Franklin Resources Inc
Alan Weinfeld, 650-525-8900
(Investor Relations)
Holly Gibson Brady, 650-312-4701
(Corporate Communications)
franklintempleton.com
Franklin Resources, Inc. Announces Fourth Quarter and Year-End Results
Franklin Resources, Inc. (Franklin Templeton Investments)(NYSE:BEN)
today reported net income of $152.1 million, or $0.61 per share
diluted on revenues of $722.0 million for the quarter ended September
30, 2003. Net income was $131.4 million, or $0.52 per share diluted,
on revenues of $683.9 million in the preceding quarter. In the
comparable quarter a year ago, net income was $68.5 million, or $0.26
per share diluted (after a pre-tax, non-cash, non-operating charge of
$60.1 million relating to an unrealized loss in the company's
corporate investments, or $0.17 per share diluted after tax), on
revenues of $608.3 million. Operating income increased 18% this
quarter over the prior quarter and increased 42% over the same quarter
in the prior year.
Net income for the year ended September 30, 2003, was $502.8 million,
or $1.97 per share diluted, on revenues of $2,624.4 million as
compared to net income of $432.7 million, or $1.65 per share diluted,
on revenues of $2,518.5 million a year ago. Operating income increased
11% as compared to the prior year primarily due to a 4% increase in
revenue resulting from a 3% increase in simple monthly average assets
under management, partially offset by a 2% increase in operating
expenses.
As of September 30, 2003, assets under management by the company's
subsidiaries were $301.9 billion, as compared to $287.0 billion last
quarter and $247.8 billion at this time last year. Simple monthly
average assets under management during the current quarter were $294.0
billion compared to $272.2 billion in the preceding quarter and $259.0
billion in the same quarter a year ago. Equity assets now comprise 51%
of total assets under management as compared to 50% last quarter and
48% at September 30, 2002. Fixed-income assets now comprise 32% of
total assets under management, as compared to 33% last quarter and 35%
at the same time last year. As of September 30, 2003, hybrid/balanced
assets accounted for 15% of total assets under management, and
remained unchanged from last quarter and the comparable quarter a year
ago. Sales exceeded redemptions by $4.4 billion for the current
quarter compared to $6.0 billion for the prior quarter and $2.5
billion for the comparable quarter a year ago.
Fiscal Fourth Quarter 2003 Highlights
Performance and Products(1,2)
(See important footnotes in "Supplemental Information" section at the
end of the release.)
-- Over 75% 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-, three-, five- and 10-year periods ended
September 30, 2003.(3,4)
-- Approximately 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, 2003,
while over 85% of the equity mutual fund assets ranked in the top two
quartiles for the three-, five- and 10-year periods.(3,5)
-- Franklin Income Fund, the company's largest fund with $15 billion
in assets, ranked in the top decile of its Lipper peer group for the
one-, three- and five-year periods and ranked in the top two quartiles
of its Lipper peer group for the 10-year period ended September 30,
2003. The fund, managed by Franklin Advisers, Inc., was also rated 4
stars overall by Morningstar.(6,7)
-- Franklin Flex Cap Growth Fund, managed by Franklin Advisers, Inc.,
ranked in the top two quartiles of its Lipper peer group over the
one-, three-, five- and 10-year periods ended September 30, 2003. The
fund was also rated 4 stars overall by Morningstar.(6,8)
-- Over 90% of Franklin Templeton's taxable 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, 2003. In addition, Franklin Strategic Income Fund
ranked in the top quartile of its Lipper peer group for the one-,
three- and five-year periods ended September 30, 2003. The fund was
also rated 4 stars overall by Morningstar.(6,9,10)
-- Over 90% of Templeton equity 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,
2003. Moreover, 96% of Templeton's equity mutual fund assets were in
funds rated 4 stars overall by Morningstar as of September 30,
2003.(3,6,11,12)
Global Business Developments
-- Completed, on October 1, 2003, the acquisition of Darby Overseas
Investments, Ltd. and Darby Overseas Partners, L.P., a group
specializing in emerging markets private equity and mezzanine funds
with managed assets of approximately $1 billion as of June 30, 2003.
-- In the 2003 DALBAR Financial Professional Survey of Financial
Advisors, Franklin Templeton tied for 2nd place, up from 4th place in
2002, in the overall general opinion category.
-- Franklin Templeton funds in India earned top honors in five out of
six categories for performance from Credit Rating and Information
Services India Limited, an S&P affiliate.
-- Received approval by the China Securities Regulatory Commission to
establish a joint venture fund management company with Sealand
Securities.
-- Franklin Templeton's assets in Taiwan exceeded $4 billion.
-- Launched Franklin Templeton Limited Duration Income Trust
(AMEX:FTF), which raised approximately $425 million in its initial
offering.
