-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TJT6LASFYyusk6QDsDUKPlRlfuq9uSR11RFxhylO5rdGQFvH5vlKgZNWDh3IVZ8Z JbFmBaGpmy+H/Knp5b/pTw== 0000038777-04-000501.txt : 20041028 0000038777-04-000501.hdr.sgml : 20041028 20041028124033 ACCESSION NUMBER: 0000038777-04-000501 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20041028 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20041028 DATE AS OF CHANGE: 20041028 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRANKLIN RESOURCES INC CENTRAL INDEX KEY: 0000038777 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 132670991 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09318 FILM NUMBER: 041101666 BUSINESS ADDRESS: STREET 1: ONE FRANKLIN PARKWAY STREET 2: BUILDING 920 CITY: SAN MATEO STATE: CA ZIP: 94403 BUSINESS PHONE: 650-312-2000 MAIL ADDRESS: STREET 1: FRANKLIN RESOURCES INC STREET 2: ONE FRANKLIN PARKWAY CITY: SAN MATEO STATE: CA ZIP: 94403 8-K 1 form8k_4q04.txt EARNINGS RELEASE FOR 4TH QTR 2004 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 28, 2004 (October 28, 2004) FRANKLIN RESOURCES, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation) 1-9318 13-2670991 (Commission File Number) (IRS Employer Identification No.) One Franklin Parkway, San Mateo, California 94403 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (650) 312-3000 ---------------------------------------------- (Former name or former address, if changed since last report): Not Applicable Item 2.02. Results of Operations and Financial Condition On October 28, 2004, Franklin Resources, Inc. issued a press release announcing its financial results for the quarter ended September 30, 2004. A copy of that press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The information in this report, including the exhibit hereto, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities and Exchange Act of 1934, or otherwise subject to the liabilities of that Section. The information in this report, including the exhibit hereto, shall not be incorporated by reference into any filing of the registrant with the SEC, whether made before or after the date hereof, regardless of any general incorporation language in such filings (unless the registrant specifically states that the information or exhibit in this particular report is incorporated by reference). Item 7.01. Regulation FD Disclosure The information furnished pursuant to Item 2.02, "Results of Operations and Financial Condition", is incorporated herein by reference. 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 hereunto duly authorized. FRANKLIN RESOURCES, INC. (Registrant) Date: October 28, 2004 /s/ James R. Baio ---------------------------- James R. Baio Senior Vice President and Chief Financial Officer EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 99.1 Press Release issued on October 28, 2004 by Franklin Resources, Inc. EX-99 2 exh99-1.txt 4TH QUARTER EARNINGS PRESS RELEASE EXHIBIT 99.1 ------------ One Franklin Parkway San Mateo, CA 94403-1906 tel 650/312.2000 franklintempleton.com [LOGO OMITTED] - -------------------------------------------------------------------------------- Contact: Franklin Resources, Inc. Investor Relations: Greta Gahl (650) 312-4091 Corporate Communications: Lisa Gallegos (650) 312-3395 franklintempleton.com - -------------------------------------------------------------------------------- FOR IMMEDIATE RELEASE FRANKLIN RESOURCES, INC. ANNOUNCES FOURTH QUARTER RESULTS SAN MATEO, CA, OCTOBER 28, 2004 - Franklin Resources, Inc. (Franklin Templeton Investments) (NYSE: BEN) today reported net income of $199.9 million, or $0.79 per share diluted on revenues of $881.7 million for the quarter ended September 30, 2004. In the quarter ended June 30, 2004, net income was $173.9 million, or $0.69 per share diluted, on revenues of $867.8 million. For the quarter ended September 30, 2003, net income was $152.1 million, or $0.61 per share diluted on revenues of $724.6 million. Operating income increased 8% this quarter over the prior quarter and increased 30% over the same quarter in the prior year. Net income for the year ended September 30, 2004, was $718.9 million, or $2.85 per share diluted, on revenues of $3,438.2 million as compared to net income of $502.8 million, or $1.97 per share diluted, on revenues of $2,632.1 million for the year ended September 30, 2003. Operating income increased 46% as compared to the prior year reflecting a 26% increase in simple monthly average assets under management. Results for the year ended September 30, 2004 include an $86.5 million ($68.4 million, net of taxes) provision for governmental investigations, proceedings and actions. As of September 30, 2004, assets under management by the company's subsidiaries were $361.9 billion, as compared to $350.8 billion last quarter