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 March 31, 1996 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: 80,348,334 shares, common stock, par value $.10 per share at April 30, 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 prior year amounts have been reclassified to conform to current year 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 Six months ended ended March 31 March 31 --------- --------- (Dollars in thousands, except per share data) 1996 1995 1996 1995 ----- ----- ----- ----- Operating revenues: Investment management fees $215,336 $172,582 $416,971 $347,156 Underwriting commissions, net 3,739 9,096 6,714 22,209 Transfer, trust and related fees 22,631 15,520 44,020 31,463 Banking/finance, net and other 2,924 2,583 3,478 7,186 -------- ---------- --------- --------- Total operating revenues 244,630 199,781 471,183 408,014 -------- ---------- --------- --------- Operating expenses: General and administrative 121,122 85,003 228,176 181,340 Selling 17,286 19,886 32,811 38,121 Goodwill amortization 4,530 4,640 9,371 9,210 -------- ---------- --------- --------- Total operating expenses 142,938 109,529 270,358 228,671 -------- ---------- --------- --------- Operating income 101,692 90,252 200,825 179,343 Other income/(expense): Investment and other income 9,989 5,262 20,654 12,025 Interest expense (3,419) (2,880) (6,042) (6,303) -------- ---------- --------- --------- Other income/(expense), net 6,570 2,382 14,612 5,722 -------- ---------- --------- --------- Income before taxes on income 108,262 92,634 215,437 185,065 Taxes on income 33,050 29,594 66,274 58,721 -------- ---------- --------- --------- Net income $75,212 $63,040 $149,163 $126,344 ======== ========== ========= ========= Earnings per share: Primary $0.91 $0.76 $1.79 $1.52 Fully diluted $0.91 $0.76 $1.79 $1.52 Dividends per share $0.11 $0.10 $0.22 $0.20 The accompanying note is an integral part of these financial statements. Franklin Resources, Inc. Consolidated Balance Sheets Unaudited March 31 September 30 (Dollars in thousands) 1996 1995 ------- ------------ ASSETS: Current assets: Cash and cash equivalents $322,953 $246,184 Receivables: Fees from Franklin Templeton Group 121,268 110,972 Other 43,248 38,407 Investment securities, available for sale 206,408 208,478 Prepaid expenses and other 11,325 7,167 --------- --------- Total current assets 705,202 611,208 --------- --------- Banking/finance group assets: Cash and cash equivalents 14,629 15,515 Loans receivable, net 385,866 450,013 Investment securities, available for sale 26,649 23,655 Other assets 6,176 6,876 -------- --------- Total banking/finance group assets 433,320 496,059 -------- --------- Other Assets: Investments: Investment securities, available for sale 18,643 15,291 Real Estate 8,890 8,826 Deferred costs 46,348 17,703 Premises and equipment, net 129,696 118,628 Goodwill, net of $65,027 and $56,375 amortization, respectively 650,982 660,363 Receivable from banking/finance group 253,426 302,273 Other assets 14,955 14,330 -------- --------- Total other assets 1,122,940 1,137,414 ---------- ---------- Total assets $2,261,462 $2,244,681 =========== ============ The accompanying note is an integral part of these financial statements. Franklin Resources, Inc. Consolidated Balance Sheets Unaudited March 31 September 30 (Dollars in thousands) 1996 1995 ------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY: LIABILITIES: Current liabilities: Trade payables and accrued expenses $121,276 $117,744 Debt payable within one year 30,333 87,204 Dividends payable 8,838 8,123 --------- --------- Total current liabilities 160,447 213,071 --------- --------- Banking/finance group liabilities: Deposits of account holders: Interest bearing 139,096 159,627 Non-interest bearing 10,110 9,747 Payable to parent 253,426 302,273 Other liabilities 3,343 2,076 --------- -------- Total banking/finance group liabilities 405,975 473,723 --------- -------- Other Liabilities: Long-term debt 421,184 382,367 Other liabilities 15,102 14,477 --------- -------- Total other liabilities 436,286 396,844 --------- -------- Total liabilities 1,002,708 1,083,638 ----------- ---------- STOCKHOLDERS' EQUITY: Preferred stock, $1.00 par value, 1,000,000 shares authorized; no shares issued or outstanding Common stock, $.10 par value; 500,000,000 shares authorized; 82,264,982 shares issued; 