-- Expanded Franklin Templeton's municipal bond offerings with three
new shorter-term maturity tax-free income funds.
-- Launched Tapestry, a group of 11 investment strategies targeting
Canada's high net-worth investors.
Franklin Resources, Inc.
Consolidated Income Statements
(Dollar amounts in thousands except assets
under management and per share data)
Three months ended
September 30
-----------------------------
2003 2002 % Change
--------- --------- ---------
Operating revenues
Investment management fees $411,469 $355,239 16%
Underwriting and distribution fees 238,947 189,853 26%
Shareholder servicing fees 56,429 47,105 20%
Sponsored investment product income, net 93 - N/A
Other, net 15,017 16,110 (7%)
--------- --------- ---------
Total operating revenues 721,955 608,307 19%
--------- --------- ---------
Operating expenses
Underwriting and distribution 211,857 175,054 21%
Compensation and benefits 166,725 157,627 6%
Information systems, technology and
occupancy 70,871 70,797 -
Advertising and promotion 23,248 25,703 (10%)
Amortization of deferred sales
commissions 21,257 16,141 32%
Amortization of intangible assets 4,245 4,236 -
September 11, 2001 recovery, net (4,401) - N/A
Other 28,613 17,983 59%
--------- --------- ---------
Total operating expenses 522,415 467,541 12%
--------- --------- ---------
Operating income 199,540 140,766 42%
--------- --------- ---------
Other income (expenses)
Sponsored investment product gains, net 1,645 - N/A
Other-than-temporary decline in
investments value - (60,068) (100%)
Investment and other income 20,116 14,015 44%
Interest expense (7,105) (3,168) 124%
--------- --------- ---------
Other income (expenses), net 14,656 (49,221) N/A
--------- --------- ---------
Income before taxes on income 214,196 91,545 134%
Taxes on income 62,117 23,027 170%
--------- --------- ---------
Net income $152,079 $68,518 122%
========= ========= =========
Year ended
September 30
----------------------------------
2003 2002 % Change
---------- ---------- ----------
Operating revenues
Investment management fees $1,487,331 $1,462,655 2%
Underwriting and distribution fees 844,674 792,697 7%
Shareholder servicing fees 217,225 191,302 14%
Sponsored investment product
income, net 93 - N/A
Other, net 75,125 71,878 5%
---------- ---------- ----------
Total operating revenues 2,624,448 2,518,532 4%
---------- ---------- ----------
Operating expenses
Underwriting and distribution 760,843 716,234 6%
Compensation and benefits 649,882 645,104 1%
Information systems, technology
and occupancy 285,329 294,161 (3%)
Advertising and promotion 92,399 106,877 (14%)
Amortization of deferred sales
commissions 73,501 67,608 9%
Amortization of intangible assets 16,961 17,107 (1%)
September 11, 2001 recovery, net (4,401) - N/A
Other 101,858 85,939 19%
---------- ---------- ----------
Total operating expenses 1,976,372 1,933,030 2%
---------- ---------- ----------
Operating income 648,076 585,502 11%
---------- ---------- ----------
Other income (expenses)
Sponsored investment product
gains, net 1,645 - N/A
Other-than-temporary decline in
investments value - (60,068) (100%)
Investment and other income 70,392 65,143 8%
Interest expense (19,910) (12,302) 62%
---------- ---------- ----------
Other income (expenses), net 52,127 (7,227) N/A
---------- ---------- ----------
Income before taxes on income 700,203 578,275 21%
Taxes on income 197,373 145,552 36%
---------- ---------- ----------
Net income $502,830 $432,723 16%
========== ========== ==========
Three months ended Year ended
September 30 September 30
------------------------ ------------------------
% %
2003 2002 Change 2003 2002 Change
-------- -------- ------ -------- -------- ------
Earnings per share
Basic $0.61 $0.26 135% $1.98 $1.66 19%
Diluted $0.61 $0.26 135% $1.97 $1.65 19%
Dividends per
share $0.075 $0.070 7% $0.300 $0.280 7%
Average shares
outstanding (in
thousands)
Basic 247,761 260,444 (5%) 253,714 261,239 (3%)
Diluted 249,263 261,497 (5%) 254,681 262,054 (3%)
Operating
Margin(1) 28% 23% - 25% 23% -
Assets under
management (in
millions)
Beginning of
period $286,954 $270,433 6% $247,760 $246,385 1%
Sales 24,087 16,083 50% 80,786 72,371 12%
Reinvested
distributions 657 628 5% 3,691 4,843 (24%)
Redemptions (19,697) (13,562) 45% (66,865) (57,492) 16%
Distributions (1,194) (1,166) 2% (5,960) (7,235) (18%)
Acquisitions - 779 (100%) - 779 (100%)
Appreciation/
(depreciation) 11,050 (25,435) N/A 42,445 (11,891) N/A
End of period $301,857 $247,760 22% $301,857 $247,760 22%
Simple monthly
average for
period $293,979 $258,993 14% $269,779 $263,178 3%
(1) Operating Margin: Operating income divided by total operating
revenues.
