FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _____________
Commission File No. 1-9318
FRANKLIN RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2670991
-------- -----------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
777 Mariners Island Blvd., San Mateo, CA 94404
(Address of Principal Executive Offices)
(Zip Code)
(415) 312-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past
90 days.
YES X NO ______
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by
Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
YES _____ NO ______
APPLICABLE ONLY TO CORPORATE ISSUERS:
Outstanding: 80,891,790 shares, common stock, par value
$.10 per share at May 8, 1995.
Exhibit index - See page
PART I: FINANCIAL INFORMATION
ITEM 1: CONDENSED FINANCIAL STATEMENTS
In the opinion of management, all appropriate adjustments
necessary to a fair presentation of the results of
operations have been made for the periods shown. All
adjustments are of a normal recurring nature. Certain
1994 amounts have been reclassified to conform to 1995
presentation. These financial statements should be read
in conjunction with the Company's audited financial
statements for the fiscal year ended September 30, 1994.
<TABLE>
<CAPTION>
Franklin Resources, Inc.
Consolidated Statements of Income
Unaudited
Three months ended Six months ended
(Dollars in thousands, March 31 March 31
except per share data) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Operating revenues:
Investment management fees $172,582 $161,196 $347,156 $313,084
Underwriting commissions, net 9,096 33,228 22,209 62,797
Transfer, trust and related fees 15,520 13,039 31,463 25,000
Banking/finance, real estate and other 12,103 6,165 24,058 11,235
Total operating revenues 209,301 213,628 424,886 412,116
Operating expenses:
General and administrative 87,487 86,918 184,978 171,375
Selling expenses 19,886 16,372 38,121 32,034
Amortization of goodwill 4,640 4,572 9,210 9,114
Banking interest expense 2,563 2,425 5,097 4,781
Total operating expenses 114,576 110,287 237,406 217,304
Operating income 94,725 103,341 187,480 194,812
Other income/(expenses):
Investment and other income 5,262 5,206 12,025 10,925
Interest expense (7,353) (6,458) (14,440) (14,513)
Other income/(expense), net (2,091) (1,252) (2,415) (3,588)
Income before taxes on income 92,634 102,089 185,065 191,224
Taxes on income 29,594 33,488 58,721 63,622
Net income $63,040 $68,601 $126,344 $127,602
Earnings per share:
Primary $0.76 $0.82 $1.52 $1.52
Fully diluted $0.76 $0.82 $1.52 $1.52
Dividends per share $0.10 $0.08 $0.20 $0.16
</TABLE>
<TABLE>
<CAPTION>
Franklin Resources, Inc.
Consolidated Balance Sheets
Unaudited
March 31 September 30
(Dollars in thousands) 1995 1994
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $172,825 $190,415
Receivables:
Fees from Franklin Templeton Group 96,893 88,801
Other 21,846 36,160
Investment securities, available for sale 181,170 153,292
Prepaid expenses and other 9,207 8,230
Total current assets 481,941 476,898
Banking/finance group assets:
Cash and cash equivalents 27,353 19,961
Loans receivable, net 481,096 391,824
Investment securities, available for sale 19,189 26,345
Other assets 7,293 5,290
Total banking/finance group assets 534,931 443,420
Other assets:
Investments:
Investment securities, available for sale 9,718 9,144
Real estate 8,969 9,014
Deferred costs 14,646 9,235
Premises and equipment, net 102,285 94,218
Goodwill, net of $47,237 and $38,070
amortization, respectively 669,501 678,668
Other assets 12,678 17,388
Total other assets 817,797 817,667
Total assets $1,834,669 $1,737,985
</TABLE>
<TABLE>
<CAPTION>
Franklin Resources, Inc.
