Form 8-K FRANKLIN RESOURCES INC For: Oct 22
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 19, 2015
FRANKLIN RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-09318 | 13-2670991 |
(State or other jurisdiction | (Commission File Number) | (IRS Employer Identification No.) |
of incorporation) | ||
One Franklin Parkway, San Mateo, California 94403
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 312-2000
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On October 22, 2015, Franklin Resources, Inc. (the “Company”) issued a press release announcing the preliminary financial results for the Company’s fourth fiscal quarter and fiscal year ended September 30, 2015. The Company also posted a preliminary fourth quarter and fiscal year financial results presentation on its internet website, as stated in the press release. A copy of the press release is attached hereto as Exhibit 99.1 and a copy of the presentation is attached hereto as Exhibit 99.2, and each is incorporated herein by reference.
The information in this report, including the exhibits hereto, (x) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section and (y) shall not be incorporated by reference into any filing of the Company with the Securities and Exchange Commission, whether made before or after the date hereof, regardless of any general incorporation language in such filings (unless the Company specifically states that the information or exhibits in this particular report are incorporated by reference).
Item 8.01 Other Events.
On October 19, 2015, the Board of Directors (“Board of Directors”) of the Company authorized the Company to repurchase, from time to time, up to an aggregate of 30.0 million shares of its common stock in either open market or off-market transactions. The size and timing of these purchases will depend on price, market and business conditions and other factors. The stock repurchase program is not subject to an expiration date. The new Board of Directors authorization is in addition to the existing authorization, of which approximately 7.2 million shares remained available for repurchase at September 30, 2015. Shares repurchased under the stock repurchase program are retired.
Item 9.01 Financial Statements and Exhibits.
(d) | Exhibits. | ||||
Exhibit No. | Description | ||||
99.1 | Press Release dated October 22, 2015 issued by Franklin Resources, Inc. | ||||
99.2 | Franklin Resources, Inc. Preliminary Fourth Quarter and Fiscal Year Results presentation, dated October 22, 2015. | ||||
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
FRANKLIN RESOURCES, INC. | ||
Date: | October 22, 2015 | /s/ Kenneth A. Lewis |
Name: Kenneth A. Lewis Title: Chief Financial Officer and Executive Vice President | ||
3
Exhibit Index
Exhibit No. | Description | |||
99.1 | Press Release dated October 22, 2015 issued by Franklin Resources, Inc. | |||
99.2 | Franklin Resources, Inc. Preliminary Fourth Quarter and Fiscal Year Results presentation, dated October 22, 2015. | |||
EXHIBIT 99.1
 |  | |
Contact: | Franklin Resources, Inc. |
Investor Relations: Brian Sevilla (650) 312-4091 | |
Media Relations: Matt Walsh (650) 312-2245 | |
investors.franklinresources.com | |
FOR IMMEDIATE RELEASE
Franklin Resources, Inc. Announces Preliminary Fourth Quarter and Fiscal Year Results
San Mateo, CA, October 22, 2015 - Franklin Resources, Inc. (the “Company”) [NYSE: BEN] today announced preliminary net income1 of $358.2 million or $0.59 per diluted share for the quarter ended September 30, 2015, as compared to $504.2 million or $0.82 per diluted share for the previous quarter and $640.6 million or $1.02 per diluted share for the quarter ended September 30, 2014. Preliminary net income1 for the year ended September 30, 2015 was $2,035.3 million or $3.29 per diluted share, as compared to $2,384.3 million or $3.79 per diluted share for the previous year.
Quarter Ended | % Change | Quarter Ended | % Change | Fiscal Year Ended September 30, | % Change | ||||||||||||||||||||||||
30-Sep-15 | 30-Jun-15 | Qtr. vs. Qtr. | 30-Sep-14 | Year vs. Year | 2015 | 2014 | |||||||||||||||||||||||
Financial Results | |||||||||||||||||||||||||||||
(in millions, except per share data) | |||||||||||||||||||||||||||||
Operating revenues | $ | 1,873.8 | $ | 2,000.8 | (6 | )% | $ | 2,155.5 | (13 | )% | $ | 7,948.7 | $ | 8,491.4 | (6 | )% | |||||||||||||
Operating income | 718.1 | 769.8 | (7 | )% | 835.3 | (14 | )% | 3,027.6 | 3,221.2 | (6 | )% | ||||||||||||||||||
Operating margin | 38.3 | % | 38.5 | % | 38.8 | % | 38.1 | % | 37.9 | % | |||||||||||||||||||
Net income1 | $ | 358.2 | $ | 504.2 | (29 | )% | $ | 640.6 | (44 | )% | $ | 2,035.3 | $ | 2,384.3 | (15 | )% | |||||||||||||
Diluted earnings per share | 0.59 | 0.82 | (28 | )% | 1.02 | (42 | )% | 3.29 | 3.79 | (13 | )% | ||||||||||||||||||
Assets Under Management | |||||||||||||||||||||||||||||
(in billions) | |||||||||||||||||||||||||||||
Ending | $ | 770.9 | $ | 866.5 | (11 | )% | $ | 898.0 | (14 | )% | $ | 770.9 | $ | 898.0 | (14 | )% | |||||||||||||
Average2 | 824.5 | 882.6 | (7 | )% | 912.1 | (10 | )% | 869.5 | 887.9 | (2 | )% | ||||||||||||||||||
Net new flows | (28.6 | ) | (11.1 | ) | 158 | % | (0.1 | ) | NM | (48.8 | ) | (4.6 | ) | 961 | % | ||||||||||||||
Total assets under management (“AUM”) were $770.9 billion at September 30, 2015, down $95.6 billion or 11% during the quarter primarily due to $61.2 billion of market depreciation, $28.6 billion of net new outflows, and a $4.6 billion decrease from foreign exchange revaluation. AUM decreased $127.1 billion or 14% during the fiscal year primarily due to $57.9 billion of market depreciation, $48.8 billion of net new outflows and a $15.1 billion decrease from foreign exchange revaluation. The foreign exchange revaluations are related to AUM in products that are not U.S. dollar denominated, which represents approximately 13% of total AUM, and primarily resulted from fluctuation of the U.S. dollar against the Canadian dollar and Australian dollar for the quarter and fiscal year, as well as the Euro for the fiscal year.
Cash and cash equivalents and investments were $10.6 billion at September 30, 2015, as compared to $10.0 billion at September 30, 2014. Total stockholders’ equity was $12.5 billion at September 30, 2015, as compared to $12.2 billion at September 30, 2014. The Company had 603.5 million shares of common stock outstanding at September 30, 2015, as compared to 622.9 million shares
1
outstanding at September 30, 2014. During the quarter ended September 30, 2015, the Company repurchased 11.9 million shares of its common stock for a total cost of $500.3 million.
On October 19, 2015, the Board of Directors (“Board of Directors”) of the Company authorized the Company to repurchase, from time to time, up to an aggregate of 30.0 million shares of its common stock in either open market or off-market transactions. The size and timing of these purchases will depend on price, market and business conditions and other factors. The stock repurchase program is not subject to an expiration date. The new Board of Directors authorization is in addition to the existing authorization, of which approximately 7.2 million shares remained available for repurchase at September 30, 2015. Shares repurchased under the stock repurchase program are retired.