Franklin Resources, Inc.
Consolidated Income Statements
(Dollar amounts in thousands
except per share data) Three months ended
%
30-Sep-03 30-Jun-03 Change
---------- ----------- ----------
Operating revenues
Investment management fees $411,469 $376,553 9%
Underwriting and distribution fees 238,947 225,632 6%
Shareholder servicing fees 56,429 57,430 (2%)
Sponsored investment product
income, net 93 - N/A
Other, net 15,017 24,292 (38%)
---------- ----------- ----------
Total operating revenues 721,955 683,907 6%
---------- ----------- ----------
Operating expenses
Underwriting and distribution 211,857 207,071 2%
Compensation and benefits 166,725 163,230 2%
Information systems, technology
and occupancy 70,871 70,459 1%
Advertising and promotion 23,248 22,281 4%
Amortization of deferred sales
commissions 21,257 19,159 11%
Amortization of intangible assets 4,245 4,244 -
September 11, 2001 recovery, net (4,401) - N/A
Other 28,613 28,088 2%
---------- ----------- ----------
Total operating expenses 522,415 514,532 2%
---------- ----------- ----------
Operating income 199,540 169,375 18%
---------- ----------- ----------
Other income (expenses)
Sponsored investment product
gains, net 1,645 - N/A
Other-than-temporary decline in
investments value - - -
Investment and other income 20,116 22,415 (10%)
Interest expense (7,105) (6,736) 5%
---------- ----------- ----------
Other income (expenses), net 14,656 15,679 (7%)
---------- ----------- ----------
Income before taxes on income 214,196 185,054 16%
Taxes on income 62,117 53,666 16%
---------- ----------- ----------
Net income $152,079 $131,388 16%
========== =========== ==========
Three months ended
31-Mar-03 31-Dec-02 30-Sep-02
---------- ----------- ----------
Operating revenues
Investment management fees $347,897 $351,412 $355,239
Underwriting and distribution fees 194,158 185,937 189,853
Shareholder servicing fees 55,315 48,051 47,105
Sponsored investment product
income, net - - -
Other, net 15,765 20,051 16,110
---------- ----------- ----------
Total operating revenues 613,135 605,451 608,307
---------- ----------- ----------
Operating expenses
Underwriting and distribution 173,068 168,847 175,054
Compensation and benefits 160,809 159,118 157,627
Information systems, technology
and occupancy 71,404 72,595 70,797
Advertising and promotion 24,226 22,644 25,703
Amortization of deferred sales
commissions 17,040 16,045 16,141
Amortization of intangible assets 4,238 4,234 4,236
September 11, 2001 recovery, net - - -
Other 22,644 22,513 17,983
---------- ----------- ----------
Total operating expenses 473,429 465,996 467,541
---------- ----------- ----------
Operating income 139,706 139,455 140,766
---------- ----------- ----------
Other income (expenses)
Sponsored investment product
gains, net - - -
Other-than-temporary decline in
investments value - - (60,068)
Investment and other income 15,558 12,303 14,015
Interest expense (3,037) (3,032) (3,168)
---------- ----------- ----------
Other income (expenses), net 12,521 9,271 (49,221)
---------- ----------- ----------
Income before taxes on income 152,227 148,726 91,545
Taxes on income 42,624 38,966 23,027
---------- ----------- ----------
Net income $109,603 $109,760 $68,518
========== =========== ==========
Three months ended
30-Sep 30-Jun % 31-Mar 31-Dec 30-Sep
03 03 Change 03 02 02
------- ------- ----- ------- ------- -------
Earnings per share
Basic $0.61 $0.52 17% $0.43 $0.43 $0.26
Diluted $0.61 $0.52 17% $0.43 $0.43 $0.26
Dividends per share $0.075 $0.075 - $0.075 $0.075 $0.070
Average shares
outstanding (in
thousands)
Basic 247,761 252,633 (2%) 257,023 257,600 260,444
Diluted 249,263 253,254 (2%) 257,654 258,218 261,497
Operating Margin(2) 28% 25% - 23% 23% 23%
Employees 6,504 6,540 (1%) 6,619 6,670 6,711
Billable shareholder
accounts(3) (in
millions) 14.2 15.2 (7%) 14.3 10.1 9.6
(2) Operating Margin: Operating income divided by total operating
revenues.
(3) Effective January 1, 2003, billable shareholder accounts include
additional partial service shareholder accounts.