Consolidated Balance Sheets
Unaudited
March 31 September 30
(Dollars in thousands) 1995 1994
<S> <C> <C>
LIABILITIES:
Current liabilities:
Trade payables and accrued expenses $85,792 $126,809
Debt payable within one year 109,794 84,482
Dividends payable 8,134 6,528
Total current liabilities 203,720 217,819
Banking/finance group liabilities:
Deposits of account holders:
Interest bearing 182,363 172,922
Non-interest bearing 12,341 17,976
Other liabilities 2,330 973
Total banking/finance group liabilities 197,034 191,871
Other liabilities:
Long-term debt 382,399 383,668
Other liabilities 14,696 13,812
Total other liabilities 397,095 397,480
Total liabilities 797,849 807,170
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000
shares authorized; no shares issued or
outstanding
Common stock, $.10 par value; 500,000,000 shares authorized;
82,264,982 shares issued; 81,335,159 and
81,597,450 shares outstanding, respectively 8,226 8,226
Capital in excess of par value 92,134 92,283
Retained earnings 964,798 855,513
Less cost of treasury stock (32,709) (25,409)
Other 4,371 202
Total stockholders' equity 1,036,820 930,815
Total liabilities and stockholders' equity $1,834,669 $1,737,985
</TABLE>
<TABLE>
<CAPTION>
Franklin Resources, Inc.
Consolidated Statements of Cash Flows
Unaudited Six months ended
March 31
(Dollars in thousands) 1995 1994
<S> <C> <C>
Net income $126,344 $127,602
Adjustments to reconcile net income to net cash provided by
operating activities:
Decrease/(increase) in receivables, prepaid expenses and other 10,611 (2,045)
Decrease in trade payables and accrued expenses (24,436) (21,977)
Depreciation and amortization 20,117 17,506
Gains on disposition of investments (407) (1,417)
Net cash provided by operating activities 132,229 119,669
Purchase of mutual funds, net (25,419) (50,748)
Purchase of banking/finance investment portfolio (67,894) (35,790)
Liquidation of banking/finance investment portfolio 75,076 49,565
Purchase and origination of loans receivable (166,199) (86,689)
Collection of loans receivable 69,242 17,835
Purchase of other investments, net (529) (5,225)
Purchase of premises and equipment and other (14,906) (16,208)
Net cash used in investing activities (130,629) (127,260)
Increase in deposits of bank account holders 3,805 18,254
Dividends paid on common stock (15,453) (12,327)
Acquisition of treasury stock (24,194) (12,077)
Issuance of commercial paper, net 44,418 -
Issuance of bank debt - 12,872
Payments on notes and capital leases (20,374) (42,566)
Net cash used in financing activities (11,798) (35,844)
Decrease in cash and cash equivalents (10,198) (43,435)
Cash and cash equivalents, beginning of the period 210,376 302,952
Cash and cash equivalents, end of the period $200,178 $259,517
Supplemental disclosure of non-cash information:
Value of common stock issued in other transactions $15,857 $1,650
</TABLE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
Franklin Resources, Inc., the parent company, and its
various operating subsidiaries (the "Company") derives
approximately 94% of its revenue from its principal line
of business of providing investment management,
administration and related services to the Franklin
Templeton funds, managed accounts and other investment
products. The Company has a diversified base of assets
under management and a full range of investment
management products and services to meet the needs of a
variety of individuals and institutions. The Company's
revenues are derived largely from the amount and
composition of assets under management.
Since September 30, 1994, volatility has continued in
global bond and stock markets. The U.S. Federal Reserve
Board has continued to raise short-term interest rates in
an attempt to control perceived inflationary pressures.
In addition, a major devaluation of the Mexican peso and
the Orange County, California declaration of bankruptcy
took place during the six month period. These events
contributed to investor caution and continued the slowing
of investment in mutual funds. Assets under the
Company's management increased during the quarter from
$114.6 billion at December 31, 1994 to $118.8 billion at
March 31, 1995 as a result of net sales and market
appreciation. Industry and Company expectations are for
continued growth over the long term. However, the
current capital market and industry environment could
have a negative impact on the Company's results of
operations in the near term.
At March 31, 1995, the Company had offices in 15
countries. During the six month period ended March 31,
1995, the Company continued to expand its international
distribution and research capabilities. The following
offices were opened with the specific intent to expand
investment research capabilities and, in some cases,
support local distribution activities:
Moscow, Russia Ho Chi Minh City, Vietnam
Paris, France Sandton, South Africa
Rio de Janeiro, Brazil
Additional foreign offices are planned for the remainder
of the year.
At March 31, 1994, the Company earns approximately 38% of
its investment management fee revenues from investment
advisory services provided by its foreign subsidiaries.
