Welcome to Franklin Resources EarningsCall for the quarter ended September 30, 2007. Please note that the financialresults to be discussed in this conference call are preliminary. Statementsmade in this conference call regarding Franklin Resources Inc., which are nothistorical facts are forward looking statements within the meaning of thePrivate Securities Litigation Reform Act of 1995. These forward lookingstatements involve a number of known and unknown risks, uncertainties, andother important factors that could cause actual results to differ materiallyfrom any future results expressed or implied by such forward lookingstatements. These and other risk, uncertainties, and other important factorsare described in more detail in Franklin’s recent filings with the SEC.Including in the risk factors and MDNA sections of Franklin’s most recent form,10K and 10Q filings. I will now turn the call over to Greg Johnson, CEO. Mr.Johnson you may begin.

Thank you and good afternoon andthank you for joining us today. This is Greg Johnson, CEO of Franklin Resourcesand joining me today is Ken Lewis, our CFO. I’d say it’s a solid quarter but achallenging quarter to look at the volatility that we’ve seen, really the firstvolatility that we’ve seen for quite a few quarters in the market. Looking at the assets undermanagement they increase slightly to $645.9 billion which is up 3.5% and theaverage assets increased from 605 to 627 or about 3.6%. The mix really didn’t shift muchbut the net sales did shift towards fixed income and money funds and at quarterend equities represented 60% of our assets, fixed income 20.7, hybrid 18.1, andmoney funds 1.2%. Looking at the over all net salesI think we are pleased with the 9.8 billion in flows and a very difficultquarter and also during the summer months which tend to be slower. Thiscompares to 15.9 in the prior quarter and 2.4 in the September ’06 quarter. Wehad appreciation of 12.8 billion for the quarter. Overall sales were up 1.3%but redemptions were up 19% resulting in the 9.8 billion in net flows. It was our twenty seventhconsecutive quarter with positive sales and just looking at some of the fiscalyear numbers gross sales were up 44% to 185.5 billion, redemptions were up 19%to 139 and net sales up 46.6 billion which compares very favorably to 12.2 inthe prior year. Some of the flows by region, thenon US flows led the wave for the quarter, US sales sold off, or had the biggestincrease in redemptions and US net sales were 2.7 versus 9.1 in the priorquarter. Non US sales were 6.1 billion versus 6.8 and again resulting in 9.8versus 15.9. In the non US we did have astrong quarter and it was led by institutional…

Thank you, Greg. Hello everyone.Well, 2007 was a record setting year for Franklin Templeton. We couldn’t reallythink of a better way to mark our 60th anniversary than to set all time highsfor sales, assets under management… Comparing the fiscal year resultswe ended the yea with earnings per share of $7.03 which was an increase of 45%,net income of 1.8 billion, an increase of 40% and that was on revenues of 6.2billion which was an increase of 23% year over year. For the quarter, we were pleasedto see operating profits grow 4%, driven by a 4% growth in average assets undermanagement and investment management fees, but increased taxes and less nonoperating income caused quarterly earnings to decrease by 6.7% from the priorquarter. So we enter the quarter with netincome of 437 million and earnings per share of $1.76. There are really three meanthemes to highlight for the quarter. The first is that we were able to maintainconsistent operating margins despite increased cost of distribution. Second,that we generated less non operating income. And third, we experienced a morenormalized tax rate. Taking a look at some of the lineitems in revenue, investment management fees increased 3.8% driven by increasedoutfits under management, the effective C rate was relatively unchanged. You may recall last quarter wehad about $5 million of performance fees that we didn’t have this quarter. And I think that the big storyhere is the underwriting and distribution, the revenue decreased reflectinglower US retail sales and higher international institutional sales this quarteras Greg discussed. And while net underwritingdistribution revenue increased in absolute dollar terms our underwriting anddistribution margin declined to 4.35% for the quarter, as institutional andinternational products are more expensive to distribute than their UScounterparts. Now I think it’s important tonote here that this really is a point of sale issue and…