Franklin Resources, Inc.
Preliminary Summary Balance Sheet
(Dollar amounts in thousands)
Preliminary
September September
30, 2003 30, 2002
----------- -----------
Assets
Current assets $2,971,787 $2,362,059
Banking/ finance assets 874,951 1,051,972
Non-current assets 3,083,497 3,008,707
----------- -----------
Total assets $6,930,235 $6,422,738
----------- -----------
Liabilities and stockholders' equity
Current liabilities $494,553 $455,019
Banking/ finance liabilities 758,506 883,936
Non-current liabilities 1,373,167 816,837
----------- -----------
Total liabilities 2,626,226 2,155,792
Total stockholders' equity 4,304,009 4,266,946
----------- -----------
Total liabilities and stockholders' equity $6,930,235 $6,422,738
----------- -----------
Ending shares of common stock outstanding 245,932 258,555
----------- -----------
New Accounting Standards
FIN 46
In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, "Consolidation of Variable Interest Entities"
("FIN 46"). Under FIN 46, a variable interest entity ("VIE") is
defined as a corporation, trust, partnership or other entity where the
equity investment holders have not contributed sufficient capital to
finance the activities of the VIE or the equity investment holders do
not have defined rights and obligations normally associated with an
equity investment. FIN 46 requires consolidation of a VIE by the
enterprise that has the majority of the risks and rewards of
ownership, referred to as the primary beneficiary. The consolidation
and disclosure provisions of FIN 46 are effective immediately for VIEs
created after January 31, 2003, and, originally, for interim or annual
reporting periods beginning after June 15, 2003 for VIEs created
before February 1, 2003. However, in October 2003, the FASB issued
Staff Position FIN 46-6 deferring the consolidation provisions of FIN
46 to interim or annual reporting periods ending after December 15,
2003 for VIEs created before February 1, 2003.
The following tables present the effect of the adoption of FIN 46 on
the consolidated results of operations and financial position of
Franklin Resources, Inc. and its subsidiaries (the "Company") for VIEs
created after January 31, 2003. These tables present the effect of
consolidating VIEs for which the Company is the primary beneficiary
and are intended to provide transparency as to the impact of the
consolidation. The Company is continuing its evaluation of sponsored
investment products and will adopt the consolidation provision of FIN
46 for entities created before February 1, 2003 in the quarter ending
December 31, 2003 in accordance with Staff Position FIN 46-6.
Six VIEs, all sponsored investment products with inception dates after
January 31, 2003, have been consolidated in the Company's financial
statements at September 30, 2003. As shown in Table I and II, the
Company's operating revenues include net operating revenues of $93
thousand related to the results of operations of these VIEs from
inception. In addition, an aggregate of $174 thousand of investment
management fees, underwriting and distribution fees, and shareholder
servicing fees related to these products have been eliminated on
consolidation. Other income includes net realized and unrealized gains
of the sponsored investment products of $1,645 thousand and $43
thousand of minority interest representing the portion of these
sponsored investment products' income that the Company does not own.
The net result of these entries required under FIN 46 increased net
income by $1,141 thousand for the quarter and year ended September 30,
2003.
Prior to the adoption of FIN 46, these sponsored investment products
would have been classified as investment securities,
available-for-sale, in the consolidated balance sheet, and the
Company's portion of the sponsored investment products' net change in
value of $1,141 thousand would have been credited to other
comprehensive income in the consolidated balance sheet, until
realized.
As shown in Table III, the impact of consolidating these VIEs on the
Company's balance sheet was to increase current assets by $10,358
thousand, current liabilities by $2,068 thousand and minority interest
by $8,290 thousand. The net impact of $10,358 thousand includes an
increase in current assets of $48,965 thousand representing the assets
of the sponsored investment products, partially offset by a decrease
of $38,607 thousand, representing the Company's carrying value of
these investments prior to the adoption of FIN 46.
In addition to our sponsored investment products, we expect to
consolidate our headquarters campus under the requirements of FIN 46
in the period ending December 31, 2003. The Company qualifies as the
primary beneficiary of the lessor trust, a special purpose entity that
financed the construction of the campus. The Company estimates the
impact on the consolidated balance sheet at October 1, 2003 will be to
increase property and equipment, net, by approximately $159.0 million,
and debt by approximately $164.9 million. The debt matures on
September 30, 2004, and will be shown in the Company's consolidated
balance sheet as a current liability until it is refinanced or paid.
During the quarter ended September 30, 2003, under the current
operating lease treatment, the Company has recognized and remitted to
the special purpose entity rental payments of approximately $0.7
million included in information systems, technology and occupancy
expense. As rental payments due under the lease agreement are equal to
the interest charges incurred by the special purpose entity on the
loan, after adopting of FIN 46, rent expense will decline and interest
expense will increase by the same amount. In addition, the Company
will recognize a quarterly depreciation charge related to the campus
of approximately $1.4 million in information systems, technology and
occupancy expense.
