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Franklin Resources Inc BEN
Q4 2012 Earnings Call Transcript

Transcript Call Date 10/25/2012

Operator: Welcome to Franklin Resources' Earnings Commentary for the quarter ended September 30, 2012.

Please note that the financial results to be presented in this commentary are preliminary. 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 fourth quarter earnings commentary. I'm Greg Johnson, CEO along with Ken Lewis, our Chief Financial Officer. Overall, relative performance rankings remained strong across the board and improved notably in several key areas such as taxable fixed income or our Global Bond Fund strategies have produced outstanding performance across all standard timeframes.

Operating results ended the fiscal year on a strong note and assets under management, net income, and earnings per share for the fiscal year set all-time highs. Expanding our alternatives business is a core strategic initiative for the Company and during the quarter, we announced the acquisition of a majority stake in fund of hedge fund specialist K2 Advisors. K2 brings a world-class reputation as a fund of hedge funds solutions provider with best-in-class asset allocation and risk management capabilities with a proven track record.

Alternative investments and multi-asset solutions are an important and growing part of our business. We see opportunity for growth in the alternatives and solutions space as investors look for added alpha and increased diversification.

Looking first at U.S. retail performance Templeton equity performance rebounded mostly due to an improved Eurozone equity market where the Templeton funds have an overweight. Franklin Equity was essentially unchanged since last quarter. Mutual series equity relative performance rankings fluctuated across all time periods this quarter, but did have a strong improvement in three-year numbers. Taxable fixed income improved across the board, the most notable improvement being the Templeton Global Bond Fund which is once again ranked in the top decile for the one year period.

Assets under management ended the quarter 6% higher at $750 billion in new high and average AUM increased 2% to $727 billion. The mix in AUM by investment objective and sales region remained consistent with last quarter. Long-term sales increased by 2% this quarter to $42.5 billion, however redemptions remained elevated increasing 9% and contributing to lower long-term net new flows of $2.3 billion. The increase in AUM was mostly due to market appreciation which added about $40 billion to AUM this quarter as performance was strong across the complex. Included in the market appreciation and other AUM roll forward category is the translation impact on approximately $95 billion in AUM that has as its base currency, a currency other than U.S. dollar.

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