Conference Call Information
Pre-recorded audio commentary on the results from Franklin Resources, Inc.’s Chairman and CEO Greg Johnson and CFO and Executive Vice President Ken Lewis will be available today at approximately 8:30 a.m. Eastern Time. They will also lead a live teleconference today at 11:00 a.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 pre-recorded audio commentary.
Access to the pre-recorded audio commentary and accompanying slides are available at investors.franklinresources.com. The pre-recorded audio commentary can also be accessed by dialing (877) 523-5612 in the U.S. and Canada or (201) 689-8483 internationally using access code 7055790, any time through November 25, 2015.
Access to the live teleconference will be available at investors.franklinresources.com or by dialing (877) 407-8293 in the U.S. and Canada or (201) 689-8349 internationally. A replay of the teleconference can also be accessed by calling (877) 660-6853 in the U.S. and Canada or (201) 612-7415 internationally using access code 13621705, after 2:00 p.m. Eastern Time on October 22, 2015 through November 25, 2015.
Questions regarding the pre-recorded audio commentary or live teleconference should be directed to Franklin Resources, Inc., Investor Relations at (650) 312-4091 or Media Relations at (650) 312-2245.
Performance Rankings of Franklin Templeton’s U.S.-Registered and Cross-Border Long-Term Mutual Funds3,4,5:
Percentage of Assets in Top Two Peer Group Quartiles | ||||||||||||
Period ended September 30, 2015 | 1-Year | 3-Year | 5-Year | 10-Year | ||||||||
Equity and Hybrid (AUM: $278 billion) | 28 | % | 40 | % | 43 | % | 77 | % | ||||
Fixed-Income (AUM: $237 billion) | 20 | % | 72 | % | 74 | % | 84 | % | ||||
Total (AUM: $515 billion) | 24 | % | 55 | % | 57 | % | 80 | % | ||||
Performance quoted above represents past performance, which cannot predict or guarantee future results. All investments involve risks, including loss of principal.
2
Franklin Resources, Inc. Preliminary Condensed Consolidated Statements of Income Unaudited | ||||||||||||||||||||||
(in millions, except per share data and AUM) | Three Months Ended September 30, | % Change | Twelve Months Ended September 30, | % Change | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||
Investment management fees | $ | 1,256.9 | $ | 1,430.7 | (12 | )% | $ | 5,327.8 | $ | 5,565.7 | (4 | )% | ||||||||||
Sales and distribution fees | 510.6 | 627.4 | (19 | )% | 2,252.4 | 2,546.4 | (12 | )% | ||||||||||||||
Shareholder servicing fees | 64.4 | 68.3 | (6 | )% | 262.8 | 281.1 | (7 | )% | ||||||||||||||
Other | 41.9 | 29.1 | 44 | % | 105.7 | 98.2 | 8 | % | ||||||||||||||
Total operating revenues | 1,873.8 | 2,155.5 | (13 | )% | 7,948.7 | 8,491.4 | (6 | )% | ||||||||||||||
Operating Expenses | ||||||||||||||||||||||
Sales, distribution and marketing | 626.3 | 755.9 | (17 | )% | 2,762.3 | 3,088.2 | (11 | )% | ||||||||||||||
Compensation and benefits | 336.8 | 365.9 | (8 | )% | 1,453.3 | 1,467.9 | (1 | )% | ||||||||||||||
Information systems and technology | 64.9 | 60.8 | 7 | % | 224.3 | 216.3 | 4 | % | ||||||||||||||
Occupancy | 35.6 | 36.7 | (3 | )% | 132.7 | 137.7 | (4 | )% | ||||||||||||||
General, administrative and other | 92.1 | 100.9 | (9 | )% | 348.5 | 360.1 | (3 | )% | ||||||||||||||
Total operating expenses | 1,155.7 | 1,320.2 | (12 | )% | 4,921.1 | 5,270.2 | (7 | )% | ||||||||||||||
Operating Income | 718.1 | 835.3 | (14 | )% | 3,027.6 | 3,221.2 | (6 | )% | ||||||||||||||
Other Income (Expenses) | ||||||||||||||||||||||
Investment and other income (losses), net | (109.5 | ) | 63.0 | NM | 40.4 | 235.8 | (83 | )% | ||||||||||||||
Interest expense | (12.9 | ) | (12.5 | ) | 3 | % | (39.6 | ) | (47.4 | ) | (16 | )% | ||||||||||
Other income (expenses), net | (122.4 | ) | 50.5 | NM | 0.8 | 188.4 | (100 | )% | ||||||||||||||
Income before taxes | 595.7 | 885.8 | (33 | )% | 3,028.4 | 3,409.6 | (11 | )% | ||||||||||||||
Taxes on income | 214.2 | 255.0 | (16 | )% | 923.7 | 997.9 | (7 | )% | ||||||||||||||
Net income | 381.5 | 630.8 | (40 | )% | 2,104.7 | 2,411.7 | (13 | )% | ||||||||||||||
Less: net income (loss) attributable to | ||||||||||||||||||||||
Nonredeemable noncontrolling interests | 26.1 | (16.2 | ) | NM | 75.5 | 6.8 | NM | |||||||||||||||
Redeemable noncontrolling interests | (2.8 | ) | 6.4 | NM | (6.1 | ) | 20.6 | NM | ||||||||||||||
Net Income Attributable to Franklin Resources, Inc. | $ | 358.2 | $ | 640.6 | (44 | )% | $ | 2,035.3 | $ | 2,384.3 | (15 | )% | ||||||||||
Earnings per Share | ||||||||||||||||||||||
Basic | $ | 0.59 | $ | 1.03 | (43 | )% | $ | 3.29 | $ | 3.79 | (13 | )% | ||||||||||
Diluted | 0.59 | 1.02 | (42 | )% | 3.29 | 3.79 | (13 | )% | ||||||||||||||
Dividends per Share | $ | 0.15 | $ | 0.12 | 25 | % | $ | 1.10 | $ | 0.48 | 129 | % | ||||||||||
Average Shares Outstanding | ||||||||||||||||||||||
Basic | 607.4 | 621.6 | (2 | )% | 614.8 | 624.8 | (2 | )% | ||||||||||||||
Diluted | 607.4 | 622.1 | (2 | )% | 614.9 | 625.2 | (2 | )% | ||||||||||||||
Operating Margin | 38.3 | % | 38.8 | % | 38.1 | % | 37.9 | % | ||||||||||||||
AUM (in billions) | ||||||||||||||||||||||
Ending | $ | 770.9 | $ | 898.0 | (14 | )% | $ | 770.9 | $ | 898.0 | (14 | )% | ||||||||||
Average | 824.5 | 912.1 | (10 | )% | 869.5 | 887.9 | (2 | )% | ||||||||||||||
Net new flows | (28.6 | ) | (0.1 | ) | NM | (48.8 | ) | (4.6 | ) | 961 | % | |||||||||||
3
Franklin Resources, Inc. Preliminary Condensed Consolidated Statements of Income Unaudited | |||||||||||||||||||||||