and $301.9 billion at this time last year. Simple monthly average assets under management during the current quarter were $353.3 billion compared to $347.8 billion in the preceding quarter and $294.0 billion in the same quarter a year ago. Equity assets now comprise 55% of total assets under management as compared to 56% last quarter and 51% at September 30, 2003. Fixed-income assets now comprise 27% of total assets under management as compared to 27% last quarter and 32% at the same time last year. As of September 30, 2004, hybrid assets account for 16% of total assets under management as compared to 16% last quarter and 15% at September 30, 2003. Sales exceeded redemptions by $6.6 billion for the current quarter compared to $2.0 billion for the prior quarter and $4.9 billion for the comparable quarter a year ago. FISCAL FOURTH QUARTER 2004 HIGHLIGHTS PERFORMANCE AND PRODUCTS1,2 (See important footnotes in "Supplemental Information" section at the end of the release.) * Over 80% of Franklin Templeton's long-term mutual fund assets were in funds ranked in the top two quartiles of their respective LIPPER peer groups for the one-year period ended September 30, 2004, while 96% of long-term mutual fund assets were in funds ranked in the top two quartiles for the three-, five- and 10-year periods. /3,/4 * Over 95% of Franklin Templeton's fixed income mutual fund assets were in funds ranked in the top two quartiles of their respective LIPPER peer groups for the one-, three-, five- and 10-year periods ended September 30, 2004. /3,/5 * Over 70% of Franklin Templeton's equity mutual fund assets were in funds ranked in the top two quartiles of their respective LIPPER peer groups for the one-year period ended September 30, 2004, while over 90% of equity mutual fund assets were in funds ranked in the top two quartiles for the three-, five- and 10-year periods. /3,/6 * Franklin Income Fund, the company's largest fund with $25 billion in assets, ranked in the top quartile of the LIPPER Income Funds peer group for total return among 175, 113, 78 and 19 funds for the one-, three-, five- and 10-year periods as of September 30, 2004. The fund, managed by Franklin Advisers, Inc., also received Lipper Leader awards for Consistent Return, Preservation and Total Return and was rated 5 stars overall by MORNINGSTAR among 216 Conservative Allocation funds as of September 30, 2004. /7,/11,/12 * Franklin Federal Tax-Free Income Fund, managed by Franklin Advisers, Inc., ranked in the top two quartiles of the LIPPER General Municipal Debt Funds peer group for total return among 299, 265, 230 and 128 funds for the one-, three-, five- and 10-year periods ended September 30, 2004. The fund also received a Lipper Leader award for Consistent Return and was rated 4 stars overall by MORNINGSTAR among 254 Muni National Long funds as of September 30, 2004. /8,/11,/12 * Franklin Flex Cap Growth Fund, a U.S. domestic equity fund managed by Franklin Advisers, Inc., ranked in the top quintile of the LIPPER Multi-Cap Growth Funds peer group for total return among 429, 349, 207 and 71 funds for the one-, three-, five- and 10-year periods ended September 30, 2004. The fund also received a Lipper Leader award for Total Return as of September 30, 2004. /9,/11 * Templeton Growth Fund, managed by Templeton Global Advisors Limited, ranked in the top two quartiles of the LIPPER Global Large-Cap Value Funds peer group for total return among 24, 23, 18 and 3 funds for the one-, three-, five- and 10-year periods ended September 30, 2004. The fund also received Lipper Leader awards for Consistent Return, Preservation and Total Return, and was rated 5 stars overall by MORNINGSTAR among 255 World Stock funds as of September 30, 2004. /10,/11,/12 PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE QUOTED. PLEASE CALL FRANKLIN TEMPLETON INVESTMENTS AT 1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM FOR MOST RECENT MONTH-END PERFORMANCE. GLOBAL BUSINESS DEVELOPMENTS * In DALBAR's 2004 annual survey of Back Office Operation Managers, Franklin Templeton ranked #3 out of 10 in Overall Operations Support, which is an improvement from last year's fifth place ranking. * In a quarterly survey of Defined Contribution plan sponsors conducted by National Quality Review (NQR), a third party customer service evaluator, 95% of top-tier clients and 100% of mid-tier clients responding to the survey indicated that they would recommend Franklin Templeton Retirement Services to others. * Franklin Templeton's Korean office received the "2003 Best Performance Award" from the Korean government's National Pension Corporation. * Received approval from the China Securities Regulatory Commission to create a joint venture investment management company in China. Franklin Templeton will initially own 33%. * Mayflower Fund, a Japanese registered fund of funds investing in GNMA pass-through securities, exceeded $3 billion in assets making it the fifth largest of the approximately 1,900 publicly offered investment trust funds in Japan. 2 * Effective October 2004, Franklin Templeton Private Client Group changed its name to Franklin Templeton Portfolio Advisors, Inc. and reached its highest assets under management in its history. * Launched Templeton Growth Fund 50th anniversary sales and marketing campaign. 3