Thank you, Ken. Looking in the United Statesour fixed income sales and marketing campaign that we started last Januarycontinues to be very successful. Not only have we seen very strong growth innet flows but we’ve seen our market share within the retail channel continue toimprove. In Canada we had one of our best yearsin net sales, there on record. We announced a strategic jointventure in Dubai with a new firm called AlgebraCapitol, which really allows us to build out our local asset managementstrategy and offer and build a retail business in the Middle East and North Africa region. In Europe, we acquired a majoritystake in RIBA Financial Systems, which is a creator of the RIBA Transfer AgentSoftware Solution Suite, and it really allow us to control our next generationbuilding our offshore transfer agency capabilities in multi-currencies. In Polandwe announced our second global servicing center outside of the US and that will help service the growingEuropean business and especially Germany. And in Japan, as I mentionedearlier, we won our first offshore Japanese equity separate account mandate. On the institutional side welaunched our fourth global private real estate fund, The Franklin InternationalReal Estate Fund. So, in sum, it was a strongquarter, a solid quarter, as far as earnings and flows go, in a somewhatdifficult environment. And we would like to now open itup for your questions.

(Operator instructions) Yourfirst question comes from the line of Ken Worthington with J.P. Morgan

(Inaudible) Question before, butwith growth out performing value, what are you feeling towards Franklin havinga more meaningful presence in growth style products, and given the magnitude ofthe outperformance of growth or of value, do you feel you have the time, theresources, and the desire to maybe continue to build those organically?

I think that is obviously atimely question with the rotation that we have seen. In one of the areas that Ididn’t mention that’s had very strong performance growth fund and the capitolgrowth fund the flex cap growth fundable had very good performance and we arestarting to see flows pick up there so regardless of what we do in the future,I think we feel that we do have those funds and the track record now are at aperiod of time that make them very marketable and more importantly they’reperformance has been very solid there. So I think we are in a good to position,to you know if the market continues to rotate and close and continue to gothere to capture some of that.

Thanks, and then maybe for Ken,on the two expense signs on IT spending, you said a bunch of the spending thisquarter was discretionary. Is that recurring? Should we expect IT to remain atthe elevated level for the next couple of quarters or is that going to fallback down to you to 1Q, 2Q, 3Q levels of 07?

Well, you know as the businessexpands I think that’s a good use of company resources. I would say that thissequential increase you know the 12% was a little bit on the high side but aslong as the business expands I think you’ll see increased spending there.

Ok and then lastly on otherincome I think in 3Q there was some litigation expense. 4Q is a little high aswell. It was, I guess maybe that’s an unusual bucket anyway but is that thatlevel of expense also recurring or should that fall back down also?

I think that in that line itemthere was kind of a mixed bag of recurring and non recurring items.

So as we think about 1Q 08 and 2Q08 any help there?

That’s a tough one there’s a lotof things in that line and don’t forget that that line is also driven by AUM soif you see a big change in that that’ll effect that line as well there is someexpenses in there that are on a percentage basis (inaudible)

Ok thank you very much

The next question comes from theline of Cynthia Mayer of Merrill Lynch

Hi and good afternoon. Veryquickly I sort of had a similar question on the amortization line. It seemedlike a big jump for something that is just driven by sales of particular shareclasses. I guess that B shares outside of the U.S. I’m just wondering if thatwould be a good run rate.

This is the differed salescommission line I think you are referring to,

Aha

Yeah that one is definitelydependant on share classes like D shares and C shares in our case it’s more Cshare driven and it has a lag effect too. So when you see the increase in rateis from sales from previous quarters so given the fact that in this quarter wehad sort of a pullback in USsales relative to total you might expect that line to level out in the shortterm.

Oh so it’s lagged but sometimesthe lag is a little as a quarter?

It can be.

Ok and than on the foreign fund,the performance has improved but of course the star ratings reflect three,five, ten years. I am wondering how you think the outlook is for a turn inflows there, and what controls more, the short term performance or the starrating?

Well I think the short termperformance helps with the bulk of the redemptions which is around theinvestment only side which is a big part of that fund. but I don’t expect tosee a turn around quickly I just hope the number redemption number should dropas the relative performance improves and than how quickly the retail new flowscome in that’s going to lag more than the improvement in the redemption number.

Ok

You are more dependant on themorning star ratings (inaudible)

Right ok and then. And then I wasjust wondering if you could give us an update on the repatriated earnings atthis point. How are they being worked throughthe system or are you have any thoughts on?

Not much to report on that it’sworking through the system nicely, and we will probably use those funds soonerthan the five year time horizon.