SFAS 150
In May 2003, Statement of Financial Accounting Standards No. 150,
"Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity" ("SFAS 150"), was issued. SFAS 150
clarifies the accounting for certain financial instruments with
characteristics of both liabilities and equity and requires that these
instruments be classified as liabilities in statements of financial
position. As disclosed previously, the Company sells put options
giving the purchaser the right to sell shares of its common stock to
the Company at a specified price on the designated expiration dates.
Prior to fiscal fourth quarter 2003, these put options were treated as
equity instruments and the related premium received was recorded in
stockholders' equity as capital in excess of par value. Under SFAS
150, effective July 1, 2003, these put options are presented as
liabilities and measured at fair value. Changes in fair value are
recognized in investment and other income in the Company's
consolidated income statements. The increase in fair value of these
instruments during the quarter ended September 30, 2003 contributed
approximately $5.0 million to non-operating income. At September 30,
2003, there were 1.9 million put options outstanding with various
expiration dates from December 2003 through January 2004 and exercise
prices ranging from $33 to $35.
TABLE I
Consolidated Income Statement
(Dollar amounts in thousands except per share data)
Three months
ended Consolidated
September three
30, 2003 months
before ended
FIN 46 FIN 46 September
adjustments adjustments(4) 30, 2003
------------ --------------- ------------
Operating revenues
Investment management fees $411,603 $(134) $411,469
Underwriting and
distribution fees 238,985 (38) 238,947
Shareholder servicing fees 56,431 (2) 56,429
Sponsored investment
product income, net - 93 93
Other, net 15,017 - 15,017
------------ --------------- ------------
Total operating revenues 722,036 (81) 721,955
------------ --------------- ------------
Operating expenses
Underwriting and
distribution 211,857 - 211,857
Compensation and benefits 166,725 - 166,725
Information systems,
technology and occupancy 70,871 - 70,871
Advertising and promotion 23,248 - 23,248
Amortization of deferred
sales commissions 21,257 - 21,257
Amortization of intangible
assets 4,245 - 4,245
September 11, 2001
recovery, net (4,401) - (4,401)
Other 28,613 - 28,613
------------ --------------- ------------
Total operating expenses 522,415 - 522,415
------------ --------------- ------------
Operating income 199,621 (81) 199,540
------------ --------------- ------------
Other income (expenses)
Sponsored investment
product gains, net
Investment and other
income - 1,645 1,645
Investment and other income 20,073 43 20,116
Interest expense (7,105) - (7,105)
------------ --------------- ------------
Other income, net 12,968 1,688 14,656
------------ --------------- ------------
Income before taxes on
income 212,589 1,607 214,196
Taxes on income 61,651 466 62,117
------------ --------------- ------------
Net income $150,938 $1,141 $152,079
============ =============== ============
Earnings per share
Basic $0.61
Diluted $0.61
Average shares outstanding
(in thousands)
Basic 247,761
Diluted 249,263
(4) Adjustments to consolidate certain sponsored investment products
and related elimination adjustments.
TABLE II
Consolidated Income Statement
(Dollar amounts in thousands except per share data)
Year ended
September
30, 2003 Consolidated
before Year ended
FIN 46 FIN 46 September
adjustments adjustments(5) 30, 2003
------------ --------------- ------------
Operating revenues
Investment management fees $1,487,465 $(134) $1,487,331
Underwriting and
distribution fees 844,712 (38) 844,674
Shareholder servicing fees 217,227 (2) 217,225
Sponsored investment
product income, net - 93 93
Other, net 75,125 0 75,125
------------ --------------- ------------
Total operating revenues 2,624,529 (81) 2,624,448
------------ --------------- ------------
Operating expenses
Underwriting and
distribution 760,843 - 760,843
Compensation and benefits 649,882 - 649,882
Information systems,
technology and
occupancy 285,329 - 285,329
Advertising and promotion 92,399 - 92,399
Amortization of deferred
sales commissions 73,501 - 73,501
Amortization of intangible
assets 16,961 - 16,961
September 11, 2001
recovery, net (4,401) - (4,401)
Other 101,858 - 101,858
------------ --------------- ------------
Total operating expenses 1,976,372 - 1,976,372
------------ --------------- ------------
Operating income 648,157 (81) 648,076
------------ --------------- ------------
Other income (expenses)
Sponsored investment
product gains, net - 1,645 1,645
Investment and other income 70,349 43 70,392
Interest expense (19,910) - (19,910)
------------ --------------- ------------
Other income, net 50,439 1,688 52,127
------------ --------------- ------------
Income before taxes on
income 698,596 1,607 700,203
Taxes on income 196,907 466 197,373
------------ --------------- ------------
Net income $501,689 $1,141 $502,830
============ =============== ============
Earnings per share
Basic $1.98
Diluted $1.97
Average shares outstanding
(in thousands)
Basic 253,714
Diluted 254,681
(5) Adjustments to consolidate certain sponsored investment products
and related elimination adjustments.