80,349,133 and 80,939,611 shares outstanding, respectively 8,226 8,226 Capital in excess of par value 98,261 92,190 Retained earnings 1,222,678 1,091,204 Less cost of treasury stock (86,360) (48,519) Other 15,949 17,942 --------- --------- Total stockholders' equity 1,258,754 1,161,043 ---------- ---------- Total liabilities and stockholders' equity $2,261,462 $2,244,681 =========== =========== The accompanying note is an integral part of these financial statements. Franklin Resources, Inc. Consolidated Statements of Cash Flows Unaudited Six months ended March 31 -------- (Dollars in thousands) 1996 1995 ----- ----- Net income $149,163 $126,344 Adjustments to reconcile net income to net cash provided by operating activities: (Increase)/decrease in receivables, prepaid expenses and other (33,969) 10,611 Increase/(decrease) in trade payables, accrued expenses and other 23,463 (24,436) Depreciation and amortization 19,839 20,117 Gains on disposition of assets (5,411) (407) ---------- ----------- Net cash provided by operating activities 153,085 132,229 ---------- ----------- Purchases of Franklin Templeton funds, net (2,572) (25,419) Purchases of banking/finance investment portfolio (36,850) (67,894) Liquidations of banking/finance investment portfolio 33,929 75,076 Originations of banking/finance loans receivable (21,382) (166.199) Collections of banking/finance loans receivable 77,239 69,242 Purchases of other investments, net (3,495) (529) Purchases of premises and equipment and other (19,985) (14,906) ---------- ----------- Net cash provided by (used in) investing activities 26,884 (130,629) ---------- ----------- Increase/(decrease) in deposits of bank account holders (20,168) 3,805 Exercise of common stock options 1,009 - Dividends paid on common stock (16,973) (15,453) Purchases of treasury stock (50,682) (24,194) Issuance of debt 65,440 44,418 Repayment of debt (82,712) (20,374) ---------- ----------- Net cash used in financing activities (104,086) (11,798) ---------- ----------- Increase (decrease) in cash and cash equivalents 75,883 (10,198) Cash and cash equivalents, beginning of the period 261,699 210,376 --------- --------- Cash and cash equivalents, end of the period $337,582 $200,178 ========== =========== Supplemental disclosure of non-cash information: Value of common stock issued in other transactions $18,040 $15,857 The accompanying note is an integral part of these financial statements. Note to Condensed Consolidated Financial Statements 1. Debt The Company issued $60 million in medium-term notes during March, 1996, maturing March, 2001 with coupon rates of 6.56%. The proceeds were used to retire $20 million in medium-term notes that had matured and reduce outstanding short-term commercial paper. The Company's overall effective interest rate at March 31, 1996 was 6.21% on approximately $450 million of outstanding commercial paper, medium-term notes and subordinated debentures. The Company has entered into interest rate swap agreements to exchange variable-rate interest payment obligations for fixed-rate interest payment obligations without the exchange of underlying principal amounts. At March 31, 1996, the Company had swap agreements outstanding with an aggregate notional amount of $125 million, maturing August through September 1999, under which the Company paid fixed rates of interest ranging from 6.24% to 6.45%. 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. Any potential loss from failure of the counterparties to perform is deemed to be immaterial. Item 2. 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 $141.4 billion at March 31, 1996, an increase of $10.6 billion (8%) from September 30, 1995 and an increase of $22.6 billion (19%) from March 31, 1995. 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 March 31, 1996, 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 Six months ended March 31 % March 31 % (In millions) 1996 1995 Change 1996 1995 Change ------ ----- ------- ------- ------- ------- Net Income $75.2 $63.0 19% $149.2 $126.3 18% Earnings per share Primary $.91 $.76 20% $1.79 $1.52 18% Fully diluted $.91 $.76 20% $1.79 $1.52 18% Operating margin 42% 45% 43% 44% The increases in net income were primarily due to increases in investment management fees as a result of higher average assets under management. Operating expenses increased at a higher rate than operating revenues resulting in a 3% and 1% decline in the Company's operating margins in the periods under review. 