富蘭克林資源 (BEN) 2003 Q3 法說會逐字稿

Good afternoon.

My name is Heather and I will be your conference facilitator.

At this time I would like to welcome everyone to the Franklin Resources third quarter earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker’s remarks there will be a question and answer period.

If you would like to ask a question press star and 1 on your telephone key pad.

If you would like to withdraw press star and 2 on your telephone keypad.

Thank you, Mr. Flanagan you may begin your conference.

Thank you very much.

Welcome to our third quarter conference call.

This is Marty Flanagan, along with Greg Johnson, co-presidents of Franklin Resources.

Just give you a highlight of the agenda.

We'll talk about assets under management flows investment performance address some business highlights and operating results and then we'll open it up to Q&A.

Before we get started I'd like to refer everybody to our forward-looking statements.

There's a copy of that in our 10-K and our most recent 10-Q but just a point or two of that I'd like to address a subset which states forward-looking statements involve a number of risks uncertainties and other important factors that could cause actual results and outcomes to differ materially from any future results or outcomes express or implied by such forward-looking statements which may be discussed here today.

With that, I'd like to get started and just to highlight the quarter from our point of view, it was a very strong quarter for us.

Driven both by good business operating results and also favorable market conditions.

This resulted in earnings per share increasing by almost 20% quarter over quarter to 52 cents per share.

If you look at assets under management we ended the quarter at $287 billion.

It's the highest level of assets under management we have achieved.

That's a 13% increase quarter over quarter.

Average assets for the quarter were $272 billion, a 6% increase from -- compared to the prior quarter.

We did have market appreciation of $29 billion during the quarter.

And we continued to have net inflows into all of our different investment objectives so very broad.

Taking a look at the mix of assets under management, at this quarter-end equities represented 49.6% of assets under management and that is up from last quarter which was 46.9%.

The blended assets are now 14.9%, pretty stable from last quarter.

Fixed income, 33.4%, down from 36% in the prior quarter.

Though we continue to benefit from the diversification of our asset base, the broad investment styles, the different investment objectives and the multiple channels that we are in and also the geography of our businesses.

And with that I'll pass it on to Greg.

Thank you Marty.

As you'd expect net sales increased quite a bit from the prior quarter up 130% to 6 billion versus 2.6 in the prior quarter.

Gross sales were up about 26% from the prior quarter and 18% looking at the year-over-year numbers.

So obviously, very pleased with the amount of net inflows.

June for a month was the highest gross sales month that the organization has ever had.

Looking at some of the flows by asset categories, as you'd expect the equity sales increased from 1.1 to 2 billion dollars.

Fixed income was also very strong from 1.9 to 2.8 without reinvested dividends from 1.4 to 2.3 and the Franklin Income Fund has been carrying most of those inflows and continues to have record inflows with the strong performance in the income balanced category.

We haven't seen a whole lot of increase in the Global International Equity side.

Still a good net inflows gross sales picked up redemptions picked up a bit there as well as opposed to the domestic equity side which we did see an increase.

Taxable side up from 1.5 to 2.3.

In addition to the Franklin Income fund the U.S. government fund continues to sell very well outside of the U.S. in Japan, Asia, and parts of Europe as well.

Looking at the investment performance the good news is it's more of the same.

The majority of the assets, 80% of the U.S. equity assets were ranked in the top two quartiles of their peer groups the one-year period and over 85% for the three, five and ten.

Taxable income funds continue for the Franklin side to have strong performance over 85% [inaudible] in the 1, 3 five and ten.

Templeton still very consistent performance with over 75% of the equity mutual fund assets in the top two quartiles for the one year and over 97% for the top two quartiles for the three five and ten year.

Mutual series again very consistent performance with all of the mutual series ranked in the top two [Lippor] quartiles for the one, three, five, and ten..

Franklin income fund is ranked in the top 6% of its Lippor peer group, for a year to date number for the one, three, five year period.

And the Franklin strategic income fund also in the top quartile for the Lippor core group for the one three four year period.

Looking at performance and what's changed over time, the out performance of the NASDAQ versus some of the other indices certainly could have effect on the one year numbers and we are starting to see that a bit with some of our categories that have less technology exposure on the equity side for Franklin Templeton.