Despite the Company's global presence, its exposure to
changes in currency rates is not considered significant
because a material portion of the foreign offices'
revenues is U.S. dollar denominated. The Company's
exposure to repatriation risks is not material because of
the minimal amount of fixed assets and U.S. dollar
deposits in those foreign locations. The relative
geographic contributions to operating profits and net
earnings have not materially changed since September 30,
1994.
During the six month period ended March 31, 1995, the
Company was a party to financial instruments with off-
balance sheet risks in order to minimize the Company's
exposure to adverse changes in interest rate movements on
the floating rate debt which the Company originally
issued when it purchased the assets of Templeton,
Galbraith & Hansberger Ltd. on October 30, 1992. These
financial instruments are discussed in more detail below.
<TABLE>
<CAPTION>
I. Material Changes in Results of Operations
Three months ended % Six months ended %
Results of operations: March 31 Change March 31 Change
(Dollars in millions) 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Operating income $94.7 $103.3 -8% $187.5 $194.8 -4%
Operating margin 45.3% 48.4% 44.1% 47.3%
Net income $63.0 $68.6 -8% $126.3 $127.6 -1%
</TABLE>
Decreases in operating income and net income are
primarily attributable to the decreases in operating
revenues earned from net underwriting commissions and
increases in operating expenses. Changes in operating
income will continue to be dependent upon general
economic growth, the strength of capital markets and the
Company's ability to meet market demands with competitive
products and services. Operating revenues will continue
to be specifically dependent upon the amount and
composition of assets under management, mutual fund
sales, and the number of mutual fund investors and
institutional clients. Operating expenses are likely to
continue to increase with the Company's continued
expansion, the increase in competition and the Company's
continued commitment to improve its products and
services. These endeavors will likely result in an
increase in employment costs, general and administrative
expenses and selling expenses. Operating margins
decreased for the three and six month periods primarily
due to the general slowdown in sales and to the increase
in operating expenses resulting from the Company's
expansion of its products and services.
<TABLE>
<CAPTION>
ASSETS UNDER MANAGEMENT - TABLE 1
Franklin Templeton Group March 31 $ %
(Dollars in millions) 1995 1994 Change Change
<S>
Fixed income funds: <C> <C> <C> <C>
Tax-free income $39,296 $39,710 ($414) -1%
U.S. government fixed income 13,738 16,277 (2,539) -16%
Money funds 2,523 2,949 (426) -14%
Global/international fixed income 2,315 2,818 (503) -18%
Total fixed income 57,872 61,754 (3,882) -6%
Equity and income funds:
Global/international equity 28,672 22,705 5,967 26%
U.S. equity/income 18,161 16,737 1,424 9%
Total equity and income 46,833 39,442 7,391 19%
Total Franklin Templeton funds 104,705 101,196 3,509 3%
Franklin Templeton institutional assets 14,083 11,521 2,562 22%
Total Franklin Templeton Group $118,788 $112,717 $6,071 5%
</TABLE>
<TABLE>
<CAPTION>
MOVEMENTS IN ASSETS UNDER MANAGEMENT - TABLE 2
Three Months Ended % Six Months Ended %
(Dollars in thousands) 1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Assets under management - beginning $114,646 $114,172 - $112,900 $107,490 5%
Sales & reinvestments 6,029 11,413 -36% 13,197 22,219 -41%
Redemptions (4,974) (7,661) -19% (11,080) (15,543) 19%
Market appreciation/(depreciation) 3,080 (5,207) 159% 3,771 (1,449) 187%
Assets under management - ending $118,788 $112,717 5% $118,788 $112,717 5%
Average assets under management $116,436 $115,137 $116,386 $114,368
</TABLE>
As shown in Table 1, the composition of assets under
management has changed since March 31, 1994, continuing a
trend of the past two years. This development is a
result of movements in relative sales, redemptions and
market value among the specific asset classes. Table 2
highlights these overall movements in assets under
management during the corresponding three and six month
periods. This table also indicates the volatility that
occurred during the periods reported as evidenced by
significant changes in overall sales, redemptions and
value. The Company's operating revenues and results of
operations will continue to be affected by these factors.
Fixed income funds represent 49% of assets under
management as of March 31, 1995, down from 55% a year
ago. Equity and income funds and institutional assets
represent 51% of assets under management as of March 31,
1995, up from 45% a year ago. The substantial increase in
U.S. interest rates during the twelve month period ended
March 31, 1995 resulted in a combination of both net
redemptions and market depreciation in various fixed
income funds. Assets under management of the Company's
fixed income funds declined 6% from levels a year ago.
