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 December 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)
___________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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: 80,349,507 shares, common stock, par value $.10 per share
at January 31, 1996.
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, 1995.
Franklin Resources, Inc.
Consolidated Statements of Income
Unaudited
Three months ended
December 31
(Dollars in thousands, except per share 1995 1994
data)
____________________________________________ _____________ _____________
Operating revenues:
Investment management fees $201,635 $174,574
Underwriting commissions, net 2,975 13,113
Transfer, trust and related fees 21,389 15,943
Banking/finance, net and other 554 4,603
____________________________________________ _____________ _____________
Total operating revenues 226,553 208,233
____________________________________________ _____________ _____________
Operating expenses:
General and administrative 107,054 96,338
Selling 15,525 18,235
Amortization of goodwill 4,841 4,570
____________________________________________ _____________ _____________
Total operating expenses 127,420 119,143
____________________________________________ _____________ _____________
Operating income 99,133 89,090
Other income/(expenses):
Investment and other income 10,665 6,763
Interest expense (2,623) (3,422)
____________________________________________ _____________ _____________
Other income/(expense), net 8,042 3,341
____________________________________________ _____________ _____________
Income before taxes on income 107,175 92,431
Taxes on income 33,224 29,127
____________________________________________ _____________ _____________
Net income $73,951 $63,304
============================================ ============= =============
Earnings per share:
Primary $0.89 $0.76
Fully diluted $0.89 $0.76
Dividends per share $0.11 $0.10
Franklin Resources, Inc.
Consolidated Balance Sheets
Unaudited
As of As of
December 31 September 30
(Dollars in thousands) 1995 1995
____________________________________________ _____________ _____________
ASSETS:
Current assets:
Cash and cash equivalents $300,415 $246,184
Receivables:
Fees from Franklin Templeton funds 113,400 110,972
Other 12,600 38,407
Investment securities, available for sale 198,949 208,478
Prepaid expenses and other 9,189 7,167
____________________________________________ _____________ _____________
Total current assets 634,553 611,208
____________________________________________ _____________ _____________
Banking/Finance assets:
Cash and cash equivalents 22,773 15,515
Loans receivable, net 416,966 450,013
Investment securities, available for sale 22,833 23,655
Other assets 7,419 6,876
____________________________________________ _____________ _____________
Total banking/finance assets 469,991 496,059
____________________________________________ _____________ _____________
Other assets:
Investments:
Investment securities, available for
sale 17,225 15,291
Real estate 8,762 8,826
Deferred costs 30,640 17,703
Premises and equipment, net 123,473 118,628
Goodwill, net of $60,495 and $56,375
accumulated 655,514 660,363
amortization, respectively
Receivable from banking/finance group 266,773 302,273
Other assets 14,115 14,330
____________________________________________ _____________ _____________
Total other assets 1,116,502 1,137,414
____________________________________________ _____________ _____________
Total assets $2,221,046 $2,244,681
============================================ ============= =============
Franklin Resources, Inc.
Consolidated Balance Sheets
Unaudited
As of As of
December September
31 30
(Dollars in thousands) 1995 1995
__________________________________________ __________ __________
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Current liabilities:
Trade payables and accrued expenses $117,621 $117,744
Debt payable within one year 75,919 87,204
Dividends payable 8,864 8,123
__________________________________________ __________ __________
Total current liabilities 202,404 213,071
__________________________________________ __________ __________
Banking/finance liabilities:
Deposits of account holders:
Interest bearing 156,193 159,627
Non-interest bearing 9,303 9,747
Payable to parent 266,773 302,273
Other liabilities 2,002 2,076
__________________________________________ __________ __________
Total banking/finance liabilities 434,271 473,723
__________________________________________ __________ __________
Other Liabilities:
Long-term debt 382,294 382,367
Other liabilities 14,410 14,477
__________________________________________ __________ __________
Total other liabilities 396,704 396,844
__________________________________________ __________ __________
Total liabilities 1,033,379 1,083,638
__________________________________________ __________ __________
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value,
1,000,000 shares authorized; none issued - -
Common stock, $.10 par value, 500,000,000
shares authorized; 82,264,982 shares
issued; 80,325,566 and 80,939,611 shares
outstanding, respectively 8,226 8,226
Capital in excess of par value 99,793 92,190
Retained earnings 1,156,305 1,091,204
Less cost of treasury stock (87,705) (48,519)
Other 11,048 17,942
__________________________________________ __________ __________
Total stockholders' equity 1,187,667 1,161,043
__________________________________________ __________ __________
Total liabilities and stockholders'
equity $2,221,046 $2,244,681
========================================== ========== ==========
Franklin Resources, Inc.