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 in Canada, the Bahamas and the Asia/Pacific region. 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 March % 31 (In billions) 1996 1995 Change -------- ------- ------- Franklin Templeton Group: Fixed income funds: Tax-free $41.5 $39.4 5% U.S. government (primarily GNMA's) 15.8 16.4 (4%) Taxable and tax-free money funds 3.0 2.8 7% Global/international 2.8 2.7 4% -------- ------- ------- Total fixed-income funds 63.1 61.3 3% -------- ------- ------- Equity and income funds: Global/international 41.3 30.0 38% U.S. equity/income 17.9 13.3 35% -------- ------- ------- Total equity and income funds 59.2 43.3 37% -------- ------- ------- Total Franklin Templeton fund assets 122.3 104.6 17% -------- ------- ------- Franklin Templeton institutional assets 19.1 14.2 35% -------- ------- ------- Total Franklin Templeton Group $141.4 $118.8 19% ======== ======= ======= *Certain prior year amounts have been reclassified to conform to current year presentation. Changes in assets under management Three months ended Six months ended March 31 % March 31 % (In billions) 1996 1995 Change 1996 1995 Change ------ ------ ------ ------ ------ ------ Assets under management - beginning $135.1 $114.6 18% $130.8 $118.2 11% Sales & reinvestments 9.9 6.1 62% 17.3 13.6 27% Redemptions (5.1) (4.9) 4% (10.1) (11.2) (10%) Market appreciation /(depreciation) 1.5 3.0 (50%) 3.4 (1.8) 289% ------ ------ ------ ------ ------ ------ Assets under management - ending $141.4 $118.8 19% $141.4 $118.8 19% ====== ====== ====== ====== ====== ====== Average assets under management $139.1 $116.4 20% $135.6 $116.4 16% ====== ====== ====== ====== ====== ====== Fixed income funds represent 45% of assets under management as of March 31, 1996, down from 52% a year ago. This trend generally reflects investors' preference for equity funds and their relatively high level of market appreciation during the periods under review. Equity and income funds represent 42% of assets under management as of March 31, 1996, up from 36% a year ago. Global/international equity funds' assets under management were up 38% from levels a year ago. U.S. equity/income funds increased 35% from levels a year ago. Institutional assets represent 14% of assets under management as of March 31, 1996 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 Six months ended ended March 31 % March 31 % (In millions) 1996 1995 Change 1996 1995 Change ------ ------ ------ ------ ------ ------ Investment management fees $215.3 $172.6 25% $417.0 $347.1 20% Underwriting commissions, net 3.8 9.1 (58)% 6.7 22.2 (70%) Transfer, trust and related fees 22.6 15.5 46% 44.0 31.5 40% Banking/finance, net and other 2.9 2.6 12% 3.5 7.2 (51%) ------ ------ ------ ------ ------ ------ Total operating revenues $244.6 $199.8 22% $471.2 408.0 15% 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 periods under review. Investment management fees increased primarily due to 20% and 16% increases in average assets under management during the periods. Underwriting commissions, net includes sales commission and distribution fee revenues earned primarily from fund sales, offset by payments to selling intermediaries and amortization of deferred sales commissions paid by the Company. During the third quarter of the previous fiscal year, many of the U.S. Franklin and Templeton funds introduced a new class of shares, Class II shares, which pay brokers a sales commission and distribution fees that are only partially recovered by the Company through distribution fee revenues. During the three- and six-month periods under review, distribution expenses have grown at a faster rate than distribution revenues because of the relative growth of Class II shares and other similar products outside the United States in the Company's sales mix. 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 12% of the Company's long-term U.S. mutual fund sales during the first six months of 1996. Underwriting commissions, net, also decreased due to a decrease in commission revenue from sales of annuity products resulting from a change in commission rates effective September 1, 1995. 