Assets under management in the Company's money funds
decreased 14% from levels a year ago.
Assets under management in the Company's equity and
income funds as of March 31, 1995 increased 19% from
levels at March 31, 1994. Global/international equity
funds' assets under management represented most of this
increase, up 26% from levels a year ago.
Institutional assets under management increased 22% from
levels as of March 31, 1994. This increase resulted
principally from an increase in the number of clients as
well as additional investments from existing clients.
The Company is strongly committed to the institutional
account area and intends to continue the expansion of the
services it provides in this area.
<TABLE>
<CAPTION>
Three months ended Six months ended
Operating revenues: March 31 % March 31 %
(Dollars in millions) 1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Investment management fees $172.6 $161.2 7% $347.2 $313.1 11%
Underwriting commissions, net 9.1 33.2 -73% 22.2 62.8 -65%
Transfer, trust and related fees 15.5 13.0 19% 31.5 25.0 26%
Banking/finance, real estate and
other 12.1 6.2 95% 24.1 11.2 115%
Total operating revenues $209.3 $213.6 -2% $424.9 $412.1 3%
</TABLE>
I. - Material Changes in Results of Operations
(continued)
Investment management fees increased as a result of an
increase in and the change in composition of average
assets under management during the current reporting
periods as compared to the corresponding periods in 1994.
Table 1 shows the change in asset composition to the
higher fee-based equity and income funds and
institutional assets for the period ended March 31, 1995.
The decreases in net underwriting commissions were due
primarily to the 53% and the 54% decreases in U.S.
mutual fund sales during the three and six month periods
respectively, as compared to the corresponding periods in
the previous year, which was consistent with industry
results. An additional factor causing the decreases was
the change in the composition of sales to fund products
with lower underwriting commission retention rates.
Furthermore, during the quarter ended June 30,1994, the
Franklin Group of Funds implemented a distribution plan
pursuant to Rule 12b-1 of the Investment Company Act of
1940 while simultaneously eliminating fees on fund
reinvestments. This change has made underwriting
commissions dependent upon absolute mutual fund sales
levels rather than mutual fund investor dividend
reinvestment rates. The level of underwriting
commission revenues in future periods will continue to be
dependent upon investor purchases.
The boards of directors and/or shareholders of the
Franklin and Templeton funds have approved proposals to
adopt multiple classes of shares for various existing
funds. The Company expects the new class of shares,
called Class II, to be introduced during the third
quarter of the current fiscal year. Class II shares are
intended to expand the distribution of fund shares to a
broader audience of investors who have different pricing
preferences, but who share similar investment objectives.
While the new class of shares will increase distribution
expenses to the Company as compared to the existing class
of shares and will utilize the Company's capital
resources over the short term, the Company believes that
Class II shares will result in an overall increase in
assets under management by expanding distribution of fund
shares. The financial impact of Class II shares is
further discussed under Material Changes in Financial
Condition, Liquidity and Capital Resources.
The increases in transfer, trust and related fees is
related principally to the 18% increase to 4.6 million
retail fund shareholder accounts over the twelve month
period ended March 31, 1995. The number of institutional
clients continued to increase but had an immaterial
impact on transfer, trust and related fees because these
types of accounts generally require only investment
management services.
SHAREHOLDER ACCOUNTS - TABLE 3
%
1995 1994 Change
Number of retail fund
shareholder accounts 4.6 million 3.9 million 18%
The increases in banking/finance, real estate and other
revenues were due principally to the 182% and 200%
increases in the average auto and credit card loans
outstanding during the three and six month periods,
respectively. The banking/finance activities are further
discussed below.
I. - Material Changes in Results of Operations
(continued)
<TABLE>
<CAPTION>
Three months ended Six months ended
Operating expenses: March 31 % March 31 %
(Dollars in millions) 1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
General and administrative $87.5 $86.9 1% $185.0 $171.4 16%
Selling expenses 19.9 16.4 21% 38.1 32.0 19%
Amortization of goodwill 4.6 4.6 0% 9.2 9.1 1%
Banking interest expense 2.6 2.4 8% 5.1 4.8 6%
Total operating expenses $114.6 $110.3 4% $237.4 $217.3 9%
</TABLE>
Increases in operating expenses principally resulted from
the general expansion of the Company's business and are
more fully described below.