Consolidated Statements of Cash Flows
Unaudited
Three months ended
(Dollars in thousands) 1995 1994
_________________________________________________ __________ ___________
Net income $73,951 $63,304
Adjustments to reconcile net income to net cash
provided by operating activities:
Decrease in receivables, prepaid expenses and
other 17,024 28,613
Decrease(increase) in trade payables and accrued
expenses 17,441 (11,341)
Depreciation and amortization 10,093 9,329
Gains on investments (1,561) (473)
_________________________________________________ __________ ___________
Net cash provided by operating activities 116,948 89,432
_________________________________________________ __________ ___________
Purchase of Franklin Templeton
funds, net (1,276) (5,006)
Purchase of banking/finance investment portfolio (30,350) (39,920)
Liquidation of banking/finance investment
portfolio 31,172 54,628
Originations of banking/finance loans
receivable (8,692) (106,291)
Collections of banking/finance loans receivable 38,174 25,299
Purchase of real estate and other
investments, net (1,870) (9,960)
Purchase of premises and equipment and other (9,249) (6,785)
_________________________________________________ __________ ___________
Net cash provided by (used in) investing
activities 17,909 (88,035)
_________________________________________________ __________ ___________
Increase (decrease) in deposits of bank account
holders (3,878) 7,517
Dividends paid on common stock (8,109) (6,528)
Purchase of treasury stock (50,682) (13,948)
Exercise of common stock options 301 -
Issuance of debt - 105
Repayment of debt (11,000) (1,060)
_________________________________________________ __________ ___________
Net cash used in financing activities (73,368) (13,914)
_________________________________________________ __________ ___________
Net change in cash and cash equivalents 61,489 (12,517)
Cash and cash equivalents, beginning of the
period 261,699 210,376
_________________________________________________ __________ ___________
Cash and cash equivalents, end of the period $323,188 $197,859
================================================= ========== ===========
Supplemental disclosure of non-cash information:
Value of common stock issued in other
transactions $17,706 $16,174
Management's Discussion and Analysis of
Financial Condition and Results of Operations
GENERAL
Franklin Resources, Inc. and its majority-owned subsidiaries (the
"Company") derives substantially all of its revenue and net income from
providing investment management, administration, distribution and
related services to the Franklin Templeton funds, managed accounts and
other investment products. The Company's revenues are derived largely
from the amount and composition of assets under management. 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 assets under management were $135.1 billion at
December 31, 1995, an increase of $4.3 billion (3%) from September
30, 1995 and an increase of $20.5 billion (18%) from December 31,
1994. These increases were the result of both net sales and market
appreciation.
The Company operates in five geographic areas of the world: the United
States, Canada, the Bahamas, Europe and Asia/Pacific. At December 31,
1995, the Company had offices in 18 countries. The Company continues
to explore opportunities globally to increase its investment research
capabilities and to support global distribution channels.
I. Material Changes in Results of Operations
Results of operations
Three months ended
December 31 %
(In millions) 1995 1994 Change
____________________________ _________ __________ __________
Net income $74.0 $63.3 17%
Earnings per share
Primary $.89 $.76 17%
Fully-diluted $.89 $.76 17%
Operating margin 44% 43%
____________________________ _________ __________ __________
The increase in net income was primarily due to an increase in
investment management fees as a result of higher average assets under
management. Operating expenses increased at a slightly lower rate than
operating revenues resulting in a 1% improvement in the Company's
operating margin. Operating revenues will continue to be 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 expected to increase with the
Company's ongoing expansion, the increase in competition and the
Company's commitment to improve its products and services. These
endeavors will likely result in an increase in selling expenses,
employment costs and other general and administrative expenses.
The contributions to the Company's operating profit from its non-U.S.
operations continued to increase principally as a result of increased
fee revenues from investment management services provided by its
foreign subsidiaries. This trend will continue to be dependent on the
amount and composition of assets managed by the Company's non-U.S.
subsidiaries. There have been no significant changes to the Company's
limited exposure to fluctuations in global currency markets.
