CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME(in thousands)as of and for the fiscal years ended September 30,2009, 2008 and 2007Common StockShares AmountCapital inExcess ofPar ValueRetainedEarningsAccumulatedOtherComprehensiveIncome (Loss)TotalStockholders’EquityTotalComprehensiveIncome (Loss)Balance at October 1, 2006 ........................ 253,249 $25,325 $ 185,583 $ 6,333,843 $ 139,977 $ 6,684,728Net income ...................................... 1,772,938 1,772,938 $1,772,938Other comprehensive incomeNet unrealized losses on investments, net of tax ..... (468) (468) (468)Currency translation adjustments ................. 117,585 117,585 117,585Minimum pension liability adjustment ............. (1,391) 1,831 440 1,831Total comprehensive income ........................ $1,891,886Repurchase of common stock ........................ (10,142) (1,014) (387,571) (900,072) (1,288,657)Cash dividends on common stock .................... (149,136) (149,136)Issuance of common stock under stock incentive plans andemployee stock investment plans ................... 1,077 108 95,412 95,520Issuance of common stock on exercise of stock options, netof forfeitures ................................... 1,286 128 65,493 65,621Tax benefit from employee stock plans ................ 38,608 38,608Stock-based compensation .......................... 3,866 3,866Adjustment to initially record the funded status of definedbenefit plans, net of tax .......................... (614) (614)Disproportional dividends on equity investment ......... (8,156) (8,156)Balance at September 30, 2007 ..................... 245,470 $24,547 $ — $ 7,049,417 $ 258,311 $ 7,332,275Net income ...................................... 1,588,213 1,588,213 $1,588,213Other comprehensive incomeNet unrealized losses on investments, net of tax ..... (107,875) (107,875) (107,875)Currency translation adjustments ................. (143,800) (143,800) (143,800)Net unrealized losses on defined benefit plans, net oftax ....................................... (282) (282) (282)Total comprehensive income ........................ $1,336,256Repurchase of common stock ........................ (14,241) (1,424) (158,201) (1,383,686) (1,543,311)Cash dividends on common stock .................... (188,813) (188,813)Issuance of common stock under stock incentive plans andemployee stock investment plans ................... 1,242 124 100,144 100,268Issuance of common stock on exercise of stock options, netof forfeitures ................................... 307 31 12,985 13,016Tax benefit from employee stock plans ................ 33,613 33,613Stock-based compensation .......................... 11,459 11,459Adjustment to initially record unrecognized tax benefits . . . (20,759) (20,759)Disproportional dividends on equity investment ......... 360 360Balance at September 30, 2008 ..................... 232,778 $23,278 $ — $ 7,044,732 $ 6,354 $ 7,074,364Net income ...................................... 896,778 896,778 $ 896,778Other comprehensive incomeNet unrealized gains on investments, net of tax ...... 106,897 106,897 106,897Currency translation adjustments ................. (8,288) (8,288) (8,288)Net unrealized losses on defined benefit plans, net oftax ....................................... (1,612) (1,612) (1,612)Total comprehensive income ........................ $ 993,775Repurchase of common stock ........................ (5,475) (548) (134,687) (241,672) (376,907)Cash dividends on common stock .................... (194,438) (194,438)Issuance of common stock under stock incentive plans andemployee stock investment plans ................... 1,512 151 109,292 109,443Issuance of common stock on exercise of stock options, netof forfeitures ................................... 509 51 22,184 22,235Tax benefit from employee stock plans ................ 7,349 7,349Stock-based compensation .......................... (4,138) (4,138)Disproportional dividends on equity investment ......... 490 490Balance at September 30, 2009 ..................... 229,324 $22,932 $ — $ 7,505,890 $ 103,351 $ 7,632,173See Notes to Consolidated Financial Statements.70
CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)for the fiscal years ended September 30, 2009 2008 2007Net Income ........................................... $ 896,778 $ 1,588,213 $ 1,772,938Adjustments to reconcile net income to net cash provided byoperating activities:Depreciation and amortization ............................. 181,272 215,222 198,619Stock-based compensation ................................ 84,443 80,705 90,145Excess tax benefit from stock-based compensationarrangements ........................................ (4,923) (27,905) (33,517)Net losses (gains) on sale of assets ......................... 1,665 (36,418) (96,805)Equity in net income of affiliated companies ................. (17,727) (28,353) (63,566)Provision for loan losses ................................. 5,789 13,407 2,877Other-than-temporary impairment of investments .............. 