General and administrative expenses increased during the
periods due to higher employment, technology and
facilities costs related to the expansion of the
Company's business. Employee count increased to 4,392 at
March 31, 1995 compared to 3,915 at March 31, 1994.
Employment costs represent approximately 51% of operating
expenses.
Selling expenses increased mainly due to continued
increases in media advertising and additional marketing
initiatives.
The Company has evaluated potential impairment of
goodwill on the basis of the expected future operating
cash flows derived from this intangible asset in relation
to the Company's carrying value and has determined that
there is no impairment. The Company will periodically
review the carrying value of goodwill for potential
impairment.
Banking interest expense increased due to an increase in
the cost of funds during the periods.
As shown in Table 6, gross loans outstanding increased by
23% since September 30, 1994 to $486,520. As discussed
below under Material Changes in Financial Condition,
Liquidity and Capital Resources, the Company has also
experienced an increase in delinquency rates on dealer
auto loans during the recent growth period which has
resulted in an increase in charge-offs and provisions as
shown in Table 4 below.
<TABLE>
<CAPTION>
CHARGE-OFFS AND PROVISIONS - TABLE 4
Three months ended Six months ended
March 31 March 31
(Dollars in thousands) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Combined net charge-offs:
Auto loans $2,581 $194 $3,384 $333
Credit cards 977 661 1,890 1,522
Other 21 15 156 68
Total net charge-offs $3,579 $870 $5,430 $1,923
Combined provisions:
Auto loans $3,272 $181 $5,253 $315
Credit cards 1,069 609 1,470 1,439
Other 61 (4) 245 48
Total provisions $4,402 $786 $6,968 $1,802
</TABLE>
<TABLE>
<CAPTION>
Three months ended Six months ended
Other income/(expenses): March 31 % March 31 %
(Dollars in millions) 1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Investment and other income $5.3 $5.2 2% $12.0 $10.9 10%
Interest expense (7.4 ) (6.5 ) 14% (14.4 ) (14.5 ) -1%
Other income (expense), net ($2.1 ) ($1.3 ) 62% ($2.4 ) ($3.6 ) -33%
</TABLE>
The increases in investment income for the three and six
month periods resulted from increases in the average
levels of interest and dividend rates on investments.
Interest expense for the three and six month periods
increased due to increased rates and higher average debt
outstanding. The Company's effective interest rate at
March 31, 1995 was 6.23% on $489.0 million of outstanding
commercial paper, medium-term notes and subordinated
debentures compared to 4.85% on $471.0 million of debt
outstanding at March 31, 1994. At March 31, 1995,
commercial paper comprised $259.0 million of total debt
outstanding with an effective interest rate of 5.90%
including swaps and 6.05% excluding swaps. Medium-term
notes comprised $80 million of the debt outstanding with
an effective borrowing rate of 6.50% at March 31, 1995.
At March 31, 1994 bank debt comprised $321 million of
debt outstanding with an effective interest rate of 4.02%
including swaps and 3.58% excluding swaps. Subordinated
6.25% debentures due August 3, 2002, comprised $150
million of the total debt outstanding at March 31, 1995
and 1994 with an effective interest rate of 6.64% and
6.61%, respectively.
The Company has entered into interest swap agreements to
exchange variable rate interest payment obligations for
fixed rate interest payment obligations without the
exchange of the underlying principal amounts in order to
minimize the Company's exposure to adverse changes in
interest rate movements. At March 31, 1995, the Company
had swap agreements outstanding with an aggregate
notional amount of $30 million, maturing January 1996,
under which the Company paid a fixed rate of 5.015
percent and received a floating rate of 5.6875 percent
from banks. These financial instruments are with major
financial institutions. The credit worthiness of the
counterparties is subject to continuing review and full
performance is anticipated.
During the period, the Company had the following interest
rate swap agreements outstanding. The interest
differential between the fixed rate and floating rate to
be paid or received is accrued as an increase or decrease
to interest expense over the period of the agreements.