Assets under management
As of
December 31 %
(In billions) 1995 1994 Change
_____________________________ _________ _________ ________
Franklin Templeton Group:
Fixed income funds:
Tax-free $41.9 $37.6 11%
U.S. government (primarily
GNMA's) 16.8 16.2 4%
Taxable and tax-free money
funds 2.7 3.3 (18%)
Global/international 2.9 2.6 12%
_____________________________ _________ _________ ________
Total fixed-income
funds 64.3 59.7 8%
_____________________________ _________ _________ ________
Equity and income funds:
Global/international 36.7 28.9 27%
U.S. equity/income 16.7 12.6 33%
_____________________________ _________ _________ ________
Total equity and income
funds 53.4 41.5 29%
_____________________________ _________ _________ ________
Total Franklin Templeton
fund assets 117.7 101.2 16%
_____________________________ _________ _________ ________
Franklin Templeton
institutional assets 17.4 13.4 30%
_____________________________ _________ _________ ________
Total Franklin Templeton
Group $135.1 $114.6 18%
============================= ========= ========= ========
Changes in assets under
management
Three months ended
December 31 %
(In billions) 1995 1994 Change
_____________________________ _________ _________ _________
Assets under management -
beginning $130.8 $118.2 11%
Sales & reinvestments 7.4 7.5 -1%
Redemptions (5.0) (6.3) 21%
Market
appreciation/(depreciation) 1.9 (4.8) 140%
_____________________________ _________ _________ _________
Assets under management -
ending $135.1 $114.6 18%
_____________________________ _________ _________ _________
Monthly average assets under
management $132.1 $116.3 14%
_____________________________ ________ ________ ______
Fixed income funds represent 48% of assets under management as of
December 31, 1995, down from 52% a year ago. Tax-free and
global/international assets have experienced significant growth.
Equity and income funds represent 40% of assets under management as of
December 31, 1995, up from 36% a year ago. Global/international equity
funds' assets under management were up 27% from levels a year ago. U.S.
equity/income funds increased 33% from levels a year ago.
Institutional assets, including both U.S. and global/international, as
well as both fixed-income and equity/income products, represent 13% of
assets under management as of December 31, 1995 up from 12% a year ago.
This increase resulted from both 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.
Operating revenue
Three months ended
December 31 %
(In millions) 1995 1994 Change
_____________________________ _________ _________ ________
Investment management fees $201.6 $174.6 16%
Underwriting commissions, net 3.0 13.1 -77%
Transfer, trust and related
fees 21.4 15.9 35%
Banking/finance, net and
other .6 4.6 -87%
_____________________________ _________ _________ ________
Total operating revenues $226.6 $208.2 9%
============================= ========= ========= ========
The Company's revenues from investment management fees are derived
primarily from fixed-fee arrangements based upon the level of assets
under management with open-end and closed-end investment companies and
managed accounts. There have been no significant changes in the
management fee structures for the Franklin Templeton Group in the
period under review. Investment management fees increased primarily
due to a 14% increase in average assets under management during the
period.
Revenues from underwriting commissions are earned primarily from fund
sales. Most sales of Franklin Templeton funds include a sales
commission, of which a significant portion is reallowed to selling
intermediaries. Most of the Franklin Templeton funds have implemented
distribution plans which reimburse the Company for distribution costs
incurred up to a maximum allowed by each fund. These payments are
typically based on levels of assets under management. Many of the U.S.
Franklin and Templeton mutual funds introduced a new class of shares,
called Class II, during the third quarter of the previous fiscal year.
The Company pays out of its own resources a portion of the sales
commission paid to the selling intermediaries related to Class II
shares and may recover some of the commission paid over a twelve-month
period. Underwriting commissions, net, includes sales commission and
distribution fee revenues, offset by payments to selling intermediaries
and amortization of deferred commissions paid by the Company.
While Class II shares have increased the Company's distribution
expenses and utilized the Company's capital resources over the short
term, the Company believes that the new class of shares will result in
an overall increase in assets under management by expanding
distribution of fund shares. Sales of Class II shares represented 11%
of the Company's long-term U.S. mutual fund sales during the first
quarter of 1996.
Underwriting commissions, net, decreased due to an increase in the
amortization of deferred sales charges both in the U.S. and Canada, an
increase in the Canadian funds' asset-based distribution fees paid to
selling intermediaries and a decrease in commission revenue from sales
of annuity products resulting from a change in commissions rates
effective October 1, 1993.