(in millions, except per share data and employees) | Three Months Ended | % Change | Three Months Ended | ||||||||||||||||||||
30-Sep-15 | 30-Jun-15 | 31-Mar-15 | 30-Dec-14 | 30-Sep-14 | |||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||
Investment management fees | $ | 1,256.9 | $ | 1,340.9 | (6 | )% | $ | 1,347.6 | $ | 1,382.4 | $ | 1,430.7 | |||||||||||
Sales and distribution fees | 510.6 | 566.8 | (10 | )% | 580.0 | 595.0 | 627.4 | ||||||||||||||||
Shareholder servicing fees | 64.4 | 66.5 | (3 | )% | 66.1 | 65.8 | 68.3 | ||||||||||||||||
Other | 41.9 | 26.6 | 58 | % | 16.1 | 21.1 | 29.1 | ||||||||||||||||
Total operating revenues | 1,873.8 | 2,000.8 | (6 | )% | 2,009.8 | 2,064.3 | 2,155.5 | ||||||||||||||||
Operating Expenses | |||||||||||||||||||||||
Sales, distribution and marketing | 626.3 | 694.0 | (10 | )% | 710.5 | 731.5 | 755.9 | ||||||||||||||||
Compensation and benefits | 336.8 | 363.5 | (7 | )% | 377.5 | 375.5 | 365.9 | ||||||||||||||||
Information systems and technology | 64.9 | 58.3 | 11 | % | 49.9 | 51.2 | 60.8 | ||||||||||||||||
Occupancy | 35.6 | 30.7 | 16 | % | 32.1 | 34.3 | 36.7 | ||||||||||||||||
General, administrative and other | 92.1 | 84.5 | 9 | % | 82.1 | 89.8 | 100.9 | ||||||||||||||||
Total operating expenses | 1,155.7 | 1,231.0 | (6 | )% | 1,252.1 | 1,282.3 | 1,320.2 | ||||||||||||||||
Operating Income | 718.1 | 769.8 | (7 | )% | 757.7 | 782.0 | 835.3 | ||||||||||||||||
Other Income (Expenses) | |||||||||||||||||||||||
Investment and other income (losses), net | (109.5 | ) | (4.7 | ) | NM | 102.9 | 51.7 | 63.0 | |||||||||||||||
Interest expense | (12.9 | ) | (13.7 | ) | (6 | )% | (1.7 | ) | (11.3 | ) | (12.5 | ) | |||||||||||
Other income (expenses), net | (122.4 | ) | (18.4 | ) | 565 | % | 101.2 | 40.4 | 50.5 | ||||||||||||||
Income before taxes | 595.7 | 751.4 | (21 | )% | 858.9 | 822.4 | 885.8 | ||||||||||||||||
Taxes on income | 214.2 | 217.4 | (1 | )% | 236.0 | 256.1 | 255.0 | ||||||||||||||||
Net income | 381.5 | 534.0 | (29 | )% | 622.9 | 566.3 | 630.8 | ||||||||||||||||
Less: net income (loss) attributable to | |||||||||||||||||||||||
Nonredeemable noncontrolling interests | 26.1 | 28.6 | (9 | )% | 14.1 | 6.7 | (16.2 | ) | |||||||||||||||
Redeemable noncontrolling interests | (2.8 | ) | 1.2 | NM | 2.3 | (6.8 | ) | 6.4 | |||||||||||||||
Net Income Attributable to Franklin Resources, Inc. | $ | 358.2 | $ | 504.2 | (29 | )% | $ | 606.5 | $ | 566.4 | $ | 640.6 | |||||||||||
Earnings per Share | |||||||||||||||||||||||
Basic | $ | 0.59 | $ | 0.82 | (28 | )% | $ | 0.98 | $ | 0.91 | $ | 1.03 | |||||||||||
Diluted | 0.59 | 0.82 | (28 | )% | 0.98 | 0.91 | 1.02 | ||||||||||||||||
Dividends per Share | $ | 0.15 | $ | 0.15 | 0 | % | $ | 0.15 | $ | 0.65 | $ | 0.12 | |||||||||||
Average Shares Outstanding | |||||||||||||||||||||||
Basic | 607.4 | 614.1 | (1 | )% | 617.6 | 620.1 | 621.6 | ||||||||||||||||
Diluted | 607.4 | 614.2 | (1 | )% | 617.7 | 620.2 | 622.1 | ||||||||||||||||
Operating Margin | 38.3 | % | 38.5 | % | 37.7 | % | 37.9 | % | 38.8 | % | |||||||||||||
Employees | 9,489 | 9,576 | (1 | )% | 9,362 | 9,368 | 9,266 | ||||||||||||||||
Billable Shareholder Accounts | 24.8 | 25.3 | (2 | )% | 24.8 | 24.3 | 23.9 | ||||||||||||||||
4
AUM AND FLOWS
(in billions) | Three Months Ended September 30, | % Change | Twelve Months Ended September 30, | % Change | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||||||
Beginning AUM | $ | 866.5 | $ | 920.5 | (6 | )% | $ | 898.0 | $ | 844.7 | 6 | % | ||||||||||
Long-term sales | 30.5 | 45.4 | (33 | )% | 161.4 | 192.6 | (16 | )% | ||||||||||||||
Long-term redemptions | (58.1 | ) | (46.0 | ) | 26 | % | (209.0 | ) | (197.5 | ) | 6 | % | ||||||||||
Net cash management | (1.0 | ) | 0.5 | NM | (1.2 | ) | 0.3 | NM | ||||||||||||||
Net new flows | (28.6 | ) | (0.1 | ) | NM | (48.8 | ) | (4.6 | ) | 961 | % | |||||||||||
Reinvested distributions | 4.8 | 4.1 | 17 | % | 28.5 | 21.6 | 32 | % | ||||||||||||||
Net flows | (23.8 | ) | 4.0 | NM | (20.3 | ) | 17.0 | NM | ||||||||||||||
Distributions | (6.0 | ) | (5.1 | ) | 18 | % | (33.8 | ) | (26.1 | ) | 30 | % | ||||||||||
Appreciation (depreciation) and other6 | (65.8 | ) | (21.4 | ) | 207 | % | (73.0 | ) | 62.4 | NM | ||||||||||||
Ending AUM | $ | 770.9 | $ | 898.0 | (14 | )% | $ | 770.9 | $ | 898.0 | (14 | )% | ||||||||||
AUM BY INVESTMENT OBJECTIVE
(in billions) | 30-Sep-15 | 30-Jun-15 | % Change | 31-Mar-15 | 30-Dec-14 | 30-Sep-14 | |||||||||||||||||
Equity | |||||||||||||||||||||||
Global/international | $ | 212.1 | $ | 247.3 | (14 | )% | $ | 251.8 | $ | 248.5 | $ | 261.5 | |||||||||||
United States | 100.8 | 114.4 | (12 | )% | 115.6 | 113.1 | 109.5 | ||||||||||||||||
Total equity | 312.9 | 361.7 | (13 | )% | 367.4 | 361.6 | 371.0 | ||||||||||||||||
Hybrid | 138.3 | 154.8 | (11 | )% | 158.2 | 157.1 | 159.0 | ||||||||||||||||
Fixed-Income | |||||||||||||||||||||||
Tax-free | 71.7 | 72.7 | (1 | )% | 74.2 | 73.2 | 72.1 | ||||||||||||||||
Taxable | |||||||||||||||||||||||
Global/international | 182.7 | 208.5 | (12 | )% | 211.1 | 219.1 | 225.1 | ||||||||||||||||
United States | 58.5 | 61.8 | (5 | )% | 63.1 | 62.2 | 63.8 | ||||||||||||||||
Total fixed-income | 312.9 | 343.0 | (9 | )% | 348.4 | 354.5 | 361.0 | ||||||||||||||||
Cash Management | 6.8 | 7.0 | (3 | )% | 6.6 | 6.9 | 7.0 | ||||||||||||||||
Total AUM | $ | 770.9 | $ | 866.5 | (11 | )% | $ | 880.6 | $ | 880.1 | $ | 898.0 | |||||||||||