<TABLE>
<CAPTION>
SWAP AGREEMENTS - TABLE 5
Issue Maturity Notional Fixed
Date Date Amount Rate
<S> <C> <C> <C> <C>
3/8/93 1/30/95 $75. million 4.44%
3/8/93 1/29/96 $30. million 5.015%
</TABLE>
II. Material Changes in Financial Condition, Liquidity
and Capital Resources
<TABLE>
<CAPTION>
Selected balance sheet items: March 31 September 30 $ %
(Dollars in millions) 1995 1994 Change Change
<S> <C> <C> <C> <C>
Receivables:
Fees from Franklin Templeton Group $96.9 $88.8 $8.1 9%
Other $21.8 $36.2 ($14.4 ) -40%
Investment securities, available for sale $190.9 $162.4 $28.5 18%
Banking/finance loans receivable, net $481.1 $391.8 $89.3 23%
Premises and equipment, net $102.3 $94.2 $8.1 9%
Trade payables and accrued expenses $85.8 $126.8 ($41.0 ) -32%
Debt payable within one year $109.8 $84.5 $25.3 30%
Retained earnings $964.8 $855.5 $109.3 13%
</TABLE>
The increase in fees receivable from the Franklin
Templeton Group primarily resulted from an increase in
investment management fees.
The decrease in other receivables was related primarily
to the payment of advances on deferred sales charges for
Canadian based mutual funds.
The increase in investment securities, available for sale
was the result of increased investment of the Company's
cash from operating activities.
Banking/finance loans receivable, net increased due to a
$92.6 million increase in dealer auto loans as shown in
Table 6 below.
<TABLE>
<CAPTION>
BANKING/FINANCE LOANS OUTSTANDING - TABLE 6
Mar 31 Sep 30
(Dollars in thousands) 1995 1994
<S> <C> <C>
Loan portfolio:
Credit cards $89,272 $89,408
Dealer auto 386,611 293,967
Other 10,637 11,619
Gross loans outstanding $486,520 $394,994
Allowance for loan losses (5,424) (3,170)
Net loans outstanding $481,096 $391,824
Loan originator:
Franklin Bank, Inc. loans outstanding 171,381 169,616
Franklin Capital Corp. loans outstanding 315,139 225,378
Gross loans outstanding $486,520 $394,994
</TABLE>
<TABLE>
<CAPTION>
DELINQUENCY RATE ANALYSIS - TABLE 7
<S> <C> <C>
Days past due:
30-59 days $12,968 $4,767
60-89 days 4,157 1,579
90+ days 3,751 2,359
Total loans past due $20,876 $8,705
Total banking/finance loans outstanding $486,520 $394,994
% of loans outstanding past due 4.29% 2.20%
</TABLE>
The auto loan portfolio consists of approximately 50% new
cars and 50% used cars. At March 31, 1995,
approximately 50% of the auto loans outstanding were in
California, 20% in New Mexico, and the balance
distributed throughout the United States. The Company
has experienced an increase in delinquency rates since
September 30, 1994. In response, the Company has
significantly expanded its auto loan collection efforts
and enhanced the systems supporting those activities.
The Company anticipates continued increases in its
investment in credit card and dealer auto loan
portfolios. The Company intends to continue funding
these investments through operating cash flows and
existing debt facilities. Additionally, the Company is
reviewing the possibility of alternative funding sources
such as securitization of the auto loan portfolio.
Premises and equipment increased primarily as a result of
investments in new building construction and computer
equipment.
Trade payables and accrued expenses decreased due to the
payment of various employee related accruals since year
end.
Debt payable within one year increased primarily due to a
$24.8 million increase in short-term commercial paper.
Retained earnings increased as a result of net income for
the period.
Six months ended
Selected cash flow items: March 31
(Dollars in millions) 1995 1994
Cash flows from operating activities $132.2 $119.7
Cash flows from investing activities ($130.6 ) ($127.3 )
Cash flows from financing activities ($11.8 ) ($35.8 )
The increase in cash flows from operating activities was
primarily the result of the decrease in receivables,
prepaid expenses and other.
The cash flows from investing and financing activities
during the period were affected primarily by the
Company's funding of auto and credit card loans of the
banking/finance group, dividends paid on common stock and
purchase of treasury shares. The Company continues to
fund these activities primarily from operating cash flows
while utilizing the commercial paper and medium-term
notes facilities when appropriate.