The level of underwriting commissions, net can be expected to vary with
the level of sales and the level of assets under management and the
composition of products sold.
Transfer, trust and related fees are generally fixed charges per
account which vary with the particular type of fund and the service
being rendered. Transfer, trust and related fees increased in part as
a result of a 14% increase in retail fund shareholder accounts to 4.9
million from 4.3 million a year ago. Also, effective July 1, 1995,
approximately 85 of the Company's U.S. mutual funds consisting of
approximately 2.3 million shareholder accounts implemented an average
annual fee increase of $4 per shareholder account.
Banking/finance, net and
other
As of
December 31 %
(In millions) 1995 1994 Change
_____________________________ ________ ________ __________
Revenues $12.9 $13.4 -4%
Provision for loan losses (5.3) (2.6) 104%
Interest expense (7.0) (6.2) 13%
_____________________________ ________ ________ __________
Total banking, finance, net
and other $.6 $4.6 -87%
============================= ======== ======== ==========
Compared to the corresponding period in the prior year,
banking/finance, net and other revenues declined principally due to
increases in the provision for loan losses and interest expense
attributable to the banking/finance group. Revenues decreased
principally due to an 8% decrease in loans outstanding during the
period. Provision for loan losses increased due to an increase in
charge-offs and an increase in delinquencies as a percent of loans
outstanding from 3% to 6%. Interest expense increased due to the
effect of an increase in amounts payable to parent and used to fund
banking/finance operations during the period which was only partially
offset by the effect of a reduction in deposits of bank account
holders.
Operating expenses
Three months ended
December 31 %
(In millions) 1995 1994 Change
_____________________________ _________ ________ _________
_
General and administrative $107.1 $96.3 11%
Selling expenses 15.5 18.2 -15%
Amortization of goodwill 4.8 4.6 4%
_____________________________ _________ ________ _________
Total operating expenses $127.4 $119.1 7%
============================= ========= ======== =========
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 period due to
higher employment, technology and facilities costs related to the
expansion of the Company's business. Employee count increased
approximately 7% from December 31, 1994 to over 4,600 at December 31,
1995. Employment costs represent approximately 60% of operating
expenses for the three-month period ended December 31, 1995.
Selling expenses decreased during the comparative three-month period
mainly due to periodic variations in media advertising and special non-
recurring marketing campaigns.
Other income/(expense)
Three months ended
December 31 %
(In millions) 1995 1994 Change
_____________________________ _________ ________ ________
Investment and other income $10.7 $6.7 60%
Interest expense (2.6) (3.4) -24%
_____________________________ _________ ________ ________
Other income (expense), net $8.0 $3.3 142%
============================= ========= ======== ========
The increase in investment income resulted from an increase in the
average levels of interest-bearing assets invested as well as capital
gains realized.
Interest expense decreased due to slightly lower rates and lower
average debt outstanding. The Company's overall effective interest
rate at December 31, 1995 was 6.21% on $456 million of outstanding
commercial paper, medium-term notes and subordinated debentures as
compared to 6.22% on $463 million of debt outstanding at December 31,
1994.
In prior periods, the Company entered into interest rate swap
agreements to exchange variable rate interest payment obligations for
fixed-rate interest payment obligations without exchanging of the
underlying principal amounts. At December 31, 1995, the Company had
swap agreements outstanding with an aggregate notional amount of $155
million, maturing January 1996 through September 1999, under which the
Company paid fixed rates of interest ranging from 5.015% to 6.451%.
These financial instruments are placed with major financial
institutions. The credit worthiness of the counterparties is subject
to continuing review and full performance is anticipated.
The increase in taxes on income is primarily attributable to the
increase in pretax income.
II. Material Changes in Financial Condition, Liquidity and
Capital Resources
Selected balance sheet items
As of As of
December September %
31 30
(In millions) 1995 1995 Change
_____________________________ _________ _________ _________
Receivables:
Other $12.6 $38.4 -67%
Banking/finance loans
receivable, net $417.0 $450.0 - 7%
Receivable from the
banking/finance group $266.8 $302.3 -12%
_____________________________ ______ ______ ______
The decrease in other receivables was related primarily to the
collection of advances on deferred sales charges on Canada-based mutual
funds.
Banking/finance loans receivable, net decreased primarily due to a 10%
reduction in the Company's investment in dealer auto loans. This
decrease was the result of general economic conditions and credit
market changes, as well as, the Company's more stringent credit
policies.