Average AUM for the Three-Month Period | $ | 824.5 | $ | 882.6 | (7 | )% | $ | 881.6 | $ | 894.1 | $ | 912.1 | |||||||||||
AUM AND FLOWS - UNITED STATES AND INTERNATIONAL7
As of and for the Three Months Ended | |||||||||||||||||||||
(in billions) | 30-Sep-15 | % of Total | 30-Jun-15 | % of Total | 30-Sep-14 | % of Total | |||||||||||||||
Long-Term Sales | |||||||||||||||||||||
United States | $ | 16.3 | 53 | % | $ | 18.9 | 50 | % | $ | 21.6 | 48 | % | |||||||||
International | 14.2 | 47 | % | 18.8 | 50 | % | 23.8 | 52 | % | ||||||||||||
Total long-term sales | $ | 30.5 | 100 | % | $ | 37.7 | 100 | % | $ | 45.4 | 100 | % | |||||||||
Long-Term Redemptions | |||||||||||||||||||||
United States | $ | (33.1 | ) | 57 | % | $ | (24.9 | ) | 51 | % | $ | (23.3 | ) | 51 | % | ||||||
International | (25.0 | ) | 43 | % | (24.1 | ) | 49 | % | (22.7 | ) | 49 | % | |||||||||
Total long-term redemptions | $ | (58.1 | ) | 100 | % | $ | (49.0 | ) | 100 | % | $ | (46.0 | ) | 100 | % | ||||||
AUM | |||||||||||||||||||||
United States | $ | 522.4 | 68 | % | $ | 578.3 | 67 | % | $ | 589.1 | 66 | % | |||||||||
International | 248.5 | 32 | % | 288.2 | 33 | % | 308.9 | 34 | % | ||||||||||||
Total AUM | $ | 770.9 | 100 | % | $ | 866.5 | 100 | % | $ | 898.0 | 100 | % | |||||||||
5
AUM AND FLOWS BY INVESTMENT OBJECTIVE
(in billions) | Equity | Fixed-Income | ||||||||||||||||||||||||||||||
for the three months ended September 30, 2015 | Global/ International | United States | Hybrid | Tax-Free | Taxable Global/ International | Taxable United States | Cash Management | Total | ||||||||||||||||||||||||
AUM at July 1, 2015 | $ | 247.3 | $ | 114.4 | $ | 154.8 | $ | 72.7 | $ | 208.5 | $ | 61.8 | $ | 7.0 | $ | 866.5 | ||||||||||||||||
Long-term sales | 8.1 | 3.9 | 4.3 | 1.7 | 9.7 | 2.8 | — | 30.5 | ||||||||||||||||||||||||
Long-term redemptions | (13.1 | ) | (7.6 | ) | (8.2 | ) | (3.5 | ) | (21.3 | ) | (4.4 | ) | — | (58.1 | ) | |||||||||||||||||
Net exchanges | (0.1 | ) | 0.2 | (0.5 | ) | — | (0.6 | ) | 0.2 | 0.8 | — | |||||||||||||||||||||
Net cash management | — | — | — | — | — | — | (1.0 | ) | (1.0 | ) | ||||||||||||||||||||||
Net new flows | (5.1 | ) | (3.5 | ) | (4.4 | ) | (1.8 | ) | (12.2 | ) | (1.4 | ) | (0.2 | ) | (28.6 | ) | ||||||||||||||||
Reinvested distributions | 0.8 | 0.8 | 1.2 | 0.5 | 1.2 | 0.3 | — | 4.8 | ||||||||||||||||||||||||
Net flows | (4.3 | ) | (2.7 | ) | (3.2 | ) | (1.3 | ) | (11.0 | ) | (1.1 | ) | (0.2 | ) | (23.8 | ) | ||||||||||||||||
Distributions | (1.0 | ) | (0.8 | ) | (1.4 | ) | (0.6 | ) | (1.7 | ) | (0.5 | ) | — | (6.0 | ) | |||||||||||||||||
Appreciation (depreciation) and other6 | (29.9 | ) | (10.1 | ) | (11.9 | ) | 0.9 | (13.1 | ) | (1.7 | ) | — | (65.8 | ) | ||||||||||||||||||
AUM at September 30, 2015 | $ | 212.1 | $ | 100.8 | $ | 138.3 | $ | 71.7 | $ | 182.7 | $ | 58.5 | $ | 6.8 | $ | 770.9 | ||||||||||||||||
(in billions) | Equity | Fixed-Income | ||||||||||||||||||||||||||||||
for the three months ended June 30, 2015 | Global/ International | United States | Hybrid | Tax-Free | Taxable Global/ International | Taxable United States | Cash Management | Total | ||||||||||||||||||||||||
AUM at April 1, 2015 | $ | 251.8 | $ | 115.6 | $ | 158.2 | $ | 74.2 | $ | 211.1 | $ | 63.1 | $ | 6.6 | $ | 880.6 | ||||||||||||||||
Long-term sales | 9.8 | 4.6 | 5.6 | 2.1 | 12.9 | 2.7 | — | 37.7 | ||||||||||||||||||||||||
Long-term redemptions | (14.7 | ) | (5.6 | ) | (7.3 | ) | (2.5 | ) | (15.5 | ) | (3.4 | ) | — | (49.0 | ) | |||||||||||||||||
Net exchanges | 0.3 | — | — | (0.1 | ) | (0.3 | ) | — | 0.1 | — | ||||||||||||||||||||||
Net cash management | — | — | — | — | — | — | 0.2 | 0.2 | ||||||||||||||||||||||||
Net new flows | (4.6 | ) | (1.0 | ) | (1.7 | ) | (0.5 | ) | (2.9 | ) | (0.7 | ) | 0.3 | (11.1 | ) | |||||||||||||||||
Reinvested distributions | 0.3 | 0.9 | 1.7 | 0.5 | 1.4 | 0.5 | — | 5.3 | ||||||||||||||||||||||||
Net flows | (4.3 | ) | (0.1 | ) | — | — | (1.5 | ) | (0.2 | ) | 0.3 | (5.8 | ) | |||||||||||||||||||
Distributions | (0.4 | ) | (0.9 | ) | (1.9 | ) | (0.7 | ) | (1.7 | ) | (0.6 | ) | — | (6.2 | ) | |||||||||||||||||
Appreciation (depreciation) and other6 | 0.2 | (0.2 | ) | (1.5 | ) | (0.8 | ) | 0.6 | (0.5 | ) | 0.1 | (2.1 | ) | |||||||||||||||||||
AUM at June 30, 2015 | $ | 247.3 | $ | 114.4 | $ | 154.8 | $ | 72.7 | $ | 208.5 | $ | 61.8 | $ | 7.0 | $ | 866.5 | ||||||||||||||||
(in billions) | Equity | Fixed-Income | ||||||||||||||||||||||||||||||
for the three months ended September 30, 2014 | Global/ International | United States | Hybrid | Tax-Free | Taxable Global/ International | Taxable United States | Cash Management | Total | ||||||||||||||||||||||||
AUM at July 1, 2014 | $ | 273.8 | $ | 114.5 | $ | 162.5 | $ | 71.6 | $ | 230.6 | $ | 61.1 | $ | 6.4 | $ | 920.5 | ||||||||||||||||
Long-term sales | 11.4 | 4.4 | 8.1 | 2.0 | 15.0 | 4.5 | — | 45.4 | ||||||||||||||||||||||||
Long-term redemptions | (14.3 | ) | (6.4 | ) | (6.1 | ) | (2.7 | ) | (12.3 | ) | (4.2 | ) | — | (46.0 | ) | |||||||||||||||||
Net exchanges | 0.1 | (0.2 | ) | 0.2 | — | (0.2 | ) | (0.1 | ) | 0.2 | — | |||||||||||||||||||||
Net cash management | — | — | — | — | — | — | 0.5 | 0.5 | ||||||||||||||||||||||||
Net new flows | (2.8 | ) | (2.2 | ) | 2.2 | (0.7 | ) | 2.5 | 0.2 | 0.7 | (0.1 | ) | ||||||||||||||||||||
Reinvested distributions | 0.7 | 0.4 | 1.1 | 0.6 | 1.0 | 0.3 | — | 4.1 | ||||||||||||||||||||||||
Net flows | (2.1 | ) | (1.8 | ) | 3.3 | (0.1 | ) | 3.5 | 0.5 | 0.7 | 4.0 | |||||||||||||||||||||