That may affect the one-year.

You know, if that trend continues.

And that's just something I think that we should all be aware of.

Looking at some of the business highlights retail side not only good flows but good market share gains across really all categories.

We recently, the CCAB which is the family of funds sold throughout the world was recognized as the top selling CCAB family for the year.

And in Canada which has been a very difficult market with the currency moves for the equity funds especially for the Templeton side there we've been very pleased with the progress that we've made with the potential program which just really highlights how we can take all the various capabilities in the Franklin Templeton organization, create a new product which is really the potential product and have strong success in cross selling that product, we garnered 250 million in a short time period in that marketplace.

On the institutional side we've had nice recent wins in the quarter.

We recently cross sold a $500 million international equity mandate to an existing client that has been 25% funded.

Fiduciary trust, [inaudible] global fixed income area, recently won a $264 million assignment from [Shenko] investment trust in Tokyo and we are also appointed fund manager for the ministry of information and communication which is the second largest institutional investor in Korea.

The high net worth continues to gain new assets of $200 million for the quarter and Franklin Templeton private client group reached an all time high on the strength of its muni flows and small cap.

So as you would expect with the rebounds of the equity markets we’ve seen that in net inflows the good news is the trends around market share continued to grow and obviously very pleased about those results.

I'll now turn it back to Marty.

Great, Greg, thanks.

Now, discussing the operating results, and as you would imagine on the back of the increase in assets under management we saw operating revenues increase almost 12% to $683 million.

Resulting in net income increasing to $131 million which is a 20% increase.

Followed by the 20% increase in earnings per share to 52 cents per share.

To give a little more color on some of the areas in the operating revenue, investment management fees increased 8% to $376 million during the quarter.

We also saw the effect of fee rate increase at 55.3 basis points from 54.6 basis points last quarter as we saw this mix back to equities during the quarter.

We also had shareholder servicing fees increase and during the quarter we added 900,000 new shareholder accounts, which is a good sign.

We get new clients at the same time.

With regard to other income we had [inaudible] securitization during the quarter which generated a one-time gain of $9.5 million during the quarter.

Moving on to operating expenses, compensation and benefits increased just 1.5% during the quarter to $163 million.

That represents 34% of net operating revenues down from 35% in the prior quarter.

You know, looking forward, a more normalized rate would probably be around the 35%, but we continue to be very focused on that area.

IT spending was down during the quarter.

We've talked previously that we were very focused on wise technology expenditures and investing for the future which we are doing, but at the same time, focus on driving down our fixed cost and we are making some progress in that area.

An area that did see some change this quarter was advertisement promotion dropped almost 8% during the quarter.

Ad spending was actually up during the quarter but we had reduced expenses on the promotional side of the business.

Another area, other operating expenses increased $5.5 million during the quarter.

Largely driven by one-offs in two areas around some legal expenses for a project that we are working on, and also some consulting as regards to another project internally.

So there's some roll-offs in there during this quarter.

Investment in other income saw quite an increase during the quarter of 43% to 22 million dollars.

During the quarter we took gains in the fixed income portfolio on our balance sheet.

Another area that we'd like to highlight is the effective tax rate which is now 29%.

It's an area that is a difficult one to project, in a very volatile environment.

And it's not as simple as just the movement in the asset mix.

So to give a little more color on it, as you've seen the shareholder servicing fees increase which are largely U.S. based, generating more revenues in the United States and also as you see also more shareholders there, that is one of the factors.

The other area is relative decrease in operating expenses in the United States creates greater profits in the U.S.

And also at the same time, when you see the continued strong flows in domestic equity fixed income, but along with that within our global products, a number of the global products are also managed in the United States.

So it's not as easy as simply looking at our asset mix and concluding where the rate should go.

So we'll continue to try to give greater transparency into the tax rate.

That has been a very volatile market environment, and this is what's resulted from that.

Another area, during the quarter we purchased 4.9 million shares back. 9.1 million shares year to date.

The average price during the quarter on these purchases was $36 a share.

So at the end of the quarter, shares outstanding were 250.7 million.