Selected cash flow items
Nine months ended
December 31
(In millions) 1995 1994
_________________________________ ____________ __________
Cash flows from operating
activities $117.0 $89.4
Cash flows from investing
activities $17.9 ($88.0)
Cash flows from financing
activities ($73.4) ($13.9)
_____________________________ _________ ________
The increase in cash flows from operating activities was primarily the
result of an increase in net income and an increase in the net change
in trade payables and accrued expenses.
The cash flows from investing and financing activities during the
period were affected primarily by the decrease in the Company's funding
of auto and credit card loans of the banking/finance group, purchases
of investment securities and purchases of treasury shares. The Company
continues to fund these activities primarily from operating cash flows
while utilizing its commercial paper and medium-term notes facilities
when appropriate.
During the three-month period ended December 31, 1995, the Company
purchased 954,755 Franklin Resources, Inc. shares for $50.7 million.
The Company has 914,511 shares remaining under its authorized
repurchase program. The Company will continue from time to time to
purchase its own shares in the open market and in private transactions
for use in connection with various corporate employee incentive
programs and when it believes the market price of its shares merits
such action.
Distribution of Class II shares has required the Company to advance a
one percent dealer commission which is expected to be recouped
substantially during the subsequent twelve-month period primarily
through a .75% and .50% asset based charge on equity and fixed income
funds, respectively. The one per cent dealer commission has been
deferred and amortized on a straight-line basis over the eighteen-month
contingent deferred sales charge period. The Company has funded these
advances through operating cash flows and existing debt facilities. The
Company anticipates increased sales of Class II shares which will
result in increased advances of dealer commissions.
At December 31, 1995, the Company held liquid assets of $671.0 million,
including $323.2 million in cash and cash equivalents as compared to
$643.2 million, including $261.7 million in cash and cash equivalents
at September 30, 1995, respectively.
PART II - OTHER INFORMATION
Item 5 - Other Information
When used in this Form 10-Q and in future filings by the Company with
the Securities and Exchange Commission, in the Company's press releases
and in oral statements made with the approval of an authorized
executive officer, the words or phrases "will likely result", "are
expected to", "will continue", "is anticipated", "estimate", "project"
or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, including those discussed under the caption "Risk
Factors and Cautionary Statements" below, that could cause actual
results to differ materially from historical earnings and those
presently anticipated or projected. The Company wishes to caution
readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. The Company wishes to
advise readers that the factors listed below could affect the Company's
financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions or statements
expressed with respect to future periods in any current statements.
The Company will NOT undertake and specifically declines any obligation
to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of anticipated
or unanticipated events.
Risk Factors and Cautionary Statements
The Company's revenues and income are derived primarily from the
management of a variety of financial services products. The financial
services industry is highly competitive. Such competition could
negatively impact the Company's market share, which could impact assets
under management, from which the bulk of the Company's revenues and
income arise.
Sales of mutual fund shares and other financial services products can
also be negatively affected by adverse general securities market
conditions, burdensome governmental regulations and recessionary global
economic conditions. In addition, securities dealers, whose large
retail distribution systems play an important role in the sale of
shares of the Franklin and Templeton funds, also sponsor competing
proprietary mutual funds. To the extent that these firms limit or
restrict the sale of Franklin and Templeton funds shares through their
brokerage systems in favor of their proprietary mutual funds, assets
under management might decline and the Company's revenues might be
adversely affected. As the number of mutual fund competitors increases,
demand for distribution channels increase, which may have the effect of
increasing distribution costs, which in turn may adversely impact the
Company's earnings. The Company's assets under management include a
significant number of global equities, which increases the volatility
of the Company's managed portfolios and its revenue and income streams.
Certain portions of the Company's managed portfolios are invested in
various securities of corporations located or doing business in
developing regions of the world commonly known as emerging markets.
These portfolios and the Company's revenues derived from the management
of such portfolios are subject to significant risks of loss from
unfavorable political and diplomatic developments, currency
fluctuations, social instability, changes in governmental policies,
expropriation, nationalization, confiscation of assets and changes in
legislation relating to foreign ownership. Foreign trading markets,
particularly in emerging market countries are often smaller, less
liquid, poorly regulated and significantly more volatile
A number of mutual fund sponsors presently market their funds without
sales charges. As investor interest in the mutual fund industry has
increased, competitive pressures have increased on sales charges of
broker-dealer distributed funds. In response to such competitive
pressures, the Company might be forced to lower or further adjust sales
charges which are currently substantially reallowed to broker-dealers.