Distributions | (0.7 | ) | (0.4 | ) | (1.3 | ) | (0.7 | ) | (1.5 | ) | (0.5 | ) | — | (5.1 | ) | |||||||||||||||||
Appreciation (depreciation) and other6 | (9.5 | ) | (2.8 | ) | (5.5 | ) | 1.3 | (7.5 | ) | 2.7 | (0.1 | ) | (21.4 | ) | ||||||||||||||||||
AUM at September 30, 2014 | $ | 261.5 | $ | 109.5 | $ | 159.0 | $ | 72.1 | $ | 225.1 | $ | 63.8 | $ | 7.0 | $ | 898.0 | ||||||||||||||||
6
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. |
4. | Franklin/Templeton Distributors, Inc., a wholly owned subsidiary of Franklin Resources, Inc., is the principal distributor of Franklin Templeton Investments’ U.S. registered funds, which are available only in jurisdictions where an offer or solicitation of such products is permitted under applicable legislation. Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other Franklin Templeton Investments affiliates and/or their distributors as local legislation permits. |
5. | The peer group rankings are sourced from either Lipper, a Thomson Reuters Company, or Morningstar, as the case may be, and are based on an absolute ranking of returns as of September 30, 2015. Lipper rankings for Franklin Templeton U.S.-registered long-term mutual funds are based on Class A shares and do not include sales charges. Franklin Templeton U.S.-registered long-term funds are compared against a universe of all share classes. Performance rankings for other share classes may differ. Morningstar rankings for Franklin Templeton cross-border long-term mutual funds are based on primary share classes and do not include sales charges. Performance rankings for other share classes may differ. Results may have been different if these or other factors had been considered. The figures in the table are based on data available from Lipper as of October 7, 2015 and Morningstar as of October 8, 2015 and are subject to revision. © 2015 Morningstar, Inc. All Rights Reserved. The information herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. |
6. | Appreciation (depreciation) and other includes foreign exchange revaluation. |
7. | International includes North America-based advisors serving non-resident clients. |
Franklin Resources, Inc. is a global investment management organization operating as Franklin Templeton Investments. Franklin Templeton Investments provides global and domestic investment management to retail, institutional and sovereign wealth clients in over 150 countries. Through specialized teams, the Company has expertise across all asset classes - including equity, fixed income, alternative and custom solutions. The Company’s more than 600 investment professionals are supported by its integrated, worldwide team of risk management professionals and global trading desk network. With offices in 35 countries, the California-based company has more than 65 years of investment experience and $770.9 billion in AUM as of September 30, 2015. The Company posts information that may be significant for investors in the Investor Relations and News Center sections of its website, and encourages investors to consult those sections regularly. For more information, please visit investors.franklinresources.com.
Forward-Looking Statements
The financial results in this press release are preliminary. 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,” “preliminary” 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. While forward-looking statements are our best prediction at the time that they are made, you should not rely on them, and you are hereby cautioned against doing so. 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. 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, 2014 and Franklin’s subsequent Quarterly Reports on Form 10-Q:
• | 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. |
7
• | The amount and mix of our AUM are subject to significant fluctuations. |
• | We are subject to extensive, complex, overlapping and frequently changing rules, regulations and legal interpretations. |
• | U.S. and international 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 financial condition and results of operations. |
• | Failure to comply with the laws, rules or regulations in any of the non-U.S. jurisdictions in which we operate could result in substantial harm to our reputation and results of operations. |
• | 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 information and cyber security infrastructure, software applications, technology or other systems that are critical to our operations could harm our operations and reputation. |
• | Our business operations are complex and a failure to properly perform operational tasks or the misrepresentation of our products and services, or the termination of investment management agreements representing a significant portion of our AUM, 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 market-specific political, economic or other risks that may adversely impact our revenues and income generated overseas. |
• | Harm to our reputation or poor investment performance of our products could reduce the level of our AUM or affect our sales, potentially negatively impacting our revenues and income. |
• | Our future results are dependent upon maintaining an appropriate level of expenses, which is subject to fluctuation. |
• | Our ability to successfully manage and grow our business 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. |
• | 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. |
• | 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.
