Franklin Resources, Inc. Announces Preliminary Second Quarter Results, Including Repatriation Income Tax Charge, and Non-Cash Charge Related to Intangibles

Business Wire, April 27, 2006

SAN MATEO, Calif. -- Franklin Resources, Inc. (Franklin Templeton Investments) (NYSE:BEN) today announced preliminary second quarter results. The company announced net income of $196.5 million, or $0.74 per share diluted, on revenues of $1,254.8 million for the quarter ended March 31, 2006. Income taxes for the quarter ended March 31, 2006 included a charge of $111.6 million ($0.42 per share diluted) related to repatriated earnings of the company's foreign subsidiaries under the American Jobs Creation Act of 2004. As discussed below, net income also reflects a non-cash impairment charge of $68.4 million ($0.17 per share diluted, net of tax) with respect to certain intangible assets of Fiduciary Trust Company International ("Fiduciary"), a company subsidiary, related to the reorganization of that business. In the quarter ended December 31, 2005, net income was $318.0 million, or $1.21 per share diluted, on revenues of $1,181.5 million. For the quarter ended March 31, 2005, net income was $221.3 million, or $0.85 per share diluted, on revenues of $1,051.2 million.

Operating income for the quarter ended March 31, 2006 was $349.8 million, as compared to $404.6 million for the prior quarter and $273.3 million for the quarter ended March 31, 2005, a decrease of 14% for the quarter ended March 31, 2006 over the prior quarter and an increase of 28% over the same quarter in the prior year. The company's non-operating income for the quarter ended March 31, 2006 included $55.4 million of investment and other income, net, as compared to $32.4 million in the prior quarter and $38.6 million for the quarter ended March 31, 2005.

The company currently believes that it needs to recognize in the quarter ended March 31, 2006 an impairment of certain Fiduciary acquisition-related intangible assets, which were carried at $155.1 million at December 31, 2005. At the date of this release, management currently estimates the impairment charge to be $68.4 million and has reflected this as a charge in the second quarter. However, management's evaluation is still ongoing and the possibility exists that all or a portion of the charge may relate to the first fiscal quarter of 2006. The company currently expects to complete its analysis on or prior to the filing of its Form 10-Q for the period ended March 31, 2006.

Assets under management by the company's subsidiaries were $491.6 billion at March 31, 2006, as compared to $464.8 billion at December 31, 2005 and $412.1 billion at March 31, 2005. Simple monthly average assets under management during the quarter ended March 31, 2006 were $481.2 billion compared to $453.3 billion in the preceding quarter and $407.4 billion in the same quarter a year ago. Equity assets increased to 60% of total assets under management at March 31, 2006, as compared to 59% for the previous quarter and 57% at March 31, 2005. Fixed-income assets comprised 22% of total assets under management at March 31, 2006, as compared to 23% for the previous quarter and 24% at March 31, 2005. Hybrid assets accounted for 17% of total assets under management at March 31, 2006, December 31, 2005 and March 31, 2005. Sales exceeded redemptions by $2.5 billion for the quarter ended March 31, 2006, as compared to $5.8 billion for the prior quarter and $11.5 billion for the comparable quarter a year ago.

Fiscal Second Quarter 2006 Highlights

Performance and Products(1,2)

(See important footnotes in the "Supplemental Information" section at the end of the release.)

--77% of Franklin Templeton's long-term mutual fund assets were in funds ranked in the top two quartiles of their respective Lipper peer groups for the three-year period, 90% for the five-year period and 95% for the 10-year period ended March 31, 2006.(3,4)

--67% of Franklin Templeton's equity mutual fund assets were in funds ranked in the top two quartiles of their respective Lipper peer groups for the three-year period, 85% for the five-year period and 93% for the 10-year period ended March 31, 2006.(3,5)

--99% of Franklin Templeton's fixed income mutual fund assets were in funds ranked in the top two quartiles of their respective Lipper peer groups for the three-year period, 100% for the five-year period and 99% for the 10-year period ended March 31, 2006.(3,6)

--95% of Franklin Templeton's taxable fixed income mutual fund assets were in funds ranked in the top two quartiles of their respective Lipper peer groups for the three-year period, 98% for the five-year period and 96% for the 10-year period ended March 31, 2006.(3,7)

--100% of Franklin Templeton's tax-free fixed income mutual fund assets were in funds ranked in the top two quartiles of their respective Lipper peer groups for the three-, five- and 10-year periods ended March 31, 2006.(3,8)

--Franklin Income Fund ranked in the top third of the Lipper Income Funds peer group for total return among 263 funds for the one-year period, and ranked in the top quintile among 158, 107 and 26 funds for the three-, five- and 10-year periods ended March 31, 2006.(3,9) Franklin Income Fund received a Lipper Leader award for Total Return, and was rated 5 stars overall by Morningstar among 285 Conservative Allocation funds as of March 31, 2006.(19,20)