And if you look at what's been given back to shareholders in the combination of stock buy-backs or dividends during the quarter it represented 148% of net income during the quarter.

So you know, continue to be very opportunistic in that area.

Also, with all of these changes we have seen margin expansion during the quarter.

The highest margins we've had over a year increasing the operating margin to 24.8% the EBITDA margins increasing from 29.3% to 31%.

With that we continue to stay very focused on controlling costs.

It was a good quarter absolutely, our diverse range of net inflows across all channels, and brands, and investment objectives, very good service levels.

So we're very positive on the company's strategic positioning and the outlook.

But we're very cognizant that it is still a very volatile market environment and we are managing the business accordingly.

And with that Greg and I will take any questions that anybody has.

If you'd like to ask a question tilt you may press star then the number 1 on your telephone key pad.

We will pause for a moment to compile the Q&A roster.

Your first question comes from Henry McVey from Morgan Stanley.

Good afternoon.

Just a couple quick questions.

One was it look like you raised the debt to take in the converts but look like you only got less than 10 million of converts put to you so you have got even more capital now.

Can you comment on that.

And then two, your distribution revenues despite real pick up in sales kind of fell off.

Kind of trying to get my arms around that.

With regard to the convert you're right.

There was very little of it put back to us and our response to that is I think somewhat reflective in being very opportunistic in stock buy-backs during the quarter.

And with regard to the distribution levels, once again, I think as Greg was discussing in his comments, too, we are continuing to see, you know, increased success on the institutional side which also results in, you know, we don't have that commission revenue commission expense being driven by that.

And then just Greg, one follow-up.

When you said on Canada I know you guys have had problems with flows there so are things bottoming out not starting to reaccelerate or still in net outflow mode?

Canada for us on a relative basis we're having a very good year, meaning that our outflows are -- rank as No. 2.

The entire industry is in net outflows right now and we haven't seen any reason why that's going to turn around quickly.

You know, I think it's just with the currency moves and people -- the performance -- they haven't had the effect that we've had in this market.

And you know that's just been a retail market that's been under a lot of pressure.

Final thing when you talked about there were a couple of big wins on the institutional side, can you give us a feel of what you're seeing out there in terms on the pipeline and what products people are really starting to come to you guys, is it the fixed income, the international, or where are you seeing the most activity?

I think nothing has really changed as far as where we've talked about or where we see the opportunities.

I think the point around the Shenko win for us is an area that we have had very good performance with fiduciary and we think there is a real still is a very strong opportunity there to get more mandates.

But yes, that would be the one area that you're still seeing a lot of activity in and I wouldn't see the international has increased or decreased..

It's fairly steady in a good RPF pipeline.

Thanks guys.

Your next question comes from Glenn Schorr with UBS Warburg.

Hi, good afternoon.

Couple of housekeeping.

The 900,000 new billable accounts that's awesome.

You got an account purge coming up last year you gave us a good incoming into it about how much to expect.

You're right.

I don't have that right now and one is coming up at the end of July.

So I think it would be reasonable to expect probably the same level as last year.

Got it.

Follow-on on your comments on marketing you said ad spend was actually up but Promo is down.

Performance is still awesome, thoughts going forward now that we're in a little better of a seasonal time, meaning can you expect a bit of a pickup on the advertising front and Promos?

I would think it would be from the advertising line fairly stable.

We felt we needed to make a strategic spend and had an opportunity to do that at a time the market was out of favor and we're getting some of the benefit from that now.

But we don't really see any reason to pick it up from what we think is already a very strong level.

Okay.

And the investment in other income line you mentioned you booked some fixed income gains.

Is it fair to assume that it's a good portion of the delta from last quarter?

Yes, it is.

Is there still a big unrealized gain position?

Getting a feel for going forward?

I can't give that level of detail but I think we'll can clearly highlight it when it happens in the quarter and I think the gains in the fixed income portfolio were probably not unlike what you probably saw quite broad broadly.

No problem.

The long shore portfolios, can you give us any sense on performance, asset flows, demand for the product, how it's being received, which pipelines you're trying to sell it into?

I can address the performance and Greg can talk about the flows.