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 13% increase in retail fund shareholder accounts to 5.2 million from 4.6 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 Three months Six months ended ended March 31 % March 31 % (In millions) 1996 1995 Change 1996 1995 Change ------ ----- ----- ------ ------- ------ Revenues $12.2 $14.0 (13%) $25.1 $27.4 (8%) Provision for loan losses (3.0) (4.4) (32%) (8.3) (7.0) 19% Interest expense (6.3) (7.0) (10%) (13.3) (13.2) 1% ------ ----- ----- ------ ------- ------ Total banking, finance, net and other $2.9 $2.6 12% $3.5 $7.2 (51%) ====== ===== ===== ====== ======= ====== Compared to the corresponding three-month period in the prior year, banking/finance, net and other revenues increased principally due to decreases in the provision for loan losses and interest expense attributable to the banking/finance group. Revenues decreased principally due to a 20% decrease in loans outstanding during the period. Provision for loan losses decreased due to a decrease from the previous quarter in delinquencies as a percent of loans outstanding from 6.5% to 5.7%. Interest expense during the period decreased due to reduced borrowings by the banking/finance group from the parent as a result of net paydowns on dealer auto loans. Compared to the six-month period in the prior year, banking/finance, net and other revenues declined due to a decrease in revenue as a result of lower average loan balances and an increase in the provision for loan losses as a result of rising delinquency and charge-off rates compared to the same period a year ago. Operating expenses Three months Six months ended ended March 31 % March 31 % (In millions) 1996 1995 Change 1996 1995 Change ------ ------ ----- ------ ------- ------ General and administrative $121.1 $85.0 42% $228.2 $181.3 26% Selling 17.3 19.9 (13%) 32.8 38.1 (14%) Goodwill amortization 4.5 4.6 (2%) 9.4 9.2 2% ------ ------ ----- ------ ------- ------ Total operating expenses $142.9 $109.5 31% $270.4 $228.6 18% ====== ====== ===== ====== ======= ====== Increases in operating expenses principally resulted from the general expansion of the Company's business, particularly with respect to the opening of foreign offices and product development. 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 8% from March 31, 1995 to over 4,700 at March 31, 1996. Employment costs represent approximately 60% of operating expenses during the three-and six-month periods ended March 31, 1996 and represent approximately 75% and 80% of the increases in general and administrative expenses during the three-and six-month periods, respectively. Employment costs include incentive based compensation which will continue to be dependent upon increases in operating profit margins excluding such compensation. Selling expenses decreased during the comparative three-and six-month periods mainly due to periodic variations in media advertising and marketing campaigns. Other income/(expense) Three months Six months ended ended March 31 % March 31 % (In millions) 1996 1995 Change 1996 1995 Change ----- ----- ------ ----- ----- ------ Investment and other income $10.0 $5.3 89% $20.6 $12.0 72% Interest expense (3.4) (2.9) 17% (6.0) (6.3) (5%) ----- ----- ------ ----- ----- ------ Other income (expense), net $6.6 $2.4 175% $14.6 $5.7 156% ===== ===== ====== ===== ===== ====== The increases in investment income resulted from an increase in the average levels of interest-bearing assets invested as well as capital gains realized. The Company's overall effective interest rate at March 31, 1996 was 6.21% on approximately $450 million of outstanding commercial paper, medium-term notes and subordinated debentures as compared to 6.31% on $488 million of debt outstanding at March 31, 1995. The Company has fixed the interest rates it pays on over 85% of its outstanding debt through its medium-term notes program, its subordinated debentures and the interest rate swap agreements discussed below. 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 March 31, 1996, the Company had swap agreements outstanding with an aggregate notional amount of $125 million, maturing August through September 1999, under which the Company paid fixed rates of interest ranging from 6.24% to 6.45%. 