Franklin Resources, Inc. Announces First Quarter Results

SAN MATEO, CA--(Marketwire -02/01/12)- Franklin Resources, Inc. (the "Company") (NYSE: BEN - News) today announced net income(1) of $480.8 million or $2.20 per diluted share for the quarter ended December 31, 2011, as compared to $416.0 million or $1.88 per diluted share for the previous quarter and $501.2 million or $2.23 per diluted share for the quarter ended December 31, 2010.

 

                                                        Quarter
                          Quarter Ended     % Change     Ended    % Change
                      --------------------
                                            Qtr. vs.              Year vs.
                      31-Dec-11  30-Sep-11    Qtr.     31-Dec-10    Year
                      ---------  ---------  --------   ---------  --------
Financial Results
($ in millions, except
 per share amounts)
Operating revenues    $ 1,701.9  $ 1,837.1        (7)% $ 1,700.3         0%
Operating income          632.4      688.4        (8)%     659.2        (4)%
Operating margin           37.2%      37.5%                 38.8%

Net income(1)         $   480.8  $   416.0        16%  $   501.2        (4)%
Diluted earnings per
 share                $    2.20  $    1.88        17%  $    2.23        (1)%

Assets Under
 Management
(in billions)
Ending                $   670.3  $   659.9         2%  $   670.7         0%
Average(2)                675.0      714.4        (6)%     655.6         3%
Net new flows             (15.6)       3.1        NM         3.2        NM

Non-operating income for the quarter ended December 31, 2011 included $71.2 million of investment and other income (losses), net, as compared to $(116.5) million for the prior quarter and $46.3 million for the quarter ended December 31, 2010.

Total assets under management ("AUM") were $670.3 billion at December 31, 2011, up $10.4 billion or 2% during the quarter. The increase was driven by $27.2 billion in market appreciation, partially offset by net new outflows of $15.6 billion. AUM remained essentially unchanged year over year, as net new flows of $17.6 billion and $12.5 billion from acquisitions were offset by market depreciation of $27.4 billion. Redemptions included $11.1 billion and $12.0 billion from an institutional advisory account during the quarters ended December 31, 2011 and 2010.

Cash and cash equivalents and investments were $9.1 billion at December 31, 2011, as compared to $9.4 billion at September 30, 2011. Total stockholders' equity was $8.9 billion at December 31, 2011, as compared to $9.1 billion at September 30, 2011. The Company had 215.9 million shares of common stock outstanding at December 31, 2011, as compared to 217.7 million shares outstanding at September 30, 2011. During the quarter ended December 31, 2011, the Company repurchased 3.0 million shares of its common stock for a total cost of $290.9 million.

On December 8, 2011, the Company declared a regular quarterly cash dividend of $0.27 per share and a special cash dividend of $2.00 per share, both of which were paid on December 30, 2011. The quarterly dividend represents an 8% increase over the dividend declared in the prior quarter and the same quarter a year ago. The quarterly and special dividends are consistent with the Company's long-term capital management strategy of continuing to invest in the business, maintaining financial strength and flexibility, and returning a substantial portion of the Company's earnings to stockholders through the payment of dividends and common stock repurchases.

Conference Call Information

Pre-recorded audio commentary on the results from Franklin Resources, Inc.'s President and Chief Executive Officer Greg Johnson and Executive Vice President and Chief Financial Officer Ken Lewis will be available today at approximately 8:30 a.m. Eastern Time. They will also lead a live teleconference today at 4:30 p.m. Eastern Time to answer questions of a material nature. Analysts and investors are encouraged to review the Company's recent filings with the U.S. Securities and Exchange Commission and to contact Investor Relations before the live teleconference for any clarifications or questions related to the earnings release or commentary.

Access to the pre-recorded audio commentary and accompanying slides are available at franklinresources.com. The pre-recorded audio commentary can also be accessed by dialing (888) 843-7419 in the U.S. and Canada or (630) 652-3042 internationally using access code 31557826, any time through February 15, 2012.