# # #
8
Franklin Resources, Inc. Preliminary Fourth Quarter and Fiscal Year Results Greg Johnson Chairman and Chief Executive Officer Ken Lewis Chief Financial Officer October 22, 2015 Exhibit 99.2
The financial results in this presentation are preliminary. Statements in this presentation 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 presentation, 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,” “preliminary” 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. While forward-looking statements are our best prediction at the time that they are made, you should not rely on them, and you are hereby cautioned against doing so. 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. 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, 2014 and Franklin’s subsequent Quarterly Reports on Form 10-Q: (1) 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; (2) the amount and mix of our assets under management (“AUM”) are subject to significant fluctuations; (3) we are subject to extensive, complex, overlapping and frequently changing rules, regulations and legal interpretations; (4) U.S. and international 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 financial condition and results of operations; (5) failure to comply with the laws, rules or regulations in any of the non-U.S. jurisdictions in which we operate could result in substantial harm to our reputation and results of operations; (6) 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; (7) any significant limitation, failure or security breach of our information and cyber security infrastructure, software applications, technology or other systems that are critical to our operations could harm our operations and reputation; (8) our business operations are complex and a failure to properly perform operational tasks or the misrepresentation of our products and services, or the termination of investment management agreements representing a significant portion of our AUM, could have an adverse effect on our revenues and income; (9) we face risks, and corresponding potential costs and expenses, associated with conducting operations and growing our business in numerous countries; (10) we depend on key personnel and our financial performance could be negatively affected by the loss of their services; (11) 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; (12) changes in the third-party distribution and sales channels on which we depend could reduce our income and hinder our growth; (13) our increasing focus on international markets as a source of investments and sales of investment products subjects us to increased exchange rate and market-specific political, economic or other risks that may adversely impact our revenues and income generated overseas; (14) harm to our reputation or poor investment performance of our products could reduce the level of our AUM or affect our sales, potentially negatively impacting our revenues and income; (15) our future results are dependent upon maintaining an appropriate level of expenses, which is subject to fluctuation; (16) our ability to successfully manage and grow our business can be impeded by systems and other technological limitations; (17) 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; (18) 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; (19) our ability to meet cash needs depends upon certain factors, including the market value of our assets, operating cash flows and our perceived creditworthiness; (20) we are dependent on the earnings of our subsidiaries. Any forward-looking statement made by us in this presentation 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. The information in this presentation is provided solely in connection with this presentation, and is not directed toward existing or potential investment advisory clients or fund shareholders. Forward-Looking Statements 2
Audio Commentary and Conference Call Details Pre-recorded audio commentary on the results from Franklin Resources, Inc.’s Chairman and CEO Greg Johnson and CFO and Executive Vice President Ken Lewis will be available today at approximately 8:30 a.m. Eastern Time. They will also lead a live teleconference today at 11:00 a.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, this presentation or the pre-recorded audio commentary. Access to the pre-recorded audio commentary and accompanying slides are available at investors.franklinresources.com. The pre-recorded audio commentary can also be accessed by dialing (877) 523-5612 in the U.S. and Canada or (201) 689- 8483 internationally using access code 7055790, any time through November 25, 2015. Access to the live teleconference will be available at investors.franklinresources.com or by dialing (877) 407-8293 in the U.S. and Canada or (201) 689-8349 internationally. A replay of the teleconference can also be accessed by calling (877) 660-6853 in the U.S. and Canada or (201) 612-7415 internationally using access code 13621705, after 2:00 p.m. Eastern Time on October 22, 2015 through November 25, 2015. Questions regarding the pre-recorded audio commentary or live teleconference should be directed to Franklin Resources, Inc., Investor Relations at (650) 312-4091 or Media Relations at (650) 312-2245. 3
Highlights 4 Flows • The U.S. and cross-border Franklin K2 Alternative Strategies funds continue to generate solid inflows with over $500 million in net flows for the quarter • Fiscal year operating income was over $3 billion, making it the second highest year for operating income in the company’s history • The operating margin for the fiscal year was solid at 38.1% • Repurchased $500 million in shares in the 4th quarter, the highest quarterly amount of share repurchases since fiscal 2008 • The fiscal year payout increased to $1.7 billion or 86% of net income Investment Performance • Long-term fixed income performance remains strong with the majority of assets ranked in the top half of the peer groups for the 3-, 5-, and 10-yr periods • Excluding the Franklin Income Fund, the majority of our equity and hybrid assets still rank in the top half of their peer groups across all long-term periods Financial Results Capital Management Business Update • Announced the appointments of Vijay Advani and Jennifer Johnson as Co-Presidents to jointly oversee the majority of the firm’s investment management and related services • Launched the Franklin K2 Long-Short Credit fund to capitalize on momentum in other liquid alternative offerings
Investment Performance