FRANKLIN RESOURCES, INC. CONSOLIDATED INCOME STATEMENTS (Dollar amounts in thousands except assets under THREE MONTHS ENDED YEAR ENDED management and per share data) SEPTEMBER 30 SEPTEMBER 30 ------------------------------------------------------------ % % 2004 2003 CHANGE 2004 2003 CHANGE ---- ---- -------- ---- ---- -------- OPERATING REVENUES Investment management fees $511,116 $411,469 24% $1,970,628 $1,487,331 32% Underwriting and distribution fees 293,464 241,620 21% 1,150,922 852,350 35% Shareholder servicing fees 60,419 56,429 7% 244,063 217,225 12% Consolidated sponsored investment products income, net 874 93 840% 3,519 93 3,684% Other, net 15,859 15,017 6% 69,076 75,125 (8%) ------------------------------------------------------------ TOTAL OPERATING REVENUES 881,732 724,628 22% 3,438,208 2,632,124 31% ------------------------------------------------------------ OPERATING EXPENSES Underwriting and distribution 266,076 214,530 24% 1,035,111 768,519 35% Compensation and benefits 189,563 166,725 14% 769,438 649,882 18% Information systems, technology and occupancy 68,015 70,871 (4%) 273,540 285,329 (4%) Advertising and promotion 27,711 23,248 19% 112,017 92,399 21% Amortization of deferred sales commissions 26,760 21,257 26% 98,893 73,501 35% Amortization of intangible assets 4,403 4,245 4% 17,604 16,961 4% Provision for governmental investigations, proceedings and actions 5,000 -- N/A 86,500 -- N/A September 11, 2001 recovery, net -- (4,401) (100%) (30,277) (4,401) 588% Other 33,935 28,613 19% 126,057 101,858 24% ------------------------------------------------------------ TOTAL OPERATING EXPENSES 621,463 525,088 18% 2,488,883 1,984,048 25% ------------------------------------------------------------ OPERATING INCOME 260,269 199,540 30% 949,325 648,076 46% ------------------------------------------------------------ OTHER INCOME (EXPENSES) Consolidated sponsored investment products (losses) gains, net (2,963) 1,645 N/A 3,393 1,645 106% Investment and other income 30,869 20,116 53% 90,306 70,392 28% Interest expense (7,916) (7,105) 11% (30,658) (19,910) 54% ------------------------------------------------------------ OTHER INCOME, NET 19,990 14,656 36% 63,041 52,127 21% ------------------------------------------------------------ Income before taxes on income and cumulative effect of an accounting change 280,259 214,196 31% 1,012,366 700,203 45% Taxes on income 80,384 62,117 29% 298,287 197,373 51% ------------------------------------------------------------ INCOME BEFORE CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE, NET OF TAX 199,875 152,079 31% 714,079 502,830 42% Cumulative effect of an accounting change, net of tax -- -- -- 4,779 -- N/A ------------------------------------------------------------ NET INCOME $199,875 $152,079 31% $718,858 $502,830 43% ============================================================ BASIC EARNINGS PER SHARE Income before cumulative effect of an accounting change $0.80 $0.61 31% $2.87 $1.98 45% Cumulative effect of an accounting change -- -- -- 0.02 -- N/A ------------------------------------------------------------ Net income $0.80 $0.61 31% $2.89 $1.98 46% ============================================================ DILUTED EARNINGS PER SHARE Income before cumulative effect of an accounting change $0.79 $0.61 30% $2.83 $1.97 44% Cumulative effect of an accounting change -- -- -- 0.02 -- N/A ------------------------------------------------------------ Net income $0.79 $0.61 30% $2.85 $1.97 45% ============================================================ DIVIDENDS PER SHARE $0.085 $0.075 13% $0.340 $0.300 13% AVERAGE SHARES OUTSTANDING (in thousands) Basic 249,564 247,761 1% 249,166 253,714 (2%) Diluted 252,429 249,263 1% 252,152 254,681 (1%)
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FRANKLIN RESOURCES, INC. CONSOLIDATED INCOME STATEMENTS (Dollar amounts in thousands except assets under THREE MONTHS ENDED YEAR ENDED management and per share data) SEPTEMBER 30 SEPTEMBER 30 ------------------------------------------------------------ % % 2004 2003 CHANGE 2004 2003 CHANGE ---- ---- -------- ---- ---- -------- OPERATING MARGIN /1 30% 28% -- 28% 25% -- ASSETS UNDER MANAGEMENT (in millions) Beginning of period $350,775 $286,954 22% $301,857 $247,760 22% Sales 23,360 24,598 (5%) 96,843 81,297 19% Reinvested distributions 818 657 25% 4,862 3,691 32% Redemptions (16,776) (19,697) (15%) (74,425) (66,865) 11% Distributions (1,308) (1,194) 10% (7,076) (5,960) 19% Acquisitions -- -- -- 878 -- N/A Appreciation 4,991 10,539 (53%) 38,921 41,934 (7%) END OF PERIOD $361,860 $301,857 20% $361,860 $301,857 20% SIMPLE MONTHLY AVERAGE FOR PERIOD $353,295 $293,979 20% $340,242 $269,779 26%