Access to the live teleconference will be available at franklinresources.com or by dialing (888) 895-5271 in the U.S. and Canada or (847) 619-6547 internationally. A replay of the call can also be accessed by calling (888) 843-7419 in the U.S. and Canada or (630) 652-3042 internationally using access code 31557822, after 7:00 p.m. Eastern Time on February 1, 2012 through February 15, 2012.

Questions regarding the pre-recorded audio commentary or live teleconference should be directed to Franklin Resources, Inc., Investor Relations at (650) 312-4091 or Corporate Communications at (650) 312-2245.

 

Lipper Performance Rankings of Franklin Templeton's U.S.-Registered Long-
 Term Mutual Funds(3,4):


                                         Period Ended December 31, 2011
                                     --------------------------------------
                                          Percent of Assets in Top Two
                                                  Quartiles(5)
                                     --------------------------------------
                                      1-Year    3-Year    5-Year    10-Year
                                     --------  --------  --------  --------
Franklin Templeton(6)                      60%       75%       79%       90%
Franklin Templeton Equity(7)               67%       84%       73%       89%
Franklin Templeton Fixed-Income(8)         53%       64%       85%       92%
Franklin Equity(9)                         73%       90%       88%       86%
Templeton Equity(10)                       29%       73%       22%       92%
Mutual Series Equity(11)                  100%       80%       92%       99%
Franklin Templeton Taxable Fixed-
 Income(12)                                26%       66%       76%       82%
Franklin Templeton Tax-Free Fixed-
 Income(13)                                76%       62%       92%      100%

Performance quoted above represents past performance, which cannot predict or guarantee future results.

Investors should carefully consider a fund's investment goals, risks, charges and expenses before investing. To obtain a summary prospectus and/or prospectus, which contains this and other information, for any U.S.-registered Franklin Templeton fund, investors should talk to their financial advisors or call Franklin/Templeton Distributors, Inc. at 1-800/DIAL BEN® (1-800/342-5236). Please read a prospectus carefully before investing.

 

Franklin Resources, Inc.
Condensed Consolidated Statements of Income
Unaudited

(in thousands, except per share data     Three Months Ended
 and AUM)                                   December 31,         % Change
                                      ------------------------
                                          2011         2010
                                      -----------  -----------  ----------
Operating Revenues(14)
  Investment management fees          $ 1,075,137  $ 1,066,507           1%
  Sales and distribution fees             524,304      552,203          (5)%
  Shareholder servicing fees               75,405       72,055           5%
  Other, net                               27,030        9,548         183%
                                      -----------  -----------  ----------
    Total operating revenues            1,701,876    1,700,313           0%
                                      -----------  -----------  ----------
Operating Expenses
  Sales, distribution and marketing       630,618      647,153          (3)%
  Compensation and benefits               300,412      292,394           3%
  Information systems and technology       41,434       40,367           3%
  Occupancy                                31,842       30,868           3%
  General, administrative and other        65,190       30,297         115%
                                      -----------  -----------  ----------
    Total operating expenses            1,069,496    1,041,079           3%
                                      -----------  -----------  ----------
Operating Income                          632,380      659,234          (4)%
                                      -----------  -----------  ----------
Other Income (Expenses)
  Investment and other income, net         71,176       46,328          54%
  Interest expense                         (8,565)      (7,895)          8%
                                      -----------  -----------  ----------
    Other income, net                      62,611       38,433          63%
                                      -----------  -----------  ----------
  Income before taxes                     694,991      697,667           0%
  Taxes on income                         201,265      207,550          (3)%
                                      -----------  -----------  ----------
  Net income                              493,726      490,117           1%
  Less: net income (loss)
   attributable to
    Nonredeemable noncontrolling
     interests                             10,147      (11,877)         NM
    Redeemable noncontrolling
     interests                              2,794          837         234%
                                      -----------  -----------  ----------
Net Income Attributable to Franklin
 Resources, Inc.                      $   480,785  $   501,157          (4)%
                                      ===========  ===========  ==========