Equity & Hybrid ($278 billion) Total ($515 billion) Fixed-Income ($237 billion) 80% 77% 84% Investment Performance 6 The peer group rankings are sourced from either Lipper, a Thomson Reuters Company or Morningstar, as the case may be, and are based on an absolute ranking of returns as of September 30, 2015. Lipper rankings for Franklin Templeton U.S.-registered long-term mutual funds are based on Class A shares and do not include sales charges. Franklin Templeton U.S.-registered long-term funds are compared against a universe of all share classes. Performance rankings for other share classes may differ. Morningstar rankings for Franklin Templeton cross-border long-term mutual funds are based on primary share classes and do not include sales charges. Performance rankings for other share classes may differ. Results may have been different if these or other factors had been considered. The figures in the table are based on data available from Lipper as of October 7, 2015 and Morningstar as of October 8, 2015 and are subject to revision. © 2015 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Performance quoted above represents past performance, which cannot predict or guarantee future results. All investments involve risks, including loss of principal. U.S.-Registered and Cross-Border Mutual Funds Percentage of Long-Term Assets in the Top Two Peer Group Quartiles (10-Year Period ended September 30, 2015) 24% 55% 57% 80% 1-Year 3-Year 5-Year 10-Year 28% 40% 43% 77% 1-Year 3-Year 5-Year 10-Year 20% 72% 74% 84% 1-Year 3-Year 5-Year 10-Year
Assets Under Management and Flows
Simple Monthly Average vs. End of Period 8 (in US$ billions, for the three months ended) Average AUM Ending AUM Assets Under Management Growth 912.1 894.1 881.6 882.6 824.5 898.0 880.1 880.6 866.5 770.9 9/14 12/14 3/15 6/15 9/15
Assets Under Management Diversification 9 Investment Objective As of September 30, 2015 (in US$ billions, for the three months ended) 68% 15% 10% 4% 3% 41% 17% 41% 1% Sales Region Sep-15 Jun-15 % Change Equity $ 312.9 $ 361.7 (13%) Hybrid 138.3 154.8 (11%) Fixed-Income 312.9 343.0 (9%) Cash Management 6.8 7.0 (3%) Total $ 770.9 $ 866.5 (11%) Sep-15 Jun-15 % Change United States $ 522.4 $ 578.3 (10%) Europe, the Middle East and Africa 116.4 136.7 (15%) Asia-Pacific 78.8 89.6 (12%) Canada 31.4 35.2 (11%) Latin America 21.9 26.7 (18%) Total $ 770.9 $ 866.5 (11%)
Long-Term Flows Long-Term Flows and Market Return Summary 10 1. Long-term net new flows are defined as long-term sales less long-term redemptions plus long-term net exchanges. Long-Term Net New Flows1 Long-Term Sales Long-Term Redemptions (in US$ billions, for the three months ended) Appreciation (Depreciation) & Other (21.4) (12.1) 7.0 (2.1) (65.8) 9/14 12/14 3/15 6/15 9/15 45.4 46.7 46.5 37.7 30.5 (46.0) (50.0) (51.9) (49.0) (58.1) (0.8) (3.4) (5.3) (11.4) (28.4) 9/14 12/14 3/15 6/15 9/15
10.9 14.3 4.7 -8.5 -5.1 0.0 6.0 5.8 7.4 9.9 2.7 9.1 -1.4 -1.1 13.4 7.5 1.3 3.2 -0.5 -5.4 0.64 0.76 1.04 1.18 0.77 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 0.6 0.7 0.8 0.9 1.0 1.1 1.2 2015 ► Developments in BRIC countries, Ukraine, Greece, and Puerto Rico, fear of rising rates, energy prices and a strong US dollar have negative impact across the complex 1998 ► Russian Debt and the Emerging Markets Crisis. Global Equity decreases to 41% of AUM ► Global Equity AUM grows 30% per year, becomes popular in retirement channels 11 2009-2014 ► Global Fixed Income and Emerging Markets products grew quickly, later transitioning to increased interest in hybrid funds. 1997 ► Global Equity / Emerging Markets comprise almost half of AUM Mid 2000’s ► Global Fixed Income grows 10x from 2000- 2007 2007 - 2009 ► Global Financial Crisis. AUM drops from $645B to $390B 2002 - 2005 S&P 500 Value / S&P 500 Growth Pre-Market Organic Growth (%) 1. Pre-market organic growth is calculated as total net new flows divided by beginning assets under management for each fiscal year. Fiscal years 2011 and 2012 exclude previously disclosed low-fee redemptions of $12.0 and $11.1 billion, respectively. 2. Source: Bloomberg. The ratio of the S&P 500 Value Index vs. the S&P 500 Growth Index measures the relative performance of value against growth. FY 2015 in Historical Perspective: Pre-Market Organic Growth vs. S&P 500 Value / S&P 500 Growth S&P 500 Value / S&P 500 Growth
United States and International, Retail and Institutional Flows 12 (in US$ billions, for the three months ended) United States International Retail Long-Term Sales Retail Long-Term Redemptions Institutional Long-Term Sales Institutional Long-Term Redemptions Graphs do not include high net worth client flows. 17.3 17.2 17.5 14.6 12.5 4.0 4.0 5.0 3.9 3.5 (17.4) (22.4) (20.3) (18.9) (28.7) (4.8) (4.0) (4.7) (5.6) (4.2) 9/14 12/14 3/15 6/15 9/15 15.3 14.4 13.7 12.3 9.8 8.4 10.1 9.2 6.4 4.3 (16.8) (17.0) (19.0) (16.2) (16.8) (5.8) (6.2) (7.6) (7.9) (8.2) 9/14 12/14 3/15 6/15 9/15
Flows by Investment Objective: Global / International Equity and Fixed-Income 13 1. Sales and redemptions as a percentage of beginning assets under management are annualized. % of Beg. AUM1 Prior 4 Quarters Avg. Current Quarter Sales 17% 13% Redemptions 22% 21% % of Beg. AUM1 Prior 4 Quarters Avg. Current Quarter Sales 28% 19% Redemptions 29% 41% (in US$ billions, for the three months ended) Global / International Equity Global / International Fixed-Income Long-Term Net New Flows Long-Term Sales Long-Term Redemptions 11.4 10.8 11.6 9.8 8.1 (14.3) (14.2) (13.3) (14.7) (13.1) (2.8) (3.5) (1.6) (4.6) (5.1) 9/14 12/14 3/15 6/15 9/15 15.0 17.6 15.9 12.9 9.7 (12.3) (16.5) (19.5) (15.5) (21.3) 2.5 0.8 (4.0) (2.9) (12.2) 9/14 12/14 3/15 6/15 9/15
Flows by Investment Objective: U.S. Equity and Hybrid 14 1. Sales and redemptions as a percentage of beginning assets under management are annualized. % of Beg. AUM1 Prior 4 Quarters Avg. Current Quarter Sales 17% 14% Redemptions 22% 27% % of Beg. AUM1 Prior 4 Quarters Avg. Current Quarter Sales 18% 11% Redemptions 17% 21% (in US$ billions, for the three months ended) U.S. Equity Hybrid Long-Term Net New Flows Long-Term Sales Long-Term Redemptions 4.4 5.2 5.5 4.6 3.9 (6.4) (6.5) (6.6) (5.6) (7.6) (2.2) (0.9) (0.6) (1.0) (3.5) 9/14 12/14 3/15 6/15 9/15 8.1 7.5 6.7 5.6 4.3 (6.1) (6.5) (6.4) (7.3) (8.2) 2.2 1.0 0.3 (1.7) (4.4) 9/14 12/14 3/15 6/15 9/15
Flows by Investment Objective: Tax-Free and Taxable U.S. Fixed-Income 15 1. Sales and redemptions as a percentage of beginning assets under management are annualized. % of Beg. AUM1 Prior 4 Quarters Avg. Current Quarter Sales 12% 9% Redemptions 13% 19% % of Beg. AUM1 Prior 4 Quarters Avg. Current Quarter Sales 24% 18% Redemptions 25% 28% (in US$ billions, for the three months ended) Tax-Free Fixed-Income Taxable U.S. Fixed-Income Long-Term Net New Flows Long-Term Sales Long-Term Redemptions 2.0 2.0 2.4 2.1 1.7 (2.7) (2.1) (2.2) (2.5) (3.5) (0.7) 0.0 0.2 (0.5) (1.8) 9/14 12/14 3/15 6/15 9/15 4.5 3.6 4.4 2.7 2.8 (4.2) (4.2) (3.9) (3.4) (4.4) 0.2 (0.8) 0.4 (0.7) (1.4) 9/14 12/14 3/15 6/15 9/15
Financial Results
Fiscal Year Financial Highlights 17 1. Net income attributable to Franklin Resources, Inc. Operating Income Net Income1 (in US$ millions, except per share data, for the fiscal years ended) Unaudited Operating and Net Income1 Diluted Earnings Per Share 2,660 2,515 2,921 3,221 3,028 1,924 1,931 2,150 2,384 2,035 9/11 9/12 9/13 9/14 9/15 $2.87 $2.98 $3.37 $3.79 $3.29 9/11 9/12 9/13 9/14 9/15
Quarterly Financial Highlights 18 1. Net income attributable to Franklin Resources, Inc. Operating Income Net Income1 (in US$ millions, except per share data, for the three months ended) Unaudited Operating and Net Income1 Diluted Earnings Per Share 835 782 758 770 718 641 566 607 504 358 9/14 12/14 3/15 6/15 9/15 $1.02 $0.91 $0.98 $0.82 $0.59 9/14 12/14 3/15 6/15 9/15