/1 Operating margin: Operating income divided by total operating revenues. 5
FRANKLIN RESOURCES, INC. CONSOLIDATED INCOME STATEMENTS (Dollar amounts in thousands except per share data) THREE MONTHS ENDED 30-SEP-04 30-JUN-04 % CHANGE 31-MAR-04 31-DEC-03 30-SEP-03 --------------------------------------------------------------- OPERATING REVENUES Investment management fees $511,116 $505,409 1% $499,595 $454,508 $411,469 Underwriting and distribution fees 293,464 282,852 4% 298,357 276,249 241,620 Shareholder servicing fees 60,419 60,582 -- 61,724 61,338 56,429 Consolidated sponsored investment products income, net 874 1,136 (23%) 1,483 26 93 Other, net 15,859 17,836 (11%) 17,836 17,545 15,017 ----------------------------------------------------------------- TOTAL OPERATING REVENUES 881,732 867,815 2% 878,995 809,666 724,628 ----------------------------------------------------------------- OPERATING EXPENSES Underwriting and distribution 266,076 252,250 5% 268,057 248,728 214,530 Compensation and benefits 189,563 193,532 (2%) 197,139 189,204 166,725 Information systems, technology and occupancy 68,015 67,464 1% 68,413 69,648 70,871 Advertising and promotion 27,711 31,139 (11%) 31,935 21,232 23,248 Amortization of deferred sales commissions 26,760 24,688 8% 24,997 22,448 21,257 Amortization of intangible assets 4,403 4,398 -- 4,401 4,402 4,245 Provision for governmental investigations, proceedings and actions 5,000 21,500 (77%) 60,000 -- -- September 11, 2001 recovery, net -- -- -- (30,277) -- (4,401) Other 33,935 31,858 7% 29,120 31,144 28,613 ----------------------------------------------------------------- TOTAL OPERATING EXPENSES 621,463 626,829 (1%) 653,785 586,806 525,088 ----------------------------------------------------------------- OPERATING INCOME 260,269 240,986 8% 225,210 222,860 199,540 ----------------------------------------------------------------- OTHER INCOME (EXPENSES) Consolidated sponsored investment products (losses) gains, net (2,963) (3,463) (14%) 5,819 4,000 1,645 Investment and other income 30,869 14,300 116% 28,946 16,191 20,116 Interest expense (7,916) (7,832) 1% (7,799) (7,111) (7,105) ----------------------------------------------------------------- OTHER INCOME, NET 19,990 3,005 565% 26,966 13,080 14,656 ----------------------------------------------------------------- Income before taxes on income and cumulative effect of an accounting change 280,259 243,991 15% 252,176 235,940 214,196 Taxes on income 80,384 70,095 15% 79,385 68,423 62,117 ----------------------------------------------------------------- INCOME BEFORE CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE, NET OF TAX 199,875 173,896 15% 172,791 167,517 152,079 Cumulative effect of an accounting change, net of tax -- -- -- -- 4,779 -- ----------------------------------------------------------------- NET INCOME $199,875 $173,896 15% $172,791 $172,296 $152,079 ================================================================= BASIC EARNINGS PER SHARE Income before cumulative effect of an accounting change $0.80 $0.70 14% $0.69 $0.68 $0.61 Cumulative effect of an accounting change -- -- -- -- 0.02 -- ----------------------------------------------------------------- Net income $0.80 $0.70 14% $0.69 $0.70 $0.61 ================================================================= DILUTED EARNINGS PER SHARE Income before cumulative effect of an accounting change $0.79 $0.69 14% $0.68 $0.67 $0.61 Cumulative effect of an accounting change -- -- -- -- 0.02 -- ----------------------------------------------------------------- Net income $0.79 $0.69 14% $0.68 $0.69 $0.61 ================================================================= DIVIDENDS PER SHARE $0.085 $0.085 -- $0.085 $0.085 $0.075
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FRANKLIN RESOURCES, INC. CONSOLIDATED INCOME STATEMENTS THREE MONTHS ENDED 30-SEP-04 30-JUN-04 % CHANGE 31-MAR-04 31-DEC-03 30-SEP-03 --------- --------- -------- --------- --------- --------- AVERAGE SHARES OUTSTANDING (in thousands) Basic 249,564 249,802 -- 249,549 247,758 247,761 Diluted 252,429 253,116 -- 252,823 250,234 249,263 OPERATING MARGIN /2 30% 28% -- 26% 28% 28% EMPLOYEES 6,696 6,557 2% 6,484 6,462 6,504 BILLABLE SHAREHOLDER ACCOUNTS (in millions) 15.3 15.9 (4%) 16.0 15.1 14.2
/2 Operating margin: Operating income divided by total operating revenues. 7