Earnings per Share
  Basic                               $      2.21  $      2.24          (1)%
  Diluted                                    2.20         2.23          (1)%
Dividends per Share                   $      2.27  $      0.25         808%

Average Shares Outstanding (in thousands)
  Basic                                   216,143      223,169          (3)%
  Diluted                                 216,727      224,253          (3)%

Operating Margin                             37.2%        38.8%

AUM (in billions)
  Ending                              $     670.3  $     670.7           0%
  Average                                   675.0        655.6           3%
  Net new flows                             (15.6)         3.2          NM



 
Franklin Resources, Inc.
Condensed Consolidated Statements of Income
Unaudited


(in thousands, except per share data,
 employees and billable shareholder
 accounts)                               Three Months Ended      % Change
                                      ------------------------
                                       31-Dec-11    30-Sep-11
                                      -----------  -----------  ----------
Operating Revenues(14)
  Investment management fees          $ 1,075,137  $ 1,193,232         (10)%
  Sales and distribution fees             524,304      555,974          (6)%
  Shareholder servicing fees               75,405       75,469           0%
  Other, net                               27,030       12,455         117%
                                      -----------  -----------  ----------
    Total operating revenues            1,701,876    1,837,130          (7)%
                                      -----------  -----------  ----------
Operating Expenses
  Sales, distribution and marketing       630,618      669,415          (6)%
  Compensation and benefits               300,412      309,418          (3)%
  Information systems and technology       41,434       50,028         (17)%
  Occupancy                                31,842       35,335         (10)%
  General, administrative and other        65,190       84,520         (23)%
                                      -----------  -----------  ----------
    Total operating expenses            1,069,496    1,148,716          (7)%
                                      -----------  -----------  ----------
Operating Income                          632,380      688,414          (8)%
                                      -----------  -----------  ----------
Other Income (Expenses)
  Investment and other income
   (losses), net                           71,176     (116,473)         NM
  Interest expense                         (8,565)     (11,121)        (23)%
                                      -----------  -----------  ----------
    Other income (expenses), net           62,611     (127,594)         NM
                                      -----------  -----------  ----------
  Income before taxes                     694,991      560,820          24%
  Taxes on income                         201,265      203,926          (1)%
                                      -----------  -----------  ----------
  Net income                              493,726      356,894          38%
  Less: net income (loss)
   attributable to
    Nonredeemable noncontrolling
     interests                             10,147      (57,558)         NM
    Redeemable noncontrolling
     interests                              2,794       (1,524)         NM
                                      -----------  -----------  ----------
Net Income Attributable to Franklin
 Resources, Inc.                      $   480,785  $   415,976          16%
                                      ===========  ===========  ==========

Earnings per Share
  Basic                               $      2.21  $      1.89          17%
  Diluted                                    2.20         1.88          17%
Dividends per Share                   $      2.27  $      0.25         808%

Average Shares Outstanding (in
 thousands)
  Basic                                   216,143      218,989          (1)%
  Diluted                                 216,727      219,840          (1)%

Operating Margin                             37.2%        37.5%

Employees                                   8,484        8,453           0%
Billable Shareholder Accounts (in
 millions)                                   25.6         24.8           3%