During the six month period ended March 31, 1995, the
Company purchased 684,300 Franklin Resources, Inc. shares
for $24.2 million. The Company has 2,414,253 shares
authorized under its repurchase program. The Company
from time to time will continue to purchase its own
shares in the open market and in private transactions for
use in connection with various corporate incentive
programs and when it believes the market price of its
shares merits such action.
The proposed Class II shares will require the Company to
advance a one percent dealer commission which will be
recouped substantially during the subsequent twelve month
period through a .75% and .65% asset based charge on
equity and fixed income funds, respectively. The one per
cent dealer commission will be deferred and amortized on
a straightline basis over the eighteen month contingent
deferred sales charge period. The Company will fund
these advances through operating cash flows and existing
debt facilities.
On December 8, 1994, the Company announced that it had
applied and received approval from the Securities and
Exchange Commission to purchase $7.1 million of unsecured
Orange County obligations from two of its money market
mutual funds. The Company purchased these securities on
a voluntary basis to alleviate any concerns by those
funds' shareholders and does not anticipate any
significant losses as a result of such purchase. The
Company has limited additional exposure to Orange County
securities in the assets under its management and does
not anticipate any additional purchases of Orange County
securities from those assets.
At March 31, 1995, the Company held liquid assets of
$519.3 million, including $200.2 million in cash and cash
equivalents as compared to $515.0 million, including
$210.4 million in cash and cash equivalents at September
30, 1994.
Exhibit 11
COMPUTATIONS OF PER SHARE EARNINGS
Earnings per share are based on net income divided by the
average number of shares outstanding including common
stock equivalents during the period.
The computations are:
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31 March 31
(Dollars and shares in thousands) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Average outstanding shares 81,375 82,218 81,489 82,173
Common stock equivalents
Primary 1,335 1,829 1,335 1,864
Fully diluted 1,502 1,829 1,502 1,864
Total shares
Primary 82,710 84,046 82,824 84,037
Fully diluted 82,878 84,046 82,991 84,037
Net income $63,040 $68,601 $126,344 $127,602
Earnings per share:
Primary $0.76 $0.82 $1.52 $1.52
Fully diluted $0.76 $0.82 $1.52 $1.52
</TABLE>
Exhibit 12
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31 March 31
(Dollars in thousands) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Income before taxes $92,634 $102,089 $185,065 $191,224
Add fixed charges:
Interest expense 7,353 6,458 14,440 14,513
Interest factor on rent 1,905 1,295 3,398 2,626
Total fixed charges 9,258 7,753 17,838 17,139
Earnings before fixed charges
and taxes on income $101,892 $109,842 $202,903 $208,363
Ratios of earnings to fixed charges 11.0 14.2 11.4 12.2
</TABLE>
FRANKLIN RESOURCES, INC.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders
(a) The Annual Meeting of Stockholders of Franklin
Resources, Inc. was held at 10:00 a.m., Pacific Standard
Time, on January 24, 1995 at the offices of the
Corporation at 777 Mariners Island Boulevard, San Mateo,
California 94404.
The three (3) proposals presented at the meeting were:
1. The election of nine directors to hold office
until the next Annual Meeting of Stockholders
or until their successors are elected and shall
qualify.
2. The ratification of the appointment by the
Board of Directors of Coopers & Lybrand, L.L.P.
as the Company's independent certified
accountants for the current fiscal year ending
September 30, 1995.
3. The amendment of the Company's Annual Incen-
tive Compensation Plan.
(b) Each of the nine nominees for director was elected
and received the number of votes set forth below:
Name For Withheld
Harmon E. Burns 71,515,004 299,599
Judson R. Grosvenor 71,572,679 241,924
F. Warren Hellman 71,423,469 391,134
Charles B. Johnson 71,515,374 299,229
Charles E. Johnson 71,504,934 309,669
Rupert H. Johnson, Jr. 71,553,384 261,219
Harry O. Kline 71,491,376 323,227
Peter M. Sacerdote 71,493,705 320,898
Louis E. Woodworth 71,575,349 239,254
(c) The voting results of the other two (2) proposals
were as follows:
(2) With respect to the proposal to ratify the
appointment of Coopers & Lybrand, L.L.P. as the
Company's independent certified accountants for
the fiscal year ending September 30, 1995,
71,741,443 shares were voted FOR, 22,945 shares
were voted AGAINST, and 50,215 shares were
voted ABSTAIN.