FRANKLIN RESOURCES, INC. PRELIMINARY SUMMARY BALANCE SHEET (Dollar amounts in thousands) PRELIMINARY SEPTEMBER 30, SEPTEMBER 30, 2004 2003 ---------- ---- ASSETS Current assets $4,036,552 $2,968,827 Banking/ finance assets 825,391 918,425 Non-current assets 3,358,079 3,083,497 - --------------------------------------------------------------------------------------- TOTAL ASSETS $8,220,022 $6,970,749 - --------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $904,177 $488,526 Banking/ finance liabilities 658,264 801,980 Non-current liabilities 1,464,338 1,344,791 - --------------------------------------------------------------------------------------- Total liabilities 3,026,779 2,635,297 Minority interest 76,089 25,344 Total stockholders' equity 5,117,154 4,310,108 - --------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $8,220,022 $6,970,749 - --------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------- ENDING SHARES OF COMMON STOCK OUTSTANDING 249,680 245,932 - ---------------------------------------------------------------------------------------
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ASSETS UNDER MANAGEMENT BY INVESTMENT OBJECTIVE (in billions) 30-SEP-04 30-JUN-04 % CHANGE 31-MAR-04 31-DEC-03 30-SEP-03 ------------------------------------------------------------------ EQUITY Global/international $132.9 $128.6 3% $126.7 $118.5 $99.8 Domestic (U.S.) 66.4 66.3 -- 66.0 63.6 55.4 ------------------------------------------------------------------ Total equity 199.3 194.9 2% 192.7 182.1 155.2 ------------------------------------------------------------------ HYBRID 59.0 55.9 6% 54.1 51.1 45.8 FIXED-INCOME Tax-free 51.3 49.9 3% 53.0 52.4 52.2 Taxable: Domestic (U.S.) 31.3 30.1 4% 32.4 32.2 31.1 Global/international 14.2 13.6 4% 13.6 13.1 11.8 ------------------------------------------------------------------ Total 96.8 93.6 3% 99.0 97.7 95.1 fixed-income ------------------------------------------------------------------ MONEY MARKET 6.8 6.4 6% 5.8 5.8 5.8 ------------------------------------------------------------------ TOTAL ENDING ASSETS $361.9 $350.8 3% $351.6 $336.7 $301.9 ------------------------------------------------------------------ SIMPLE MONTHLY AVERAGE ASSETS $353.3 $347.8 2% $345.7 $318.7 $294.0 ==================================================================
ASSETS UNDER MANAGEMENT & FLOWS (in billions) THREE MONTHS ENDED 30-SEP-04 30-JUN-04 % CHANGE 30-SEP-03 % CHANGE --------- --------- -------- --------- -------- BEGINNING ASSETS UNDER MANAGEMENT $350.8 $351.6 -- $287.0 22% U.S. RETAIL ASSETS Beginning assets $217.6 $218.5 -- $180.0 21% --------------------------------------------------------------------------------------------- Sales 11.0 11.0 -- 12.9 (15%) Reinvested distributions 0.7 1.1 (36%) 0.6 17% Redemptions (7.5) (10.0) (25%) (10.0) (25%) Distributions (1.2) (1.6) (25%) (1.1) 9% Acquisitions -- -- -- -- -- Appreciation/(depreciation) 3.7 (1.4) N/A 5.6 (34%) --------------------------------------------------------------------------------------------- Ending assets $224.3 $217.6 3% $188.0 19% --------------------------------------------------------------------------------------------- OTHER ASSETS, INCLUDING INTERNATIONAL AND INSTITUTIONAL Beginning assets $133.2 $133.1 -- $107.0 24% --------------------------------------------------------------------------------------------- Sales 12.4 12.8 (3%) 11.7 6% Reinvested distributions 0.1 0.1 -- -- N/A Redemptions (9.3) (11.8) (21%) (9.7) (4%) Distributions (0.1) (0.1) -- (0.1) -- Acquisitions -- -- -- -- -- Appreciation/(depreciation) 1.3 (0.9) N/A 5.0 (74%) --------------------------------------------------------------------------------------------- Ending assets $137.6 $133.2 3% $113.9 21% --------------------------------------------------------------------------------------------- ENDING ASSETS UNDER MANAGEMENT $361.9 $350.8 3% $301.9 20% TOTAL ASSETS UNDER MANAGEMENT BEGINNING ASSETS $350.8 $351.6 -- $287.0 22% -------------------------------------------------------------------------------------------- Sales 23.4 23.8 (2%) 24.6 (5%) Reinvested distributions 0.8 1.2 (33%) 0.6 33% Redemptions (16.8) (21.8) (23%) (19.7) (15%) Distributions (1.3) (1.7) (24%) (1.2) 8% Acquisitions -- -- -- -- -- Appreciation/(depreciation) 5.0 (2.3) N/A 10.6 (53%) -------------------------------------------------------------------------------------------- ENDING ASSETS $361.9 $350.8 3% $301.9 20% -------------------------------------------------------------------------------------------- Note: Institutional assets totaling approximately $27.3 billion are invested in U.S. retail fund and annuity products and are disclosed in U.S. retail assets in the above table. Total institutional and high net-worth assets at September 30, 2004, were approximately $116.7 billion, of which high net-worth assets comprised $11.7 billion.