Ok thank you

Your next questions comes fromthe line of Michael Hecht with Banc of America

Hi guys thanks, can you hear me?

Yes thank you

Hi, sorry about that. I thoughtyou could just update us on kind of a capital management thinking here I mean Iguess your current assets I guess we’ll get the cash and stuff (inaudible)rather I’m (inaudible) to quarter end but can you give us a sense of how muchcash or is excess is available (inaudible) for buybacks and such?

Well you know our we’re ourstrategy is going to continue to be opportunistic in (inaudible) repurchase asI mentioned before in terms of returning capital to shareholders we do try tofocus on not adding to the cash coffers we think that having a strong balancesheet is strategic and a strategic competitive advantage and the preferredmethod of we like the flexibility of share repurchase. but anything we havedone in the we open to anything that we have done in the past in terms ofreturning money to shareholders

OK that’s fair any updatedthoughts on how the outlook for acquisitions you note that you feel pretty wellpositioned from a growth, in a perfect world any areas where you would like tobe like to be bigger?

Nothing that we haven’t mentionedbefore we feel pretty comfortable about our prospects in the growth areaorganically, but we’re always out there beating the pavement and looking fornew opportunities and we’ll continue to do that.

Ok and than can we talk a littlebit more about the performance in Templeton is there any kind of FX impact thatyou had kind of in the quarter driving week of performance and I don’t know ifthat has any impacted mutual serious (inaudible) or given to have some internationalequity product as well and than any products you feel you are getting capacityconstrained onsets flows and (inaudible) effects have pretty strong so I meando you expect that the products?

We’re not seeing any capacityconstraints I mean the big one is the income fund and that’s a question that wesee quite a bit but I think the nature of the income fund with utilities andcorporate bonds and highly liquid investments we don’t really feel that that isreaching capacity at this stage but as we have always said if we think it’scrimping performance we will go ahead and close that.

Ok and than just last questionany expectations for growth and head count from here? I mean should we expect asimilar trajectory that we saw last year? Just to get (inaudible) 2008budgeting and stuff?

You know, it’s going to be afunction of how the business grows. Obviously having said that, we’re kind ofpartial to longer term planning around here. I can say this, the bulk of thegrowth you know we will try to fund in these lower cost centers going forward,so if there is growth and head count per capita increase, I think than theexpense line will not be as much as has been in the past.

Ok I will just sorry one more taxrate next year do we think similar to what you guys saw this year, full year?

Yeah well you know putting themix earnings aside which is of course a major factor in what drives the taxrate. There are probably I was looking for looking into the future there are atleast a dozen of variables that drive the rate one way or the other and I thinkon balance id’ have to say that the variables that have an upward bias slightlyoutweigh the ones that have been negative bias in terms of tax rate.

Ok thanks a lot.

Your next question comes from theline of Mike Carrier with UBS

Thanks just a quick question youguys went over the underrating distribution margin and it came in a bit lowthen where it was kind of trending over the past (inaudible) quarters I knowsome of the new funds, when you have new funds, it has some impact on that. ButI just wanted to get your color on what you were thinking of going forward? - UBS: Thanks just a quick question youguys went over the underrating distribution margin and it came in a bit lowthen where it was kind of trending over the past (inaudible) quarters I knowsome of the new funds, when you have new funds, it has some impact on that. ButI just wanted to get your color on what you were thinking of going forward?

Yeah you’re gonna its normal tosee volatility there. I think this quarter kind of illustrated what reallydrives that line, when you have kind of the sales mixed shift in a quartertowards non US retail. I mean from non US retail to non US andinstitutional, you are going to see that margin contract a little bit. So youwill see that volatility quarter to quarter, but I do think over the long termwe are seeing a downward trend there.

Ok and than just during thequarter you announced an outside joint venture with Algebra Capital. Just nottoo familiar with the region and just on (inaudible) side just curious just whythem as a partner? What’s the competition there whether it’s local orinternational? And than also what the opportunity? Is it more than on theinstitutional side? Or any on the retail side? And if you can size it up atall? - UBS: Ok and than just during thequarter you announced an outside joint venture with Algebra Capital. Just nottoo familiar with the region and just on (inaudible) side just curious just whythem as a partner? What’s the competition there whether it’s local orinternational? And than also what the opportunity? Is it more than on theinstitutional side? Or any on the retail side? And if you can size it up atall?