Operating Revenues 19 Unaudited (in US$ millions, for the three months ended) Sep-15 Jun-15 Sep-15 vs. Jun-15 Mar-15 Dec-14 Sep-14 Sep-15 vs. Sep-14 Investment management fees $ 1,256.9 $ 1,340.9 (6%) $ 1,347.6 $ 1,382.4 $ 1,430.7 (12%) Sales and distribution fees 510.6 566.8 (10%) 580.0 595.0 627.4 (19%) Shareholder servicing fees 64.4 66.5 (3%) 66.1 65.8 68.3 (6%) Other 41.9 26.6 58% 16.1 21.1 29.1 44% Total Operating Revenues $ 1,873.8 $ 2,000.8 (6%) $ 2,009.8 $ 2,064.3 $ 2,155.5 (13%)
Operating Expenses 20 Unaudited (in US$ millions, for the three months ended) Sep-15 Jun-15 Sep-15 vs. Jun-15 Mar-15 Dec-14 Sep-14 Sep-15 vs. Sep-14 Sales, distribution and marketing $ 626.3 $ 694.0 (10%) $ 710.5 $ 731.5 $ 755.9 (17%) Compensation and benefits 336.8 363.5 (7%) 377.5 375.5 365.9 (8%) Information systems and technology 64.9 58.3 11% 49.9 51.2 60.8 7% Occupancy 35.6 30.7 16% 32.1 34.3 36.7 (3%) General, administrative and other 92.1 84.5 9% 82.1 89.8 100.9 (9%) Total Operating Expenses $ 1,155.7 $ 1,231.0 (6%) $ 1,252.1 $ 1,282.3 $ 1,320.2 (12%)
Operating Leverage Growing Operating Income Faster than AUM 21 Unaudited 1. CAGR is the compound average annual growth rate over the trailing 10-year period. 1,288 1,633 2,068 2,099 1,203 1,959 2,660 2,515 2,921 3,221 3,028 Operating Income (in US$ millions) Average AUM: 7.8% CAGR Operating Income1: 8.9% CAGR Operating Margin (%) vs. Average AUM (in US$ billions) Operating Margin Average AUM 411 482 582 605 442 571 694 706 808 888 870 29.9% 32.3% 33.3% 34.8% 28.7% 33.5% 37.3% 35.4% 36.6% 37.9% 38.1% 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 9/14 9/15
Associated Financial Statement Components ($105.7) Million2 ($16.7) Million Cash and cash equivalents, investment securities, available-for- sale and investment securities, trading Investments in equity method investees Investment securities, available-for- sale Investment securities, trading Debt and deferred taxes Foreign exchange revaluations of cash and cash equivalents held by subsidiaries with a non-USD functional currency and other miscellaneous non-operating income Investments of consolidated SIPs Investments of consolidated VIEs Related noncontrolling interests attributable to third-party investors 22 1. Reflects the portion of noncontrolling interests related to consolidated SIPs and VIEs included in Other income. 2. Net of the impact of consolidating SIPs and VIEs as summarized in the appendix. Dividend and interest income Equity method investments Available-for- sale investments Trading investments Interest expense Foreign exchange and other Consolidated sponsored investment products (SIPs) Consolidated variable interest entities (VIEs) Total other income Noncontrolling interests1 Other income, net of noncontrolling interests Unaudited (in US$ millions, for the three months ended September 30, 2015) Other Income – U.S. GAAP 6.7 (72.5) 0.8 (16.7) (12.9) (11.1) (17.5) 0.8 (122.4) 6.8 (115.6)
Capital Management
Share Repurchase Amount BEN Average Price for the Period Special Cash Dividend Declared 500 218 190 151 178 129 179 137 265 105 23 98 99 282 126 291 337 204 215 199 172 $0 $10 $20 $30 $40 $50 $60 9/153/159/143/149/133/139/123/129/113/119/10 U.S. Asset Managers (ex-BEN)1: 2.5% Compound Annual Dilution Share Repurchases Accretive to Earnings per Share 24 1. U.S. asset managers include AB, AMG, APAM, APO, BLK, BX, CG, CLMS, CNS, EV, FIG, FII, GBL, IVZ, JNS, KKR, LM, MN, OAK, OMAM, OZM, PZN, TROW, WDR and WETF. Source: Thomson Reuters and company reports. BEN U.S. Asset Managers Average (ex-BEN)1 Unaudited Change in Ending Shares Outstanding Share Repurchases (US$ millions) vs. Average BEN Price BEN: 2.1% Compound Annual Accretion -15% -10% -5% 0% 5% 10% 15% 9/10 3/11 9/11 3/12 9/12 3/13 9/13 3/14 9/14 3/15 9/15 Recent Special Cash Dividends per Share Declared: Dec-14: $0.50 Nov-12: $1.00 Dec-11: $0.67 Dec-09: $1.00
Return of Capital Distributing U.S. Free Cash Flow Unaudited Trailing 12 Months Share Repurchases and Dividends1 (US$ millions and percentage of net income) Dividends Share Repurchases 25 1. The chart above illustrates the amount of share repurchases and dividends over the trailing 12 months, for the period ended. Dividend payout is calculated as dividend amount declared divided by net income attributable to Franklin Resources, Inc. for the trailing 12-month period. Repurchase payout is calculated as stock repurchase amount divided by net income attributable to Franklin Resources, Inc. for the trailing 12-month period. 13% 27% 27% 29% 34% 26% 27% 27% 32% 52% 923 1,267 1,296 1,403 1,741 9/14 12/14 3/15 6/15 9/15
Appendix
Strong Balance Sheet Unaudited Net Cash and Investments1 (US$ billions) 27 1. Net cash and investments consists of Franklin Resources, Inc. cash and investments (including only direct investments in consolidated SIPs and VIEs), net of debt and deposits. U.S. Net Cash and Investments Non-U.S. Net Cash and Investments 1.1 0.9 0.8 1.8 1.7 4.8 5.6 6.5 7.4 7.9 5.9 6.5 7.3 9.2 9.6 FYE-9/11 FYE-9/12 FYE-9/13 FYE-9/14 FYE-9/15
Sales and Distribution Summary This table summarizes the asset- and sales- based distribution fees, net of expense. • Asset-based expenses are generally not directly correlated with asset-based revenue due to international fee structures which provide for recovery of certain distribution costs through investment management fees. • Sales-based expenses are determined as a percentage of sales and are incurred from the same commissionable sales transactions that generate sales fee revenues. • Deferred sales commissions, which are related to up-front commissions on shares sold without a front-end sales charge, are amortized over the periods in which commissions are generally recovered from distribution fee revenues (and to a lesser extent, from contingent deferred sales charges received from shareholders of the funds upon redemption of their shares). 28 Unaudited (in US$ millions, for the three months ended) • Sales and distribution fees, net increased this quarter due primarily to lower asset based expense from non-U.S. assets under management Sep-15 Jun-15 Change % Change Asset-based fees $ 396.9 $ 425.9 Asset-based expenses (504.1) (547.7) Asset-based fees, net $ (107.2) $ (121.8) $ 14.6 (12%) Sales-based fees 110.9 138.3 Contingent sales charges 2.8 2.6 Sales-based expenses (96.6) (118.5) Sales-based fees, net $ 17.1 $ 22.4 $ (5.3) (24%) Amortization of deferred sales commissions (25.6) (27.8) 2.2 (8%) Sales and Distribution Fees, Net $ (115.7) $ (127.2) $ 11.5 (9%)
Consolidated SIPs and VIEs Related Adjustments 29 Unaudited (in US$ millions, for the three and twelve months ended) This table summarizes the impact of consolidating SIPs and VIEs on the Company’s reported U.S. GAAP operating results. FY Sep-15 Sep-15 Operating Revenues $ 32.4 $ 52.8 Operating Expenses (5.4) 3.7 Operating Income 37.8 49.1 Investment Income (6.9) (23.4) Interest Expense (1.1) (4.5) Consolidated SIPs (17.5) 18.0 Consolidated VIEs 0.8 8.3 Other Income (24.7) (1.6) Net Income 13.1 47.5 Less: net income attributable to noncontrolling interests 21.3 60.7 Net Income Attributable to Franklin Resources, Inc. $ (8.2) $ (13.2)