TABLE III
Consolidated Balance Sheet
(Dollar amounts in thousands)
Preliminary
September
30, 2003 Preliminary
before Consolidated
FIN 46 FIN 46 September
Adjustments Adjustments(6) 30, 2003
------------ -------------- -------------
Assets
Current assets $2,961,429 $10,358 $2,971,787
Banking/ finance assets 874,951 - 874,951
Non-current assets 3,083,497 - 3,083,497
------------ -------------- -------------
Total assets $6,919,877 $10,358 $6,930,235
------------ -------------- -------------
Liabilities and
stockholders' equity
Current liabilities $492,485 $2,068 $494,553
Banking/ finance
liabilities 758,506 - 758,506
Non-current liabilities 1,364,877 8,290 1,373,167
------------ -------------- -------------
Total liabilities 2,615,868 10,358 2,626,226
Total stockholders' equity 4,304,009 - 4,304,009
------------ -------------- -------------
Total liabilities and
stockholders' equity $6,919,877 $10,358 $6,930,235
------------ -------------- -------------
(6) Adjustments to consolidate certain sponsored investment products
and related elimination adjustments.
ASSETS UNDER MANAGEMENT BY INVESTMENT OBJECTIVE
(in billions) 30-Sep 30-Jun 31-Mar 31-Dec 30-Sep
03 03 03 02 02
------- ------- ------- ------- -------
Equity
Global/international $99.8 $91.6 $75.7 $81.4 $76.5
Domestic (U.S.) 55.4 50.7 42.7 43.5 41.4
------- ------- ------- ------- -------
Total equity 155.2 142.3 118.4 124.9 117.9
------- ------- ------- ------- -------
Hybrid/balanced 45.8 42.8 37.4 38.3 36.6
Fixed-income
Tax-free 52.2 53.6 52.3 52.1 52.8
Taxable:
Domestic (U.S.) 31.1 31.4 29.4 27.3 26.1
Global/
international 11.8 10.9 9.4 9.1 8.6
------- ------- ------- ------- -------
Total fixed-income 95.1 95.9 91.1 88.5 87.5
------- ------- ------- ------- -------
Money market 5.8 6.0 5.5 6.0 5.8
------- ------- ------- ------- -------
Total ending assets $301.9 $287.0 $252.4 $257.7 $247.8
------- ------- ------- ------- -------
Simple monthly average assets $294.0 $272.2 $255.1 $254.8 $259.0
======= ======= ======= ======= =======
ASSETS UNDER MANAGEMENT & FLOWS
(in billions)
Three Months Ended
30-Sep 30-Jun % 30-Sep %
03 03 Change 02 Change
------- ------- -------- ------- --------
Beginning assets under
management $287.0 $252.4 14% $270.4 6%
U.S. retail assets
Beginning assets $180.0 $160.4 12% $169.9 6%
------- ------- -------- ------- --------
Sales 12.9 11.7 10% 9.5 36%
Reinvested distributions 0.6 0.9 (33%) 0.6 -
Redemptions (10.0) (8.5) 18% (8.5) 18%
Distributions (1.1) (1.4) (21%) (1.1) -
Acquisitions - - - - -
Appreciation/
(depreciation) 5.6 16.9 (67%) (12.7) N/A
------- ------- -------- ------- --------
Ending assets 188.0 180.0 4% 157.7 19%
------- ------- -------- ------- --------
Other assets, including
international and
institutional
Beginning assets $107.0 $92.0 16% $100.5 6%
------- ------- -------- ------- --------
Sales 11.2 10.2 10% 6.6 70%
Reinvested distributions - 0.1 (100%) - -
Redemptions (9.7) (7.5) 29% (5.0) 94%
Distributions (0.1) (0.1) - (0.1) -
Acquisitions - - - 0.8 (100%)
Appreciation/
(depreciation) 5.5 12.3 (55%) (12.7) N/A
------- ------- -------- ------- --------
Ending assets 113.9 107.0 6% 90.1 26%
------- ------- -------- ------- --------
Ending assets under
management $301.9 $287.0 5% $247.8 22%
Total assets under
management
Beginning assets $287.0 $252.4 14% $270.4 6%
------- ------- -------- ------- --------
Sales 24.1 21.9 10% 16.1 50%
Reinvested distributions 0.6 1.0 (40%) 0.6 -
Redemptions (19.7) (16.0) 23% (13.5) 46%
Distributions (1.2) (1.5) (20%) (1.2) -
Acquisitions - - - 0.8 (100%)
Appreciation/
(depreciation) 11.1 29.2 (62%) (25.4) N/A
------- ------- -------- ------- --------
Ending assets $301.9 $287.0 5% $247.8 22%
------- ------- -------- ------- --------
Note: Institutional assets totaling approximately $20.6 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, 2003, were approximately $100.4
billion, of which high net-worth assets comprised $10.1 billion.