The reduction in such sales charges could make the sale of shares of
the Franklin and Templeton funds less attractive to the broker-dealer
community, which could in turn have a material adverse effect on the
Company's revenues. In the alternative, the Company might be required
to pay additional fees or charges in connection with the distribution
of its shares which could have a negative effect on the Company's
earnings.
The Company is in competition with the financial services and other
investment alternatives offered by stock brokerage and investment
banking firms, insurance companies, banks, savings and loan
associations and other financial institutions. Many of these
competitors have substantially greater resources than the Company. The
banking industry in particular continues to expand its sponsorship of
proprietary funds distributed through third party distributors. To the
extent that banks limit or restrict the sale of Franklin and Templeton
shares through their distribution systems in favor of their proprietary
mutual funds, assets under management might decline and the Company's
revenues might be adversely affected.
A significant portion of the Company's assets under management are
fixed-income securities. Fluctuations in interest rates and in the
yield curve will have an effect on fixed-income assets under management
as well as on the flow of moneys to and from fixed-income funds and,
therefore, on the Company's revenues from such funds.
Current government proposals with respect to major changes in the tax
structures of the United States by creation of a so called "flat tax"
could have a material adverse impact on the tax-free municipal bond
market place and on the Company's revenues and income derived from its
fixed income portfolios. A variety of proposed changes in the capital
gains structure could also have an impact upon the Company's portfolios
as well as its revenues.
The Company's real estate activities are subject to fluctuations in the
real estate market place as well as to significant competition from
companies with much larger real estate portfolios giving them
significantly economies of scale.
The Company's auto loan receivables business and credit card receivable
activities are subject to significant fluctuations in those consumer
market places as well as to significant competition from companies with
much larger receivable portfolios. In addition, certain of the
Company's competitors are engaged in the financing of auto loans in
connection with a much larger automobile manufacturing businesses and
may at times provide loans at significantly below market interest rates
in order to further the sale of automobiles.
The consumer loan market is highly competitive. The Company competes
with many types of institutions including banks, finance companies,
credit unions and the finance subsidiaries of large automobile
manufacturers. Interest rates the Company can charge and, therefore,
its yields vary based on this competitive environment. The Company is
reliant on its relationships with various automobile dealers and this
relationship is highly dependent on the rates and service that the
Company provides. There is no guarantee that in this competitive
environment the Company can maintain its relationships with these
dealers. Auto loan and credit card portfolio losses can also be
influenced significantly by trends in the economy and credit markets
which negatively impact borrowers' ability to repay loans.
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: Computation of per share earnings.
Exhibit 12: Computation of ratio of earnings to fixed
charges
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K:
Form 8-K dated October 27, 1995 reporting under
Item 5 Other Events the filing of an earnings
press release by the Company on October 27, 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: February 13, 1996 /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: Computation of per share earnings (See Page _____)
Exhibit 12 Computation of ratios of earnings to
fixed charges (See Page ____)
Exhibit 27: Financial Data Schedule
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.
Three months ended
December 31
(Dollars and shares in thousands) 1995 1994
_______________________________________ _________ __________
Average outstanding shares 80,824 81,602
Common stock equivalents
Primary 2,695 1,260
Fully diluted 2,709 1,260
Total shares
Primary 83,519 82,862
Fully diluted 83,533 82,862
Net income $73,951 $63,304
Earnings per share:
Primary $0.89 $0.76
Fully diluted $0.89 $0.76
Dividends per share $0.11 $0.10
Exhibit 12
COMPUTATIONS OF EARNINGS TO FIXED CHARGES
Three months ended
December 31
(Dollars in thousands) 1995 1994
________________________________________ ________ __________
Income before taxes $107,175 $92,431
Add fixed charges:
Interest expense 7,365 7,088
Interest factor on rent 1,888 1,503
Total fixed charges 9,253 8,591
Earnings before fixed charges
and taxes on income $116,428 $101,022
Ratio of earnings to fixed charges 12.6 11.8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
REGISTRANT'S FINANCIAL STATEMENTS FOR THE QUARTER ENDED DECEMBER 31, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 323,188
<SECURITIES> 198,949
<RECEIVABLES> 126,000
<ALLOWANCES> 0
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<PP&E> 123,473
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0
0
<COMMON> 8,226
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