I’ll start it and Greg willprobably add. You know it’s one of our strategies for growth. We look at thatregion, there’s a lot of opportunity there’s a lot of potential for businessgrowth in that region. And we did not have local expertise and so we found somepartners that we thought did have that local expertise. I think the opportunitiesare both the on the institutional and the retail side.

I don’t, that’s fair.

Ok thanks - UBS: Ok thanks

(Operator Instructions) Your nextquestion comes from the line of William Katz with Buckingham Research.

Thank you and good afternooneveryone. I am struggling a little bit with trying to see where the earningsleverage is going to come from. I’m trying to balance your discussion that thesome of these lines that we were focused on are variable in nature. I meanyou’ve had 12% AUM growth over the last 9 months of so, and you’re operatingincome growth has been lagging that. Just trying and then if I look evensequentially your revenues and I realize distribution has an impact here, butyour revenues were flattish. And you had double digit growth on some of theseline items. So how do we think about the margin on the go forward basis? Itssort of feels like things have sort of peaked out. Help me understand thatbetter please?

Well I’m going to start with the(inaudible) you know a lot of its driven by what happens in the market. Theother thing I will point out is that this firm really is I think biased towardlong term decisions. And so we don’t really manage the short term profitmargin. But having said that if you look over at the year, you know we havebeen running at a fairly consistent operating margin which has just kind been aresidual of all the things we do here. I think that so I guess in answer toyour question, what I am saying is if we see a sharp increase in AUM in anygiven quarter, we’re not likely to go out and spend it all. The same thingwould hold true on the down side.

Ok and than just so distribution margins(inaudible) and a tax rate is edging higher, you really need to see a sort ofsort of a step up in the manufacturing margin at this point. Is that fair?

For the margin to continue?

Just so to see some materialearnings leverage at this point?

Thanks fair.

Ok. The other question I have isgoing to set us back to capital management and I guess a million shares seems alittle underwhelming relative to your capital base and your earnings leverage.Can you talk a little bit about your thinking in the quarter? I mean you have seena lot of the other asset managers buying, stepping in, and being more assertiveon capital management whether it’s adding leverage to the balance sheet, orwhether it’s just being more proactive in terms of buyback. Is it just ahusbanding of capital for uncertain times, product development, I appreciatethe 80% of net income going out but, just trying to understand how you arethinking about incremental returns on capital?

Yeah I think it’s a combinationof product development strategic competitive advantage going forward, and froma capital perspective we are going to continue on the path that we’ve had inthe last year, but we will be opportunistic, you know this was a prettyvolatile quarter.

Ok, just sort of curious you havenot talked about it directly in a while Greg. This big focus, I guess thismight be the year of a share from defined benefits and from definedcontribution. Can you give me an update a little bit on where you stand interms of the push into retirement services

Well you know I think the viewthat we have always taken is that we try to provide our funds in as manyretirement vehicles as possible and, you know, I think the shift from definedbenefit, to defined contribution benefits, are our style more than the shift tothe other way because of our mix of funds. And we’re not out there trying todevelop retirement platforms or compete in record-keeping and we’ve gotten awayfrom that. That’s really been our strategy, and really be an independent assetmanager that can, you know, because of our scale, can have service teams reallygoing after every part of the market where they have, where they are usingoutside funds. So that’s really been our retirement plan, and people talk abouthigher rollovers, “what’s your strategy there?” No, we are not in a positionwhere we are losing assets, like many firms can from that trend, we are in theposition of gaining assets. So our strategy is always to build as manyrelationships with as many advisors as possible and that’s really the beststrategy to capture rollover assets. So I think we are in a very good positionwith regard to the bigger trend in retirement.

OK, Just one more last thing,thanks for answering all the questions. As I look at the US business, atleast based on the SIM fund data, it seems like you’re lagging the industry andsome of your key peers in terms of the (chips) in equity. And just trying tounderstand how we should think about organic growth, if in fact there is a moredecisive style shift here, is your growth platform robust enough to potentialoffset some attrition that might start to come out from the macro level onvalue.

