Franklin Resources Inc BEN
Q2 2012 Earnings Call Transcript

Transcript Call Date 05/02/2012

Operator: Welcome to the Franklin Resources Earnings Commentary for the quarter ended March 31, 2012. Statements made in this commentary regarding Franklin Resources Inc. which are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from any future results expressed or implied by such forward-looking statements. These and other risks, uncertainties and other important factors are described in more detail in Franklin's recent filings with the Securities and Exchange Commission including in the risk factors and MD&A sections of Franklin's most recent Form 10-K and 10-Q filings.

This commentary was prerecorded.

Gregory E. Johnson - CEO and President: Hello and welcome to the second quarter earnings commentary. I'm Greg Johnson, CEO, along with Ken Lewis, our CFO. The March quarter got off to a strong start for us, as increased sales activity and the market tailwind led to increased assets under management. Net new flows turned positive again this quarter, driven by the increase in sales with long term flows positive across all investment objectives for the first time in nearly three years.

Most importantly, long term relative investment performance remained strong across the firm. Net income also rebounded and quarterly earnings per share of $2.32 reached a record high. Relative investment performance for the U.S. fund range is highlighted on Slide 6. Of course, this is specific to a subset of our overall business and we encourage you to take a look at the broader performance summary in our 10-Q, which was also filed this morning.

Overall, U.S. relative performance rankings were a little changed from December as improving fixed income performance was offset by weaker equity performance. The biggest detractor from equity performance rankings was the Franklin Income Fund, which represents 53% of Franklin Equity Assets. The fund underperformed its Lipper peer group average by about 80 basis points for the one year period or 66 percentile due to its traditional overweighting in utility and energy sectors that underperformed the broad market in the quarter. Importantly, long-term performance remains outstanding. Fixed-income performance improved across the board, although the strong year-to-date rebound in Templeton Global Bond's performance has not yet fully turned the one year number.

Assets under management increased 8% for the quarter to $726 billion, monthly AUM increased 5%.

Turning to Slide 9, the mix of AUM by investment objective and sales region was little changed since December. Strong equity markets and fund performance added $51 billion to assets under management this quarter. Long-term sales increased 27% to $48.5 billion, while total redemptions fell 19%, although redemptions were really little changed if you exclude last quarter's large advisory account closure.

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