ASSETS UNDER MANAGEMENT & FLOWS BY INVESTMENT OBJECTIVE
(in billions)
Three Months Ended 30-Sep 30-Jun 30-Sep
03 03 02
------- ------- -------
Global/international equity
Beginning assets $91.6 $75.7 $93.6
------- ------- -------
Sales 7.9 6.3 4.6
Reinvested distributions - 0.1 -
Redemptions (7.3) (5.7) (3.9)
Distributions - (0.1) -
Acquisitions - - 0.2
Appreciation/(depreciation) 7.6 15.3 (18.0)
------- ------- -------
Ending assets 99.8 91.6 76.5
------- ------- -------
Domestic (U.S.) equity
Beginning assets 50.7 42.7 48.5
------- ------- -------
Sales 3.8 3.2 3.0
Reinvested distributions - 0.2 -
Redemptions (2.1) (2.1) (2.7)
Distributions - (0.2) -
Acquisitions - - -
Appreciation/(depreciation) 3.0 6.9 (7.4)
------- ------- -------
Ending assets 55.4 50.7 41.4
------- ------- -------
Hybrid/balanced
Beginning assets 42.8 37.4 39.6
------- ------- -------
Sales 3.2 2.6 1.0
Reinvested distributions 0.1 0.2 0.1
Redemptions (1.1) (1.1) (0.7)
Distributions (0.2) (0.3) (0.2)
Acquisitions - - -
Appreciation/(depreciation) 1.0 4.0 (3.2)
------- ------- -------
Ending assets 45.8 42.8 36.6
------- ------- -------
Tax-free income
Beginning assets 53.6 52.3 50.2
------- ------- -------
Sales 1.6 1.7 1.9
Reinvested distributions 0.3 0.3 0.3
Redemptions (2.2) (1.5) (1.1)
Distributions (0.6) (0.6) (0.7)
Acquisitions - - -
(Depreciation)/appreciation (0.5) 1.4 2.2
------- ------- -------
Ending assets 52.2 53.6 52.8
------- ------- -------
Taxable fixed-income
Beginning assets 42.3 38.8 33.1
------- ------- -------
Sales 5.1 5.4 3.3
Reinvested distributions 0.2 0.2 0.2
Redemptions (4.1) (3.3) (2.7)
Distributions (0.4) (0.3) (0.3)
Acquisitions - - 0.3
(Depreciation)/appreciation (0.2) 1.5 0.8
------- ------- -------
Ending assets 42.9 42.3 34.7
------- ------- -------
Money market
Beginning assets 6.0 5.5 5.4
------- ------- -------
Sales 2.5 2.7 2.3
Reinvested distributions - - -
Redemptions (2.9) (2.3) (2.4)
Distributions - - -
Acquisitions - - 0.3
Appreciation 0.2 0.1 0.2
------- ------- -------
Ending assets 5.8 6.0 5.8
------- ------- -------
Ending assets under management $301.9 $287.0 $247.8
Conference Call Information
On Thursday, October 23, 2003, Franklin Resources, Inc., (NYSE:BEN)
will release its fourth fiscal quarter 2003 financial results. Martin
Flanagan and Greg Johnson, co-presidents 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 6, 2003. The replay can also be accessed by calling (800)
642-1687 in the U.S. or (706) 645-9291 internationally using access
code #2775729, after 7:30 p.m. Eastern Time on October 23, 2003,
through 11:59 p.m. Eastern Time on November 6, 2003.
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. is a global investment organization operating
as Franklin Templeton Investments. Franklin Templeton provides global
and domestic investment management services through its Franklin,
Templeton, Mutual Series and Fiduciary Trust subsidiaries. The San
Mateo, CA-based company has over 50 years of investment experience and
more than $301 billion in assets under management as of September 30,
2003. For more information, please call 1-800/DIAL BEN(R) or visit
franklintempleton.com.
Supplemental Information
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. For more information on any U.S.
Franklin Templeton fund, investors should request a prospectus
containing more complete information, including sales charges,
expenses and risks, from securities dealers or by calling Franklin
Templeton Distributors, Inc. at 1-800/DIAL BEN(R) (1-800/342-5236).
