securities Exchange Act of 1934, as amended, and shall be administered and construed accordingly.

9.2 Non-alienation of Benefits.

No benefit under this Plan may be sold, assigned, transferred, conveyed, hypothecated, encumbered, anticipated, or otherwise disposed of, and any attempt to do so shall be void. No such benefit shall, prior to receipt thereof by a Participant, be in any manner subject to the debts, contracts, liabilities, engagements, or torts of such Participant.

9.3 No Limitation of Rights.

Nothing in this Plan shall be construed to limit in any way the Company’s general personnel policies and procedures particularly with respect to the right of the Company to terminate a Participant’s employment at any time for any reason whatsoever with or without cause; nor shall it be evidence of any agreement or understanding, express or implied, that the Company (a) will employ a Participant in any particular position, (b) will ensure participation in any incentive programs, or (c) will grant any awards for such programs.

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9.4 Applicable Law.

The provisions of the Plan shall be governed by and construed in accordance with the laws of the State of Delaware, with the exception of Delaware’s conflict of laws provisions.

9.5 Mandatory Arbitration.

The Participant and the Company agree to submit all disputes arising under the Plan or the participation by Participant in the Plan exclusively to final and binding arbitration in accordance with the Company’s dispute resolution policies with respect to employment arrangements and compensation plans as in effect from time to time.

X. FORFEITURE OF INCENTIVE AWARDS PURSUANT TO RESTATEMENT OF FINANCIAL RESULTS

Notwithstanding any other provision of this Plan to the contrary, in the event that (i) the Company issues a restatement of financial results to correct a material error and (ii) the Committee determines, in good faith, that a Participant’s fraud or willful misconduct was a significant contributing factor to the need to issue such restatement and (iii) some or all of the Incentive Award that was 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 the Incentive Award, including any shares of Stock or mutual fund shares, or the pre-tax income derived from any disposition of shares of Stock or mutual fund shares previously received in settlement of the Incentive Award 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 owed by the Company to the Participant.

*    *     *

This Plan was originally approved by the stockholders of Franklin Resources, Inc. on January 19, 1994. The stockholders of Franklin Resources, Inc. approved an amendment of the Plan on January 24, 1995. The Board of Directors of Franklin Resources, Inc. approved an amendment and restatement of the Plan on December 11, 2003 to (a) provide that up to 20% of PTOI may be allocated to the Award Pool by the Committee and (b) give broad discretion to the Committee in determining the amount of Incentive Awards payable to Participants in the Plan, which amendment and restatement was approved by the stockholders of Franklin Resources, Inc. on January 29, 2004. The Board of Directors of Franklin Resources, Inc. approved an amendment and restatement of the Plan on December 16, 2004 to provide that Incentive Awards may be paid in Options, SARs, Stock Unit Awards and Restricted Stock Unit Awards, which amendment and restatement was not subject to the approval of the stockholders of Franklin Resources, Inc. The Board of Directors of Franklin Resources, Inc. approved an amendment and restatement of the Plan on September 22, 2005 principally to (a) provide that the allocation of actual amounts to the Award Pool, Associates’ Pool(s) and/or Principals’ Pool(s) for a Plan Year and the determination and payment of actual Incentive Awards for a Plan Year may be made in advance of the

8

completion of such Plan Year and (b) make various conforming and other technical changes to the Plan, which amendment and restatement was not subject to the approval of the stockholders of Franklin Resources, Inc. The Board of Directors of Franklin Resources, Inc. approved an amendment and restatement of the Plan on December 16, 2005 principally to change the governing law of the Plan to Delaware, which amendment and restatement was not subject to the approval of the stockholders of Franklin Resources, Inc. The Board of Directors of Franklin Resources, Inc. approved an amendment and restatement of the Plan on December 13, 2006 principally to make clarifying and technical changes to the Plan, which amendment and restatement was not subject to the approval of the stockholders of Franklin Resources, Inc. The Board of Directors of Franklin Resources, Inc. approved an amendment and restatement of the Plan on March 16, 2010 principally to (a) make clarifying and technical changes to the Plan, including to extend certain administrative authority to appropriate officers and members of management personnel in addition to the Committee, as well as (b) include a clawback provision providing for the forfeiture of Incentive Awards by a Participant in the context of certain material financial restatements resulting from such Participant’s misconduct, which amendment and restatement was not subject to the approval of the stockholders of Franklin Resources, Inc.

FRANKLIN RESOURCES, INC.

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Gregory E. Johnson, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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: May 6, 2010	/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 quarterly report on Form 10-Q 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: May 6, 2010	/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 Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended March 31, 2010 (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: May 6, 2010	/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 Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended March 31, 2010 (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: May 6, 2010	/s/    KENNETH A. LEWIS
	Kenneth A. Lewis
	Executive Vice President and Chief Financial Officer