63,068 13,845 863Deferred income taxes ................................... 13,182 10,742 51,120Changes in operating assets and liabilities:(Increase) decrease in receivables, prepaid expenses and other . . . (34,280) 88,463 (231,238)Principal collected on (originations of) loans held for sale, net . . . 17,959 (184,185) (635,482)Proceeds from securitization of loans held for sale ............. — 394,299 684,173Increase in trading securities, net ........................... (397,508) (687,246) (217,122)Advances of deferred sales commissions .................... (98,140) (121,885) (159,551)(Decrease) increase in income taxes payable .................. (25,258) (990) 70,891(Decrease) increase in commissions payable .................. (10,672) (44,669) 63,701Increase in other liabilities ................................ 40,775 117,192 115,663(Decrease) increase in accrued compensation and benefits ....... (75,021) 18,804 59,924Net cash provided by operating activities .................. 641,402 1,409,241 1,673,633Purchase of investments .................................. (1,869,562) (1,887,971) (1,018,145)Liquidation of investments ............................... 2,296,850 1,184,579 877,364Purchase of banking/finance investments .................... (208,920) (213,400) (49,083)Liquidation of banking/finance investments .................. 65,001 46,886 62,091Decrease (increase) in loans receivable ...................... 51,220 (162,718) 8,056Additions of property and equipment, net .................... (45,183) (70,215) (94,144)Acquisitions of subsidiaries, net of cash acquired .............. 533 6,717 (92,307)Net cash provided by (used in) investing activities ........... 289,939 (1,096,122) (306,168)Increase (decrease) in bank deposits, net ..................... 94,301 128,268 (106,896)Exercise of common stock options ......................... 24,356 13,317 66,131Dividends paid on common stock .......................... (192,784) (179,033) (142,747)Purchase of common stock ............................... (376,907) (1,543,311) (1,288,657)Excess tax benefits from stock-based compensationarrangements ........................................ 4,923 27,905 33,517Proceeds from issuance of debt ............................ 569,395 1,251,851 537,206Payments on debt ....................................... (649,231) (1,764,387) (677,310)Minority interest ........................................ 185,339 765,415 129,509Net cash used in financing activities ....................... (340,608) (1,299,975) (1,449,247)Effect of exchange rate changes on cash and cash equivalents .... (13,834) (69,775) 52,830Increase (decrease) in cash and cash equivalents .............. 576,899 (1,056,631) (28,952)Cash and cash equivalents, beginning of year ................. 2,527,552 3,584,183 3,613,135Cash and Cash Equivalents, End of Year .................. $ 3,104,451 $ 2,527,552 $ 3,584,183See Notes to Consolidated Financial Statements.71[Table continued on next page]
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G A I N F R O M O U R P E R S P E C
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Letter to StockholdersGregory E. Jo
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LETTER TO STOCKHOLDERSHaving announ
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Directors and OfficersDirectorsChar
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Performance GraphThe following perf
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(MARK ONE)UNITED STATESSECURITIES A
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operational and other services requ
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A. Assets Under Management (“AUM
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60 days. If agreements representing
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Similar arrangements exist with the
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We generally operate our institutio
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Franklin Templeton Variable Insuran
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CATEGORY(and approximate amount of
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The following table sets forth the
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- Page 46 and 47: PART IIItem 5. Market for Registran
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Exhibit No.DescriptionEXHIBIT INDEX
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Exhibit No.Description10.22 Amendme
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(dollars in thousands)COMPUTATION O
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NameState or Nation ofIncorporation
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CONSENT OF INDEPENDENT REGISTERED P
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EXHIBIT 31.2CERTIFICATIONI, Kenneth
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CERTIFICATION PURSUANT TO 18 U.S.C.
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One Franklin ParkwaySan Mateo, CA 9