I mean you know as we created these products, we thought they were, you know, good ex tenses extensions on some of our U.S. equity side it has been tougher in the long-short world, what's happened a lot of the shorts I think you know with the market rally has heard a lot of the long short, so I would suspect that there's less current demand than there was when markets were in absolute down category so, is that your sense Greg?

Yeah, I think that's right.

It -- you know we've traditionally shorted we think the overvalued segments and I think in some cases those are some of the stocks that have been doing better as NASDAQ has outperformed a lot of other things.

That for the short term means you probably will not on the relative performance and the recent flows would indicate that there's less interest but I can tell you that I think for the statement for the alternative and how we position them there is a growing retail desire to have those type of products available and they're going along the learning curve and getting more comfortable.

So we obviously think it will be a core part of what we do going forward in terms of the retail offering.

That's interesting.

So no institutional demand, no major institutional demands on the pension accounts things like that?

No, not for a retail type long-short fund that we have.

Understood.

Thanks very much, guys.

Next question comes from Mark Constant with Lehman Brothers.

Good afternoon guys.

I really try to avoid the cliche of congratulating, but you at least let me apply to the other repurchases given our discussions over the years.

We'll take it Mark.

Couple of things I wanted to follow up on.

One, numbers things, Marty, tax rate I assume from your comments we're going to see when we ultimately get disclosed the earnings allocations are going to correlate to the U.S.-non-U.S. for the reasons you said, right?

I see it even with the segments Mark, we are trying to give transparency but really --

Not the same the business allocation from the tax allocation?

Set of market dynamics we've been through is not what we've seen as a business.

So you know, I am uncomfortable to give any sense of where it might be going.

Because compared to -- I was wrong.

So --

Fair enough.

Were there any catch-up accruals this quarter in the comp line?

I know you had the sequential drop-off in the fiduciary amortization this quarter but was any of the other increase that I'm sure partially revenue related was any of that also reflecting first quarter and second quarter increases in accruals in that respect?

Not too much.

We are keenly aware of you know the relative performance of the business.

And what, you know, if we continue to have you know strong operating results you know many of much of our bonus pools are driven by the overall operating results of the company.

But you know, we're really balancing awarding individuals for performance, and at the same time, rewarding shareholders.

Okay.

And Greg, I've been a little surprised by currency swinging both up and down that we haven't had more of an impact in both performance and flows from that.

Any thoughts there from your end or was that for better and for worse we would have seen more of that?

I think it does affect Templeton you know when they don't hedge obviously what the dollar does has a direct effect on their relative performance.

But it's still you know very strong and the overall trend has been a weaker dollar over the period.

So you know, that helps, you know, the Templeton side.

Okay.

But you just don't see flows behaving or investor sort of product selecting reflecting that add as all?

I would still say it's interesting.

And we've seen a real renewal of interest in the emerge I markets area but I think core equity while there still seems to be a lot of uncertainty around that and a lot of rally that the market that took place was later for that segment so I think I would expect to see that area to increase you know if the markets stay strong and you had SARS and you had a lot of things that probably affected people's thinking again.

And there's been probably three false starts with international and all of a sudden they get hit pretty hard.

It is kind of a wait and see.

And probably over the last two times people thought they got burned by jumping in at the wrong time.

I'm talking purely the retail sentiment there.

I believe that is an area that is very underweighted.

With the recent and now positive numbers I would expect that to turn around but I think it's taken a little bit longer as being those net inflows the way they should be coming in.

Final question kind of for you both from an executive standpoint, it appears that a lot of investors are still valuing your stock on the basis of fiscal year earnings which is looking to understate your '03 and '04 comparable calendar year earnings pretty materially.

Any consideration or thought to potentially switching to a calendar fiscal year?

And I wouldn't advocate of going to the extreme of next March but that would really help the comparison.

We haven't considered that, Mark.

So that's an interesting thought.

So --

Okay, thanks.

Your next question comes from Cynthia Mayer with Merrill Lynch.

Hi, good afternoon.

Couple of product questions I'm curious about your outlook for Muni fund sales up a little bit and whether you expect global sales to be 30% still going forward.

In global sales first of all, take the last part.