Franklin Resources, Inc.
Condensed Consolidated Statements of Income
Unaudited


(in thousands, except per share data,
 employees and billable shareholder
 accounts)                                     Three Months Ended
                                     -------------------------------------
                                      30-Jun-11    31-Mar-11    31-Dec-10
                                     -----------  -----------  -----------
Operating Revenues(14)
  Investment management fees         $ 1,168,920  $ 1,102,732  $ 1,066,507
  Sales and distribution fees            594,187      561,127      552,203
  Shareholder servicing fees              77,520       75,750       72,055
  Other, net                              12,406        9,954        9,548
                                     -----------  -----------  -----------
    Total operating revenues           1,853,033    1,749,563    1,700,313
                                     -----------  -----------  -----------
Operating Expenses
  Sales, distribution and marketing      719,311      676,935      647,153
  Compensation and benefits              313,592      315,810      292,394
  Information systems and technology      41,266       41,477       40,367
  Occupancy                               32,112       32,703       30,868
  General, administrative and other       64,055       53,156       30,297
                                     -----------  -----------  -----------
    Total operating expenses           1,170,336    1,120,081    1,041,079
                                     -----------  -----------  -----------
Operating Income                         682,697      629,482      659,234
                                     -----------  -----------  -----------
Other Income (Expenses)
  Investment and other income
   (losses), net                          14,503       57,451       46,328
  Interest expense                       (10,056)      (8,364)      (7,895)
                                     -----------  -----------  -----------
    Other income (expenses), net           4,447       49,087       38,433
                                     -----------  -----------  -----------
  Income before taxes                    687,144      678,569      697,667
  Taxes on income                        208,944      183,004      207,550
                                     -----------  -----------  -----------
  Net income                             478,200      495,565      490,117
  Less: net income (loss)
   attributable to
    Nonredeemable noncontrolling
     interests                           (24,575)      (7,577)     (11,877)
    Redeemable noncontrolling
     interests                              (572)          42          837
                                     -----------  -----------  -----------
Net Income Attributable to Franklin
 Resources, Inc.                     $   503,347  $   503,100  $   501,157
                                     ===========  ===========  ===========

Earnings per Share
  Basic                              $      2.27  $      2.26  $      2.24
  Diluted                                   2.26         2.25         2.23
Dividends per Share                  $      0.25  $      0.25  $      0.25

Average Shares Outstanding (in
 thousands)
  Basic                                  220,313      221,696      223,169
  Diluted                                221,284      222,696      224,253

Operating Margin                            36.8%        36.0%        38.8%

Employees                                  8,458        8,125        7,989
Billable Shareholder Accounts (in
 millions)                                  26.3         23.7         22.0



 
AUM AND FLOWS

                                           Three Months Ended        %
                                              December 31,         Change
                                         ----------------------
(in billions)                               2011        2010
                                         ----------  ----------  ---------
Beginning AUM                            $    659.9  $    644.9          2%
  Long-term sales                              38.2        54.9        (30)%
  Long-term redemptions                       (53.0)      (52.8)         0%
  Net cash management                          (0.8)        1.1         NM
                                         ----------  ----------  ---------
    Net new flows                             (15.6)        3.2         NM
  Reinvested distributions                      7.3         5.8         26%
                                         ----------  ----------  ---------
    Net flows                                  (8.3)        9.0         NM
  Distributions                                (8.5)       (7.3)        16%
  Appreciation and other                       27.2        24.1         13%
                                         ----------  ----------  ---------
Ending AUM                               $    670.3  $    670.7          0%
                                         ==========  ==========  =========



 
AUM BY INVESTMENT OBJECTIVE


                            31-Dec- 30-Sep-    %     30-Jun- 31-Mar- 31-Dec-
(in billions)                  11      11   Change      11      11      10
                            ------- ------- ------   ------- ------- -------
Equity
  Global/international      $ 194.5 $ 185.8      5%  $ 226.2 $ 225.4 $ 219.1
  United States                75.7    68.4     11%     83.6    83.5    77.0
                            ------- ------- ------   ------- ------- -------
    Total equity              270.2   254.2      6%    309.8   308.9   296.1
                            ------- ------- ------   ------- ------- -------
Hybrid                         96.4   101.3     (5)%   115.1   113.4   106.1
Fixed-Income
  Tax-free                     74.1    72.0      3%     69.6    67.5    71.4
  Taxable
    Global/international      174.7   178.8     (2)%   185.4   160.6   144.7
    United States              48.9    46.9      4%     48.1    47.1    45.9
                            ------- ------- ------   ------- ------- -------
    Total fixed-income        297.7   297.7      0%    303.1   275.2   262.0
Cash Management                 6.0     6.7    (10)%     6.2     6.0     6.5
                            ------- ------- ------   ------- ------- -------
    Total AUM               $ 670.3 $ 659.9      2%  $ 734.2 $ 703.5 $ 670.7
                            ======= ======= ======   ======= ======= =======
Average AUM for the Three-
 Month Period               $ 675.0 $ 714.4     (6)% $ 726.7 $ 687.2 $ 655.6