9
ASSETS UNDER MANAGEMENT & FLOWS BY INVESTMENT OBJECTIVE (in billions) THREE MONTHS ENDED 30-SEP-04 30-JUN-04 30-SEP-03 - ------------------ --------- --------- --------- GLOBAL/INTERNATIONAL EQUITY Beginning assets $128.6 $126.7 $91.6 ------------------------------------------------------------------------------------------ Sales 7.6 8.8 7.9 Reinvested distributions -- 0.1 -- Redemptions (4.6) (6.3) (7.3) Distributions (0.1) (0.2) -- Acquisitions -- -- -- Appreciation/(depreciation) 1.4 (0.5) 7.6 ------------------------------------------------------------------------------------------ Ending assets 132.9 128.6 99.8 ------------------------------------------------------------------------------------------ DOMESTIC (U.S.) EQUITY Beginning assets 66.3 66.0 50.7 ------------------------------------------------------------------------------------------ Sales 3.4 3.7 4.3 Reinvested distributions -- 0.2 -- Redemptions (2.7) (4.0) (2.1) Distributions -- (0.2) -- Acquisitions -- -- -- (Depreciation)/appreciation (0.6) 0.6 2.5 ------------------------------------------------------------------------------------------ Ending assets 66.4 66.3 55.4 ------------------------------------------------------------------------------------------ HYBRID Beginning assets 55.9 54.1 42.8 ------------------------------------------------------------------------------------------ Sales 3.4 3.1 3.2 Reinvested distributions 0.3 0.3 0.1 Redemptions (1.1) (1.2) (1.1) Distributions (0.4) (0.4) (0.2) Acquisitions -- -- -- Appreciation 0.9 -- 1.0 ------------------------------------------------------------------------------------------ Ending assets 59.0 55.9 45.8 ------------------------------------------------------------------------------------------ TAX-FREE INCOME Beginning assets 49.9 53.0 53.6 ------------------------------------------------------------------------------------------ Sales 1.2 1.1 1.6 Reinvested distributions 0.3 0.3 0.3 Redemptions (1.4) (2.2) (2.2) Distributions (0.5) (0.6) (0.6) Acquisitions -- -- -- Appreciation/(depreciation) 1.8 (1.7) (0.5) ------------------------------------------------------------------------------------------ Ending assets 51.3 49.9 52.2 ------------------------------------------------------------------------------------------ TAXABLE FIXED-INCOME Beginning assets 43.7 46.0 42.3 ------------------------------------------------------------------------------------------ Sales 4.2 4.2 5.1 Reinvested distributions 0.2 0.3 0.2 Redemptions (3.6) (5.3) (4.1) Distributions (0.3) (0.3) (0.4) Acquisitions -- -- -- Appreciation/(depreciation) 1.3 (1.2) (0.2) ------------------------------------------------------------------------------------------ Ending assets 45.5 43.7 42.9 ------------------------------------------------------------------------------------------ MONEY MARKET Beginning assets 6.4 5.8 6.0 ------------------------------------------------------------------------------------------ Sales 3.6 2.9 2.5 Reinvested distributions -- -- -- Redemptions (3.4) (2.8) (2.9) Distributions -- -- -- Acquisitions -- -- -- Appreciation 0.2 0.5 0.2 ------------------------------------------------------------------------------------------ Ending assets 6.8 6.4 5.8 ------------------------------------------------------------------------------------------ ENDING ASSETS UNDER MANAGEMENT $361.9 $350.8 $301.9
10 CONFERENCE CALL INFORMATION - --------------------------- On Thursday, October 28, 2004, Franklin Resources, Inc., [NYSE:BEN] will release its fourth fiscal quarter 2004 financial results. Martin Flanagan and Greg Johnson, co-CEOs of Franklin Resources, Inc., will lead a live conference call at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss the quarterly results and answer analysts' questions. Access to the teleconference will be available via franklintempleton.com 10 minutes before the start of the call or by dialing (877) 574-4065 in the U.S. or (706) 679-3804 internationally. A replay of the call will be archived on franklintempleton.com through November 4, 2004. The replay can also be accessed by calling (800) 642-1687 in the U.S. or (706) 645-9291 internationally using access code #1232999, after 5:30 p.m. Eastern Time on October 28, 2004, through 11:59 p.m. Eastern Time on November 4, 2004. Questions regarding the teleconference call should be directed to Franklin Resources, Inc., Investor Relations at (650) 525-8900 or Corporate Communications at (650) 312-3395. Franklin Resources, Inc. [NYSE:BEN], is a global investment organization operating as Franklin Templeton Investments. Franklin Templeton Investments provides global and domestic investment management solutions managed by its Franklin, Templeton, Mutual Series and Fiduciary Trust investment teams. The San Mateo, CA-based company has more than 50 years of investment experience and over $361 billion in assets under management as of September 30, 2004. For more information, please call 1-800/DIAL BEN(R) or visiT franklintempleton.com. SUPPLEMENTAL INFORMATION INVESTORS SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE INVESTING. TO OBTAIN A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION, FOR ANY U.S. FRANKLIN TEMPLETON FUND, INVESTORS SHOULD TALK TO THEIR FINANCIAL ADVISORS OR CALL FRANKLIN TEMPLETON DISTRIBUTORS, INC. AT 1-800/DIAL BEN(R) (1-800/342-5236). PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. 