Of for us as far as inflows are over 30% right now.

When we say global, that's retail investors outside of the U.S.

As far as the global percentage of sales, that's another measurement so I'm not sure which one you're referring to.

Are you referring --

I think I'm referring to the first, to the -- there are over 30%?

Coming from investors outside the U.S. today.

Non-U.S. investors.

35% of our inflows are from investors outside the U.S.

Okay, is that up?

That has been trending up all year.

You don't have the big asset base of redemption so a net flow number is somewhat misleading but one a lot of people like to look at and very important for our incremental growth and it is about 35% today.

Okay.

What is your outlook for Munis?

Under pressure for a couple of reasons, the state budget and California in the headlines and the uncertainty that creates around municipal investing has put the pressure when you see the kind of growth we've had in the taxable side and the rest of the industry had and yields make a still more sense to be own munis but around the net effect of some of these budget shortfalls around municipal bond investing so I think that's put pressure on it.

We've still seen very good flows and are still having inflows but still a lot of redemptions there as well because of the uncertainty around that and rate moving and the sentiment how we bottomed-out and rates could be going up.

I think that will put some pressure.

We've seen a lot of movement or market share gains for some of our competitors in the shorter duration muni area and that's something we're looking at, considering bringing out new types of funds to position ourselves more defensively if rates do go up.

Okay.

Last question on the comp, you haven't had salary increases for three years.

What are your thoughts on that?

And does the 35% normalized comp ratio allow for that, or are you --

Yeah, that's -- we have, it has been three years and you know we've given an expectation internally that you know if we stay on this path we're going to institute salary increases for next fiscal year.

We've not concluded on the levels but that is, you know, in the making going forward.

And you know we think that the 35% level should incorporate that.

So but it's once again it's going to depend on where asset levels too and the revenues generated from it.

But from what we see right now we think that's reasonable.

Okay great thanks.

Next question comes from Jeff Hopson with A.G. Edwards.

Two questions.

First in regard to the shareholder accounts, even in the context of higher sales, it seems like the growth rate there is very good.

Curious, if there's anything you can say in terms reaching new distribution, new types of investors, or do you think it's just a general trend?

And then on the expense side, it sounds like if conditions stay like they are or better, there is potential for more margin improvement, in particular Info systems technology, can you address that particular line?

Maybe I'll start with the expense side.

Yeah, I mean as we've been talking and we're finally, you've seen it in this quarter, there is any if you refer to a wind at the back increase in assets under management you would see margin expansion and you saw that this quarter.

And you know, the magnitude of it we can all calculate based on our estimates of what's going to ham going forward.

But you know we think we have been operating clearly for the last four quarters at a lower range -- the lower end of a margin range.

And so I think your thoughts are correct along those lines.

And [inaudible] we continue to invest, and we have during the past couple years because, you know, we're balancing what we need to do for the future for competitive reasons against earnings results.

And we think we've done that pretty well.

And we've talked a number of times that we're focused on trying to make some of our contracts more variable and making progress along those lines.

So you know we think that although we'll continue to invest we'll do it wisely and we think we're at a pretty reasonable spot there.

And I'll add on the net new account, it's really, if you're in net inflows generally you're adding accounts.

And I don't think there is any new channels of distribution that are emerging or coming.

I think we're penetrating the advisor market better than we ever had and all the measurements we use in seeing how successful we are in getting multiple products in front of the key advisors, I think we're doing a better and better job of that.

That's bringing in new customers that have relationships with advisors today.

Great, thanks.

Next question comes from Bill Katz with Putnam and Lovell.

Good afternoon everybody.

Marty, could you give me a sense of what the time line is on fiduciary related roll-off in terms of incentive over the next six months or year.

Second question I have going back to institutional pipeline.

If you may give more color on what you hear incrementally discussions around bonds as equity and value into growth.

Currency translation gain among in the non-operating line?

Thanks.

Let me start with -- I'll take the first and the last one.

You know, we've actually, it's really been the other way, right?

We've had downward pressure because of the -- on earnings because of foreign currency but it's not to the degree that we're highlighting or making a big deal about it.

When it is we'll tell you.