 
AUM AND FLOWS - UNITED STATES AND INTERNATIONAL(15)


                                 As of and for the Three Months Ended
                          -------------------------------------------------
                          31-Dec-   % of   30-Sep-   % of   31-Dec-   % of
(in billions)                11     Total     11     Total     10     Total
                          -------  ------  -------  ------  -------  ------
Long-Term Sales
  United States           $  21.2      55% $  24.2      46% $  25.3      46%
  International              17.0      45%    28.7      54%    29.6      54%
                          -------  ------  -------  ------  -------  ------
    Total long-term sales $  38.2     100% $  52.9     100% $  54.9     100%
                          =======  ======  =======  ======  =======  ======
Long-Term Redemptions
  United States           $ (33.1)     62% $ (24.8)     50% $ (30.9)     59%
  International             (19.9)     38%   (24.9)     50%   (21.9)     41%
                          -------  ------  -------  ------  -------  ------
    Total long-term
     redemptions          $ (53.0)    100% $ (49.7)    100% $ (52.8)    100%
                          =======  ======  =======  ======  =======  ======
AUM
  United States           $ 439.0      65% $ 431.5      65% $ 448.3      67%
  International             231.3      35%   228.4      35%   222.4      33%
                          -------  ------  -------  ------  -------  ------
    Total AUM             $ 670.3     100% $ 659.9     100% $ 670.7     100%
                          =======  ======  =======  ======  =======  ======



 
AUM AND FLOWS BY INVESTMENT OBJECTIVE


(in billions)                   Equity
                     ---------------------------
for the three months
 ended                  Global/        United
December 31, 2011    International     States        Hybrid
                     ------------- ------------- -------------
AUM at October 1,
 2011                $       185.8 $        68.4 $       101.3
  Long-term sales              9.8           3.7           4.1
  Long-term
   redemptions               (10.4)         (4.3)        (15.1)
  Net exchanges               (0.7)          0.1           0.1
  Net cash
   management                    -             -             -
                     ------------- ------------- -------------
    Net new flows             (1.3)         (0.5)        (10.9)
  Reinvested
   distributions               1.5           1.3           1.2
                     ------------- ------------- -------------
    Net flows                  0.2           0.8          (9.7)
  Distributions               (1.8)         (1.4)         (1.4)
  Appreciation and
   other                      10.3           7.9           6.2
                     ------------- ------------- -------------
AUM at December 31,
 2011                $       194.5 $        75.7 $        96.4
                     ============= ============= =============

AUM AND FLOWS BY INVESTMENT OBJECTIVE


(in billions)                  Fixed-Income
                    ---------------------------------
for the three months            Taxable     Taxable
 ended                          Global/      United       Cash
December 31, 2011   Tax-Free International   States    Management   Total
                    -------- ------------- ---------- ----------- ---------
AUM at October 1,
 2011               $   72.0 $       178.8 $     46.9 $       6.7 $   659.9
  Long-term sales        2.8          14.2        3.6           -      38.2
  Long-term
   redemptions          (2.2)        (17.7)      (3.3)          -     (53.0)
  Net exchanges          0.2          (0.5)       0.7         0.1         -
  Net cash
   management              -             -          -        (0.8)     (0.8)
                    -------- ------------- ---------- ----------- ---------
    Net new flows        0.8          (4.0)       1.0        (0.7)    (15.6)
  Reinvested
   distributions         0.6           2.3        0.4           -       7.3
                    -------- ------------- ---------- ----------- ---------
    Net flows            1.4          (1.7)       1.4        (0.7)     (8.3)
  Distributions         (0.8)         (2.6)      (0.5)          -      (8.5)
  Appreciation and
   other                 1.5           0.2        1.1           -      27.2
                    -------- ------------- ---------- ----------- ---------
AUM at December 31,
 2011               $   74.1 $       174.7 $     48.9 $       6.0 $   670.3
                    ======== ============= ========== =========== =========