Well I think that’s a hard one toanswer. I mean obviously it’s not as large it doesn’t have the brand awarenesson the value side between Franklin and Templeton. But, you know, I think wehave addressed that and it’s one thing going out to starting funds, and sayingyou are in a position to capture assets, these funds have been around they havesignificant assets in them already and they have very good track records. So Idon’t think there’s any reason why we can’t go out and market thosesuccessfully and get very significant flows but whether or not you can capturewhatever you are going to lose if there is rotation I think that’s a questionfor the distribution teams and how they execute.

And, like your peers, are youseeing a big shift going on, sort of seemingly, at the moment?

Well you see the numbers. I thinkwe haven’t seen the big shift yet. We have been talking about a shift for a lotof years. I think the more recent relative performance you will start to see amovement because it’s fairly dramatic, but one could argue that it’s a shift totechnology stocks instead of the whole large cap and growth versus value, I getmore confused the more I look at it. I think that tech stocks, tech stocks havedone very well, large cap stocks because of the decline of the dollar, and Isee a lot of value funds that are positioned in both of those sectors. I justdon’t think that we are going to see this kind of rotation that was so crazy afew years back for a lot of reasons, for the internet and tech stocks andthings; and then it took a lot of years to get back to a more normalized valuation.And now you are seeing, you see both sides buying the two. So I think it reallycomes down to just relative performance and probably the dollar has beendriving a lot of the large cap movement lately.

Sure, ok thanks for answering allmy questions

The next question comes from theline of Marc Irizarry with Goldman Sachs

Oh great thanks, Gregory Johnsonyou guys obviously mentioned the quarter in terms of being a little bitabnormal in terms of, volatility and seeing money market flows increasing andmaybe some investor behavior that is maybe not sustainable. But what have youseen so far in terms of the way retail versus institutional investors have sortof reacted post -- maybe the Fed easing, thanks.

Well figure you will always seethere’s more volatility with retail relating to what’s happening, you know,with the marketplace and headlines and daily and that’s going to affect theredemption rates and certainly the new sales coming in a lot faster than itwill the institutional markets. The institutional market, and that’s consistentwith our results, didn’t really seem to be disrupted, disrupted by thevolatility in the quarter and clearly the retail market was disrupted. And alot of times people will just put off purchases until something like the fedcut and then you saw things move back pretty quickly in more of a normalizedenvironment. But clearly as quick as the markets come back the mindset of theretail investor is probably not where it was four or five months ago becausethat, you know, really significant shock as far, and still today reading allthe headlines and things people are going to be a little more cautious.

Okay great and, I know, there isprobably not much more help you can give, just on the other income line can yougive maybe a little bit of the, maybe color, behind the characteristics ofthose investment. So we can get a better sense of how we should be thinkingabout the change in that line item, thanks?

Well I can give you a littlecolor. Look at the last quarter; we talked about $13 million of earnings fromaffiliates; that is an annual event, that is seasonal, and so we did not havethat this quarter. And then the sponsored investment products is, you’reprobably talking mostly about equity funds there, whether it be internationalor domestic.

Okay, thanks

Your next question comes from theline of Christopher Spahr with Deutsche Bank.

Good afternoon I just wanted toget us to take a step back and get a sense of how much of your AUM are held bynon-US clients and what was the total level of flows by these clients duringthe quarter?

Non AUM…

Non-US domiciled AUM

40%

40% in terms of sales thisquarter? Or total?

That’s of assets from clientsthat reside outside of the US…

OK, at quarter end?

And I would have to look at what,I think. we have to look at what the flows were for the… US net was 3.7 and non6... so 60% or so was the exact reverse for the quarter for non-US versus theasset base. ..

In the previous quarter

So 60% non-US in terms of netflows for the quarter on a asset base that is 40%, that makes sense.

Okay, and I just…

I wouldn’t draw anything fromthat because, as I mentioned, there were a couple of big chunky institutionalaccounts that came in that were non US investors…

And any sense of the momentumgoing into the December quarter? Whether institutional or international?

You know, I think as wementioned, one we really can’t give you any guidance on that; but I thinkthat’s the first shock we seen in the retail marketplace and I don’t think theinstitutional market will be affected by what we’ve seen. That is as specificas I can get.

Thank you

There are no further questions atthis time sir

Ok, well thank you everyone forparticipating on the call and we look forward to chatting next quarter. Thankyou.

This does conclude today’sconference call, you may now disconnect your lines.