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 pre-tax income. II. Material Changes in Financial Condition, Liquidity and Capital Resources Selected balance sheet items As of As of March September 31 30 % (In millions) 1996 1995 Change ------ ------- ------- Banking/finance loans receivable, net $385.9 $450.0 (14%) Receivable from the banking/finance group $253.4 $302.3 (16%) Deferred costs $46.3 $17.7 162% Debt payable within one year $30.3 $87.2 (65%) Long term debt $421.2 $382.4 10% -------- ------- ------ The Company substantially increased its auto loan portfolio during fiscal year 1994 as it expanded this business activity. Because a substantial portion of the portfolio was new, the impact of delinquency and loss trends was not fully reflected in the financial performance of the Company until fiscal year 1995. As the Company has expanded its auto loan financing business, it has concurrently strengthened its collection systems, policies and procedures, as well as its underwriting criteria and its overall management team. Management is monitoring the results of its increased efforts in the credit and collection areas. At March 31, 1996, banking/finance loans receivable, net decreased due to net paydowns and a decrease in funding of new auto loans as a result of higher credit requirements. The net paydowns on loans receivable resulted in a reduction of the receivable from the banking/finance group. Deferred costs increased due to a $15.6 million increase in deferred commissions related to Canada-based funds and Class II shares. They also increased as a result of $11.2 million in costs related to the purchase of a building which will house the Company's operations in Singapore. Debt payable within one year decreased as a result of the Company using the proceeds from a $40 million issuance of medium-term notes and approximately $17 million in cash from operations to reduce outstanding short-term commercial paper. The Company used the proceeds from an additional issuance of $20 million in medium-term notes to retire notes that matured March 15, 1996. The Company also issued $5.4 million in short term notes and repaid them during the period. Selected cash flow items Six months ended March 31 (In millions) 1996 1995 ------- ------ Cash flows from operating activities $153.1 $132.2 Cash flows from investing activities $26.9 ($130.6) Cash flows from financing activities ($104.1) ($11.8) 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 premises and equipment, repayment of debt and purchase 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 six-month period ended March 31, 1996, the Company purchased 954,755 Franklin Resources, Inc. shares for $50.7 million. On March 14, 1996, the Board of Directors of the Company authorized up to an additional 3,000,000 shares under its repurchase program. At March 31, 1996, the Company had 3,914,511 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 March 31, 1996, the Company held liquid assets of $735.2 million, including $337.6 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. FRANKLIN RESOURCES, INC. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Stockholders of Franklin Resources, Inc. was held at 10:00 a.m., Pacific Standard Time, on January 25, 1996 at the offices of the Corporation at 777 Mariners Island Boulevard, San Mateo, California 94404. The three (3) proposals presented at the meeting were: 1. The election of nine (9) directors to hold office until the next Annual Meeting of Stockholders or until their successors are elected and shall qualify. 2. The ratification of the appointment by the Board of Directors of Coopers & Lybrand, L.L.P. as the Company's independent certified accountants for the current fiscal year ending September 30, 1996. 3. The transaction of such other business as properly may come before the Meeting or any adjournments or postponements thereof. (b) Each of the nine nominees for director was elected and received the number of votes set forth below: Name For Withheld Harmon E. Burns 72,645,467 362,138 Judson R. Grosvenor 72,624,017 383,588 F. Warren Hellman 72,648,746 358,859 Charles B. Johnson 72,645,110 362,495 Charles E. Johnson 72,644,467 363,138 Rupert H. Johnson, Jr. 72,644,808 362,797 Harry O. Kline 72,553,475 454,130 Peter M. Sacerdote 72,557,828 449,777 Louis E. Woodworth 72,663,631 343,974 The ratification of the appointment of Coopers & Lybrand, L.L.P. as the Company's independent certified accountants for the fiscal year ending September 30, 1996, was approved by a vote of 72,975,914 in favor, , 20,016 shares against, and 11,675 shares abstaining. Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits are filed as part of the report: Exhibit (3)(i)(a)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(i)(b) 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)(i)(c) 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)(i)(d) 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)(ii) Registrant's By-Laws are incorporated by reference to Exhibit 3(v) to Registrant's Form 10-Q for the Quarterly Period ended December 31, 1994. Exhibit 4: Instruments defining the rights of holders, including indentures i) Form of Indenture-Exhibit No. 4 to the Company's Registration Statement on Form S-3 (33-53147) filed by the Company electronically on April 14, 1994 (the "MTN S-3"), incorporated by reference in its entirety. ii) Form of Fixed Rate Note-Exhibit No.4.1 to Amendment No. 1 to the MTN S-3, filed by the Company electronically on May 19, 1994, incorporated by reference in its entirety. iii) Form of Floating Rate Note-Exhibit 4.2 to Amendment No. 1 to the MTN S-3, filed by the Company electronically on May 19, 1994, incorporated by reference in its entirety. Exhibit 10.1 Representative Investment Management Agreement between Templeton Global Strategy SICAV and Templeton Global Advisors Limited. Exhibit 10.2 Representative Investment Management Agreement between Templeton Global Strategy SICAV and Franklin Advisors, Inc. Exhibit 10.3 Representative Investment Management Agreement between Templeton Russian and Eastern European Debt Fund and Templeton Investment Management Limited, Inc. Exhibit 10.4 Representative Service Agreement between Templeton Russian and Eastern European Debt Fund and Templeton Global Strategic Services S.A. Exhibit 11 Computations of per share earnings. (See page ) Exhibit 12 Computations of ratios of earnings to fixed charges (See page) Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K: Form 8-K dated April 26, 1996 reporting under Item 5 Other Events the filing of an earnings press release by the Company on April 25, 1996 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: May 14, 1996 /S/ Martin L. Flanagan ---------------------- MARTIN L. FLANAGAN Senior Vice President, Treasurer and Chief Financial Officer INDEX TO EXHIBITS Exhibit (3) The following exhibits are filed as part of this report: Exhibit (3)(i)(a) 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(i)(b) 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)(i)(c) 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)(i)(d) 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)(ii) Registrant's By-Laws are incorporated by reference to Exhibit 3(v) to Registrant's Form 10-Q for the Quarterly Period ended December 31, 1994. Exhibit 4: Instruments defining the rights of holders, including indentures i) Form of Indenture-Exhibit No. 4 to the Company's Registration Statement on Form S-3 (33-53147) filed by the Company electronically on April 14, 1994 (the "MTN S-3"), incorporated by reference in its entirety. ii) Form of Fixed Rate Note-Exhibit No.4.1 to Amendment No. 1 to the MTN S-3, filed by the Company electronically on May 19, 1994, incorporated by reference in its entirety. iii) Form of Floating Rate Note- Exhibit 4.2 to Amendment No. 1 to the MTN S-3, filed by the Company electronically on May 19, 1994, incorporated by reference in its entirety. Exhibit 10.1 Representative Investment Management Agreement between Templeton Global Strategy SICAV and Templeton Global Advisors Limited. Exhibit 10.2 Representative Investment Management Agreement between Templeton Global Strategy SICAV and Franklin Advisors, Inc. Exhibit 10.3 Representative Investment Management Agreement between Templeton Russian and Eastern European Debt Fund and Templeton Investment Management Limited, Inc. Exhibit 10.4 Representative Service Agreement between Templeton Russian and Eastern European Debt Fund and Templeton Global Strategic Services S.A. Exhibit 11 Computations of per share earnings. (See page ) Exhibit 12 Computations of ratios of earnings to fixed charges (See page) Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K: Form 8-K dated April 26, 1996 reporting under Item 5 Other Events the filing of an earnings press release by the Company on April 25, 1996 and including said press release as an Exhibit under Item 7 Financial Statements and Exhibits.