(in billions)                  Equity
                     --------------------------
for the three months
 ended                  Global/        United
September 30, 2011   International     States       Hybrid
                     -------------  -----------  -----------
AUM at July 1, 2011  $       226.2  $      83.6  $     115.1
 Long-term sales              11.0          4.2          4.8
 Long-term
  redemptions                (15.4)        (5.9)        (5.1)
 Net exchanges                (0.5)        (0.3)        (0.5)
 Net cash management             -            -            -
                     -------------  -----------  -----------
  Net new flows               (4.9)        (2.0)        (0.8)
 Reinvested
  distributions                0.7          0.4          0.9
                     -------------  -----------  -----------
  Net flows                   (4.2)        (1.6)         0.1
 Distributions                (0.8)        (0.5)        (1.1)
 Acquisitions                 10.9            -            -
 Appreciation
  (depreciation) and
  other                      (46.3)       (13.1)       (12.8)
                     -------------  -----------  -----------
AUM at September 30,
 2011                $       185.8  $      68.4  $     101.3
                     =============  ===========  ===========



(in billions)                  Fixed-Income
                    ---------------------------------
for the three months             Taxable     Taxable
 ended                           Global/      United       Cash
September 30, 2011  Tax-Free  International   States    Management   Total
                    --------  -------------  --------  -----------  -------
AUM at July 1, 2011 $   69.6  $       185.4  $   48.1  $       6.2  $ 734.2
 Long-term sales         2.3           27.6       3.0            -     52.9
 Long-term
  redemptions           (2.7)         (16.9)     (3.7)           -    (49.7)
 Net exchanges           0.1            0.3       0.2          0.7        -
 Net cash management       -              -         -         (0.1)    (0.1)
                    --------  -------------  --------  -----------  -------
  Net new flows         (0.3)          11.0      (0.5)         0.6      3.1
 Reinvested
  distributions          0.6            1.1       0.3            -      4.0
                    --------  -------------  --------  -----------  -------
  Net flows              0.3           12.1      (0.2)         0.6      7.1
 Distributions          (0.8)          (1.1)     (0.4)           -     (4.7)
 Acquisitions              -              -         -            -     10.9
 Appreciation
  (depreciation) and
  other                  2.9          (17.6)     (0.6)        (0.1)   (87.6)
                    --------  -------------  --------  -----------   ------
AUM at September 30,
 2011               $   72.0  $       178.8  $   46.9  $       6.7  $ 659.9
                    ========  =============  ========  ===========  =======


(in billions)                  Equity
                     --------------------------
for the three months
 ended                  Global/        United
December 31, 2010    International     States       Hybrid
                     -------------  -----------  -----------
AUM at October 1,
 2010                $       204.2  $      69.5  $     110.8
  Long-term sales             15.6          4.3          5.1
  Long-term
   redemptions               (14.6)        (3.8)       (15.8)
  Net exchanges                0.4          0.2          0.3
  Net cash
   management                    -            -            -
                     -------------  -----------  -----------
    Net new flows              1.4          0.7        (10.4)
  Reinvested
   distributions               1.6          1.1          1.1
                     -------------  -----------  -----------
    Net flows                  3.0          1.8         (9.3)
  Distributions               (2.2)        (1.1)        (1.4)
  Appreciation
   (depreciation)
   and other                  14.1          6.8          6.0
                     -------------  -----------  -----------
AUM at December 31,
 2010                $       219.1  $      77.0  $     106.1
                     =============  ===========  ===========