1. Nothing in this section shall be considered a solicitation to buy or an offer to sell a security to any person in any jurisdiction where such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Franklin Templeton Distributors, Inc., One Franklin Parkway, San Mateo, CA, is the funds' principal distributor and a wholly owned subsidiary of Franklin Resources, Inc. 2. MORNINGSTAR ratings and LIPPER rankings for Franklin Templeton funds are based on Class A shares, with the exception of LIPPER rankings for Mutual Series funds, which are based on Class Z shares. Class Z shares are offered to qualified investors only and have no sales charges nor Rule 12b-1 fees. Franklin Templeton funds are compared against a universe of all share classes. All Franklin Templeton Class A (Class Z) asset data is based on 8/31/04 figures unless noted otherwise. Indices are unmanaged and one cannot invest directly in them. Unless otherwise noted, fund returns quoted reflect Class A shares. Performance returns, ratings and rankings for other classes may vary. 3. LIPPER calculates averages by taking all the funds and share classes in a peer group and averaging their total returns for the periods indicated. LIPPER tracks 143 peer groups of long-term U.S. retail mutual funds, and the groups vary in size from 4 to 987 funds. LIPPER total return calculations include reinvested dividends and capital gains, but do not include sales charges or expense subsidization by the manager. Results may have been different if these or other factors had been considered. 4. Source: LIPPER(R) Inc., 9/30/04. Of the eligible Franklin Templeton long-term mutual funds tracked by LIPPER, 48, 52, 46 and 29 funds ranked in the top quartile and 25, 26, 33 and 26 funds ranked in the second quartile, for the one-, three-, five- and 10-year periods, respectively, in their respective LIPPER peer groups. 5. Source: LIPPER(R) Inc., 9/30/04. Of the eligible Franklin Templeton non-money market fixed income funds tracked by LIPPER, 33, 30, 23 and 18 funds ranked in the top quartile and 10, 11, 18 and 19 funds ranked in the second quartile, for the one-, three-, five- and 10-year periods, respectively, in their respective LIPPER peer groups. 6. Source: LIPPER(R) Inc., 9/30/04. Of the eligible Franklin Templeton equity funds tracked by LIPPER, 15, 22, 23 and 11 funds ranked in the top quartile and 15, 15, 15 and 7 funds ranked in the second quartile, for the one-, three-, five- and 10-year periods, respectively, for their respective LIPPER peer groups. 11 7. Source: Lipper(R) Inc., 9/30/04. Franklin Income Fund Class A ranked 26 in a universe of 175 funds in Lipper's "Income Funds" group for the one-year period, 2 of 113 for the three-year period, 2 of 78 for the five-year period and 5 of 19 for the 10-year period. 8. Source: Lipper(R) Inc., 9/30/04. Franklin Federal Tax-Free Income Fund Class A ranked 21 in a universe of 299 funds in Lipper's "General Municipal Debt Funds" group for the one-year period, 66 of 265 for the three-year period, 91 of 230 for the five-year period and 40 of 128 for the 10-year period. 9. Source: Lipper(R) Inc., 9/30/04. Franklin Flex Cap Growth Fund Class A ranked 48 in a universe of 429 funds in Lipper's "Multi-Cap Growth Funds" group for the one-year period, 33 of 349 for the three-year period, 15 of 207 for the five-year period and 5 of 71 for the 10-year period. 10. Source: Lipper(R) Inc., 9/30/04. Templeton Growth Fund Class A ranked 7 in a universe of 24 funds in Lipper's "Global Large-Cap Value Funds" group for the one-year period, 2 of 23 for the three-year period, 2 of 18 for the five-year period and 1 of 3 for the 10-year period. 11. Source: Lipper(R) Inc., 9/30/04. A Lipper Leaders distinction does not imply that a fund named as a Lipper Leader had the best performance in its category. Lipper Leaders Awards are based on Class A shares. Lipper ratings for Consistent Return reflect funds' historical risk-adjusted returns, adjusted for volatility, relative to peers. Lipper ratings for Total Return reflect funds' historical total return performance relative to peers. Lipper ratings for Preservation reflect funds' historical loss avoidance relative to other funds within the same asset class. Preservation ratings are relative, rather than absolute, measures, and funds named Lipper Leaders for Preservation may still experience losses periodically; those losses may be larger for equity and mixed equity funds than for fixed income funds. The Lipper ratings are subject to change every month and are based on an equal-weighted average of percentile ranks for the Consistent Return, Total Return and Preservation metrics over three-, five- and 10-year periods (if applicable). 