Investors should read the prospectus carefully before investing or
sending money. 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. Past performance does not guarantee future results. Morningstar
ratings are based on Class A shares. Lipper rankings are based on
Class A shares, with the exception of those for Mutual Series, which
are based on Class Z shares, which are offered to qualified investors
only and have no sales charges nor Rule 12b-1 fees. All asset data is
based on 8/31/03 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. Investment return and
principal value will fluctuate with market conditions and an investor
may experience a gain or loss when they sell their shares.
3. Lipper calculates averages by taking all the funds in a peer group
and averaging their total returns for the periods indicated. Lipper
tracks 129 peer groups of long-term U.S. retail mutual funds, and the
groups vary in size from 4 to 1127. 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., 9/30/03. Of the eligible Franklin Templeton
long-term mutual funds tracked by Lipper, 33, 37, 39 and 30 funds
ranked in the top quartile and 28, 30, 27 and 22 funds ranked in the
second quartile, for the one-, three-, five- and 10-year periods,
respectively, for their respective Lipper peer groups.
5. Source: Lipper(R) Inc., 9/30/03. Of the eligible Franklin Templeton
non-money market equity funds tracked by Lipper, 8, 23, 16 and 9 funds
ranked in the top quartile and 15, 8, 13 and 10 funds ranked in the
second quartile, for the one-, three-, five- and 10-year periods,
respectively, for their respective Lipper peer groups.
6. Source: (Morningstar) 9/30/03. 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 Rating is for the A share class
only; other classes may have different performance characteristics.
The following fund was rated against 156; 115; 29 Conservative
Allocation funds for the respective 3-, 5- and 10-year periods ended
9/30/03, as applicable. For the 3-, 5- and 10-year periods ended
9/30/03, the Morningstar ratings were: Franklin Income Fund 4, 4, 3.
The following fund was rated against 547; 366; 112 Mid-Cap Growth
funds for the respective 3-, 5- and 10-year periods ended 9/30/03, as
applicable. For the 3-, 5- and 10-year periods ended 9/30/03, the
Morningstar ratings were: Franklin Flex Cap Growth Fund 3, 3, 5. The
following fund was rated against 135; 110; N/A Multisector Bond funds
for the respective 3-, 5- and 10-year periods ended 9/30/03, as
applicable. For the 3-, 5- and 10-year periods ended 9/30/03, the
Morningstar ratings were: Franklin Strategic Income Fund 3, 4, N/A.
7. Source: Lipper(R) Inc., 9/30/03. Franklin Income Fund Class A
ranked 6 in a universe of 149 funds in Lipper's "Income Funds" group
for the one-year period, 4 of 91 for the three-year period, 4 of 73
for the five-year period and 7 of 18 for the 10-year period.
8. Source: Lipper(R) Inc., 9/30/03. Franklin Flex Cap Growth Fund
Class A ranked 148 in a universe of 409 funds in Lipper's "Multi-Cap
Growth Funds" group for the one-year period, 131 of 289 for the
three-year period, 11 of 159 for the five-year period and 4 of 62 for
the 10-year period.
9. Source: Lipper(R) Inc., 9/30/03. Of the eligible Franklin Templeton
non-money market taxable income funds tracked by Lipper, 5, 4, 3 and 3
funds ranked in the top quartile and 3, 4, 4 and 1 fund(s) ranked in
the second quartile, for the one-, three-, five- and 10-year periods,
respectively, for their respective Lipper peer groups.
10. Source: Lipper(R) Inc., 9/30/03. Franklin Strategic Income Fund
Class A ranked 7 in a universe of 109 funds in Lipper's "Multi-Sector
Income Funds" group for the one-year period, 25 of 103 for the
three-year period, and 13 of 89 for the five-year period.
11. Source: Lipper(R) Inc., 9/30/03. Of the eligible Templeton equity
funds tracked by Lipper, 1 out of 10 funds ranked in the top Lipper
quartile for the one-year period, 7 of 9 for the three-year period, 3
of 9 for the five-year period and 3 of 8 for the 10-year period for
their respective Lipper peer groups. 7 out of 10 eligible Templeton
equity funds ranked in the second Lipper quartile for the one-year
period, 2 of 9 for the three-year period, 3 of 9 for the five-year
period and 3 of 8 for the 10-year period for their respective Lipper
peer groups.
12. Source: (Morningstar) 9/30/03. Five Templeton equity mutual funds
received 4 stars, three received 3 stars, and one received 2 stars.
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, 2002, and Franklin's most recent Form
10-Q.
-- 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 and 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 risks and limitations could constrain our
operations.
-- Regulatory and legislative actions and reforms, including those
directed at the mutual fund industry, could impact the Company.