(in billions)                  Fixed-Income
                    ---------------------------------
for the three months             Taxable     Taxable
 ended                           Global/      United       Cash
December 31, 2010   Tax-Free  International   States    Management   Total
                    --------  -------------  --------  -----------  -------
AUM at October 1,
 2010               $   77.7  $       130.7  $   45.4  $       6.6  $ 644.9
  Long-term sales        3.1           23.5       3.3            -     54.9
  Long-term
   redemptions          (4.2)         (11.5)     (2.9)           -    (52.8)
  Net exchanges         (0.9)           1.5      (0.2)        (1.3)       -
  Net cash
   management              -              -         -          1.1      1.1
                    --------  -------------  --------  -----------  -------
    Net new flows       (2.0)          13.5       0.2         (0.2)     3.2
  Reinvested
   distributions         0.5            1.2       0.3            -      5.8
                    --------  -------------  --------  -----------  -------
    Net flows           (1.5)          14.7       0.5         (0.2)     9.0
  Distributions         (0.8)          (1.4)     (0.4)           -     (7.3)
  Appreciation
   (depreciation)
   and other            (4.0)           0.7       0.4          0.1     24.1
                    --------  -------------  --------  -----------  -------
AUM at December 31,
 2010               $   71.4  $       144.7  $   45.9  $       6.5  $ 670.7
                    ========  =============  ========  ===========  =======

Franklin Resources, Inc. is a global investment management organization operating as Franklin Templeton Investments. Franklin Templeton Investments provides global and domestic investment management solutions managed by its Franklin, Templeton, Mutual Series, Fiduciary Trust, Darby and Bissett investment teams. The San Mateo, CA-based company has more than 60 years of investment experience and over $670 billion in AUM as of December 31, 2011. For more information about our company, please visit franklinresources.com.

Notes

1. Net income represents net income attributable to Franklin Resources, Inc.

2. Average AUM represents simple monthly average AUM.

3. 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.

4. Lipper rankings for Franklin Templeton U.S.-registered mutual funds are based on Class A shares. Franklin Templeton funds are compared against a universe of all share classes. Performance rankings for other share classes may differ. 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 155 peer groups of U.S. retail mutual funds, and the groups vary in size from 9 to 1,114 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.

5. The figures in the table are based on data available from Lipper® Inc. as of January 6, 2012 and are subject to revision.

6. Of the eligible Franklin Templeton long-term mutual funds tracked by Lipper, 38, 31, 41 and 46 funds ranked in the top quartile and 28, 26, 26 and 17 funds ranked in the second quartile, for the one-, three-, five- and 10-year periods, respectively, for their respective Lipper peer groups.

7. Of the eligible Franklin Templeton equity mutual funds tracked by Lipper, 14, 22, 21 and 17 funds ranked in the top quartile and 16, 11, 10 and 7 funds ranked in the second quartile, for the one-, three-, five- and 10-year periods, respectively, for their respective Lipper peer groups.

8. Of the eligible Franklin Templeton non-money market fixed-income mutual funds tracked by Lipper, 24, 9, 20 and 29 funds ranked in the top quartile and 12, 15, 16 and 10 funds ranked in the second quartile, for the one-, three-, five- and 10-year periods, respectively, for their respective Lipper peer groups.

9. Of the eligible Franklin equity mutual funds tracked by Lipper, 7, 16, 16 and 11 funds ranked in the top quartile and 12, 8, 6 and 3 funds ranked in the second quartile, for the one-, three-, five- and 10-year periods, respectively, for their respective Lipper peer groups.

10. Of the eligible Templeton equity mutual funds tracked by Lipper, 2, 5, 3 and 3 funds ranked in the top quartile and 2, 2, 2 and 2 funds ranked in the second quartile, for the one-, three-, five- and 10-year periods, respectively, for their respective Lipper peer groups.

11. Of the eligible Mutual Series equity mutual funds tracked by Lipper, 5, 1, 2 and 3 funds ranked in the top quartile and 2, 1, 2 and 2 funds ranked in the second quartile, for the one-, three-, five- and 10-year periods, respectively, for their respective Lipper peer groups.

12. Of the eligible Franklin Templeton non-money market taxable fixed-income mutual funds tracked by Lipper, 3, 2, 5 and 4 funds ranked in the top quartile and 3, 5, 2 and 4 funds ranked in the second quartile, for the one-, three-, five- and 10-year periods, respectively, for their respective Lipper peer groups.