20% of funds in each peer group are named Lipper Leaders, the next 20% receive a score of 2, the middle 20% are scored 3, the next 20% are scored 4, and the lowest 20% are scored 5. Bracketed information represents the number of funds in each category. N/A indicates that there were not enough funds in a category to constitute a class. Franklin Flex Cap Growth Fund, in Lipper's Multi-Cap Growth classification, received the following ratings for the 3-, 5- and 10-year periods respectively: Total Return: Lipper Leader [349], Lipper Leader [207], Lipper Leader [71]. Franklin Income Fund, in Lipper's Income classification, received the following ratings for the 3-, 5- and 10-year periods respectively: Consistent Return: Lipper Leader [110], Lipper Leader [77], Lipper Leader score of 2 [16]; Preservation (in Mixed Equity asset class): Lipper Leader [932], Lipper Leader [724], Lipper Leader [281]; Total Return: Lipper Leader [113], Lipper Leader [78], 2 [19]. Templeton Growth Fund, in Lipper's Global Large-Cap Value classification, received the following ratings for the 3-, 5- and 10-year periods respectively: Consistent Return: Lipper Leader [23], Lipper Leader [18], N/A [N/A]; Preservation (in Mixed Equity asset class): Lipper Leader [7377], Lipper Leader [5102], Lipper Leader [1643]; Total Return: Lipper Leader [23], Lipper Leader [18], N/A [N/A]. Franklin Federal Tax-Free Income Fund, in Lipper's General Municipal Debt classification, received the following ratings for the 3-, 5- and 10-year periods respectively: Consistent Return: Lipper Leader score of 2 [258], Lipper Leader score of 2 [222], Lipper Leader [99]. LIPPER ratings are not intended to predict future results, and Lipper does not guarantee the accuracy of this information. More information is available at www.lipperleaders.com. Lipper Leader Copyright 2003, Reuters, All Rights Reserved. 12. Source: [Morningstar](C) 9/30/04. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) THE OVERALL MORNINGSTAR RATING FOR A FUND IS DERIVED FROM A WEIGHTED-AVERAGE OF THE PERFORMANCE FIGURES ASSOCIATED WITH ITS THREE-, FIVE- AND 10-YEAR (IF APPLICABLE) MORNINGSTAR RATING METRICS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. MORNINGSTAR Ratings are for the A share class only; other classes may have different performance characteristics. The following fund was rated against 216; 162; 48 Conservative Allocation funds for the respective 3-, 5- and 10-year periods ended 9/30/04, as applicable. For the 3-, 5- and 10-year periods ended 9/30/04, the MORNINGSTAR ratings were: Franklin Income Fund 5, 5, 4. The following fund was rated against 255; 193; 71 World Stock funds for the respective 3-, 5- and 10-year periods ended 9/30/04, as applicable. For the 3-, 5- and 10-year periods ended 9/30/04, the MORNINGSTAR ratings were: Templeton Growth Fund 4,4,5. The following fund was rated against 254; 229; 138 Muni National Long funds for the respective 3-, 5- and 10-year periods ended 9/30/04, as applicable. For the 3-, 5- and 10-year periods ended 9/30/04, the MORNINGSTAR ratings were: Franklin Federal Tax-Free Income Fund 3, 3, 4. 12 FORWARD-LOOKING STATEMENTS - -------------------------- Statements in this press release regarding Franklin Resources, Inc.'s business, which are not historical facts, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of risks, uncertainties and other important factors, some of which are listed below, that could cause the actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements. These and other risks, uncertainties and other important factors are described in more detail in Franklin's recent filings with the U.S. Securities and Exchange Commission, including, without limitation, the "Risk Factors" section of the Management's Discussion and Analysis of Financial Condition and Results of Operations in Franklin's Annual Report on Form 10-K for the fiscal year ended September 30, 2003, and Franklin's most recent quarterly report on Form 10-Q. * Governmental investigations, settlements of such investigations, ongoing and proposed governmental actions, and regulatory examinations of the company and its business activities as described in more detail in the company's press releases and regulatory filings as well as civil litigation arising out of or related to such matters could adversely impact our assets under management, increase costs and negatively impact the profitability of the company and future financial results. * Regulatory or legislative actions and reforms, particularly those specifically focused on the mutual fund industry, could adversely impact our assets under management, increase costs and negatively impact the profitability of the company and future financial results. * Volatility in the equity markets may cause the levels of our assets under management to fluctuate significantly. * Weak market conditions may lower our assets under management and reduce our revenues and income. * We face strong competition from numerous and sometimes larger companies. * Changes in the distribution channels on which we depend could reduce our revenues or hinder our growth. * We face risks associated with conducting operations in numerous foreign countries. * Certain of the portfolios we manage, including our emerging market portfolios and related revenues, are vulnerable to market-specific political or economic risks. * Our ability to meet cash needs depends upon certain factors, including our asset value, credit worthiness and the market value of our stock. * Technology and operating risk and limitations could constrain our operations. # # # 13 - -------- -----END PRIVACY-ENHANCED MESSAGE-----