(3) With respect to the proposal to adopt the
amendment of the Company's Annual Incentive
Compensation Plan, 68,147,157 shares were voted
FOR, 1,170,412 shares were voted AGAINST,
568,779 shares were voted ABSTAIN, with
1,928,255 BROKER NON-VOTES.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of the
report:
Exhibit (3)(i): Registrant's Certificate of
Incorporation, as filed November 28, 1969,
incorporated by reference to Exhibit (3)(i)
to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994
(the "1994 Annual Report)
Exhibit (3)(ii): Registrant's Certificate of
Amendment of Certificate of Incorporation,
as filed March 1, 1985, incorporated by
reference to Exhibit (3)(ii) to the 1994
Annual Report
Exhibit (3)(iii):Registrant's Certificate of
Amendment of Certificate of Incorporation,
as filed April 1, 1987, incorporated by
reference to Exhibit (3)(iii) to the 1994
Annual Report
Exhibit (3)(iv): Registrant's Certificate of
Amendment of Certificate of Incorporation,
as filed February 2, 1994, incorporated by
reference to Exhibit (3)(iv) to the 1994
Annual Report
Exhibit (3)(v): Registrant's By-Laws, as filed
February 14, 1995, incorporated by reference
to Exhibit (3)(v) to the Company's Quarterly
Report on Form 10-Q for the quarter ended
December 31, 1994
Exhibit 11: Computations of per share
earnings
Exhibit 12: Computations of ratios of
earnings to fixed charges
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K:
Form 8-K dated January 25, 1995 reporting in Item
5 Other Events the filing of an earnings press
release by the Company electronically on
January 24, 1995 and including said press release
as an Exhibit under Item 7 Financial Statements
and Exhibits.
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 thereunto
duly authorized.
FRANKLIN RESOURCES, INC.
Registrant
Date: May 15, 1995 /S/ Martin L. Flanagan
----------------------
MARTIN L. FLANAGAN
Senior Vice President,
Treasurer and Chief
Financial Officer
INDEX TO EXHIBITS
Exhibit Page
Exhibit (3)(i): Registrant's Certificate of -
Incorporation, as filed November 28, 1969,
incorporated by reference to Exhibit (3)(i)
to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994
(the "1994 Annual Report)
Exhibit (3)(ii): Registrant's Certificate of -
Amendment of Certificate of Incorporation,
as filed March 1, 1985, incorporated by
reference to Exhibit (3)(ii) to the 1994
Annual Report
Exhibit (3)(iii):Registrant's Certificate of -
Amendment of Certificate of Incorporation,
as filed April 1, 1987, incorporated by
reference to Exhibit (3)(iii) to the 1994
Annual Report
Exhibit (3)(iv): Registrant's Certificate of -
Amendment of Certificate of Incorporation,
as filed February 2, 1994, incorporated by
reference to Exhibit (3)(iv) to the 1994
Annual Report
Exhibit (3)(v): Registrant's By-Laws, as filed -
February 14, 1995, incorporated by reference
to Exhibit (3)(v) to the Company's Quarterly
Report on Form 10-Q for the quarter ended
December 31, 1994
Exhibit 11: Computations of per share earnings
Exhibit 12 Computations of ratios of
earnings to fixed charges
Exhibit 27: Financial Data Schedule -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 200,178
<SECURITIES> 181,170
<RECEIVABLES> 118,739
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 481,941
<PP&E> 102,285
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,834,669
<CURRENT-LIABILITIES> 203,720
<BONDS> 382,399
<COMMON> 8,226
0
0
<OTHER-SE> 1,028,594
<TOTAL-LIABILITY-AND-EQUITY> 1,834,669
<SALES> 0
<TOTAL-REVENUES> 436,911
<CGS> 0
<TOTAL-COSTS> 237,406
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,440
<INCOME-PRETAX> 185,065
<INCOME-TAX> 58,721
<INCOME-CONTINUING> 126,344
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 126,344
<EPS-PRIMARY> 1.520
<EPS-DILUTED> 1.520
</TABLE>