13. Of the eligible Franklin Templeton non-money market tax-free fixed-income mutual funds tracked by Lipper, 21, 7, 15 and 25 funds ranked in the top quartile and 9, 10, 14 and 6 funds ranked in the second quartile, for the one-, three-, five- and 10-year periods, respectively, for their respective Lipper peer groups.

14. In the quarter ended September 30, 2011, the Company discontinued the classification of a portion of the investment management fees earned by certain of its non-U.S. subsidiaries as sales and distribution fees. This presentation change does not represent a restatement of any previously published financial results. See the Company's Form 10-K for the fiscal year ended September 30, 2011 for additional information.

15. International includes North America-based advisors serving non-resident clients.

Forward-Looking Statements

Statements in this press release regarding Franklin Resources, Inc. ("Franklin") and its subsidiaries, which are not historical facts, are "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. When used in this press release, words or phrases generally written in the future tense and/or preceded by words such as "will," "may," "could," "expect," "believe," "anticipate," "intend," "plan," "seek," "estimate" or other similar words are forward-looking statements.

Forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors, some of which are listed below, that could cause actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance.

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, in Risk Factors and 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, 2011:

  • Volatility and disruption of the capital and credit markets, and adverse changes in the global economy, may significantly affect our results of operations and may put pressure on our financial results.
  • The amount and mix of our AUM are subject to significant fluctuations.
  • We are subject to extensive and complex, overlapping and frequently changing rules, regulations and legal interpretations.
  • Regulatory and legislative actions and reforms have made the regulatory environment in which we operate more costly and future actions and reforms could adversely impact our AUM, increase costs and negatively impact our profitability and future financial results.
  • Changes in tax laws or exposure to additional income tax liabilities could have a material impact on our financial condition, results of operations and liquidity.
  • Any significant limitation, failure or security breach of our software applications, technology or other systems that are critical to our operations could constrain our operations.
  • Our investment management business operations are complex and a failure to properly perform operational tasks or the misrepresentation of our products and services could have an adverse effect on our revenues and income.
  • We face risks, and corresponding potential costs and expenses, associated with conducting operations and growing our business in numerous countries.
  • We depend on key personnel and our financial performance could be negatively affected by the loss of their services.
  • Strong competition from numerous and sometimes larger companies with competing offerings and products could limit or reduce sales of our products, potentially resulting in a decline in our market share, revenues and income.
  • Changes in the third-party distribution and sales channels on which we depend could reduce our income and hinder our growth.
  • Our increasing focus on international markets as a source of investments and sales of investment products subjects us to increased exchange rate and other risks in connection with our revenues and income generated overseas.
  • Poor investment performance of our products could affect our sales or reduce the level of AUM, potentially negatively impacting our revenues and income.
  • We could suffer losses in our revenues and income if our reputation is harmed.
  • Our future results are dependent upon maintaining an appropriate level of expenses, which is subject to fluctuation.
  • Our ability to successfully integrate widely varied business lines can be impeded by systems and other technological limitations.
  • Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, regulatory actions, reputational harm, or legal liability.
  • Certain of the portfolios we manage, including our emerging market portfolios, are vulnerable to significant market-specific political, economic or other risks, any of which may negatively impact our revenues and income.
  • Our revenues and income could be adversely affected if the terms of our management agreements are significantly altered or these agreements are terminated by the funds and other sponsored investment products we advise.
  • Regulatory and governmental examinations and/or investigations, litigation and the legal risks associated with our business, could adversely impact our AUM, increase costs and negatively impact our profitability and/or our future financial results.
  • Our ability to meet cash needs depends upon certain factors, including the market value of our assets, operating cash flows and our perceived creditworthiness.
  • Diverse and strong competition limits the interest rates that we can charge on consumer loans.
  • Our business could be negatively affected if we or our banking subsidiaries fail to remain well capitalized, and liquidity needs could affect our banking business.
  • We are dependent on the earnings of our subsidiaries.

Any forward-looking statement made by us in this press release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.