With regard to fiduciary, the larger part of the retention packages are rolling off now.

There's still some tail for another year and a half, which is there.

But you know, we're coming to the end of it for the bulk of the organization there.

Okay.

So you're peaking out?

Yeah.

Okay.

And that's the balance of you know, there are a lot of puts and takes in trying to get some sense of you know, comp as a percentage of net operating revenues.

And that's sort of where we're trying to give, you know, sort of highlighting 35% seems reasonable right now.

So and that's the combination of those factors, fiduciary rolling off, performance, increasing, and the possibility the incentive pool increases and salary increases and literally trying to include all of those in that analysis.

Terrific.

Your question around the institutional trend around the pipeline, I haven't -- I think your question is probably directed well with the shift in the market and growth doing better and you know would you see more searches, you know, I think that would probably happen.

We have not seen that yet and I think the -- you know there is a discipline around asset allocation.

And I think people aren't going to be too quickly to jump back the other way.

And I think you know, what's changed is the discipline to having that asset allocation as part of their plan.

And we haven't seen really a big shift with their recent backup in the bond market, it's probably too early and it is also you know entering the summer months where the search has slowed down a little bit.

But that would be a trend you could expect to see in the next quarter or two.

Away from bonded equities?

Yes.

Sort of a follow-on to your comment before about the advertising and promotion line, looking at the number in an absolute sense, the lowest number in well over a year on a quarterly basis, and I am just curious your commentary that still at relatively high levels.

Why not be a little more offensive on that line to really maximize the market share?

Just sort of wondering if you could talk about that a little bit more.

I think it's great, you know, to discuss.

I mean, from -- and Greg could probably do this more effectively.

The notion is we look at it, we think that we're penetrating to the degree that we need to and that you know, dollars beyond where we are would not be effective.

Would you agree with that Greg?

Yeah, I think we have better been very aggressive in advertising in a difficult market.

I think what we're looking at is possibly expanding resources into other areas which could mean more wholesalers to really improve the relationships that we're going to need to do with a lot of the advisors that may be representing the fund.

So it's really, we've made the step with additional advertising.

I think resources around infrastructure outbound telemarketing and wholesaling would be the area that we could look at having an incremental spend in the next year.

Thanks very much.

I'll add Bill, the other thing you might look at it, two components, part of it's promotion, that's where we've had relaxation in this quarter.

I think if you look at the advertised promotion as a percentage of net revenues, it's probably lower than where it might be over the next 12 months and might get closer to sort of the 5% level, you know, couple quarters out there so --

Okay great, thanks for answering all my questions.

Next question comes from Daniel Goldberg with Bear Stearns.

Good afternoon.

Just a couple of remaining questions.

In terms of the other expenses being up 25% quarter over quarter, you mentioned legal and consulting fees.

Any specific thing you could give us a little more color on?

Well, you know, some restructuring around closed-end funds was one of the projects you might have heard about and also just some of our efforts around working on contracts around the data centers with IBM.

So that's the magnitude of it so --

Okay.

In terms of dividends, obviously it's a big topic now.

And I think you typically have raised your dividend in the December quarter.

Any comment there in terms of something of more of a larger increase than the regular half a cent increase we've seen?

Clearly we're well aware of the enhanced benefits of dividends these days and the board will be addressing it at that quarter also.

That is not to say conversations and work has not been done already.

We have just not concluded what the answer is going to be.

Finally any comment on activity to date in July, anything different than you've seen in just the completed quarter?

No, I think everything really is in line.

Okay, thank you.

Thank you.

Your next question comes from Michael Freudenstein with JP Morgan Chase.

Some of that was due to greater sales in the institutional channel.

Should we take away anything from that in terms of an emphasis shift?

I don't think you can and that's something on the margin within it too.

I don't think there are any strategic changes that are happening.

It's just really the facts within the quarter.

And you know, we do see some sort of strategic shift, we'll clearly highlight it to people.

But I don't think we could conclude that now.

Okay.

On the share guy back front, what sort of -- how are you thinking about that going forward?

Obviously you had an opportunity this quarter.

But is this part of an overall stepped up program or more of a one shot deal?

I don't know what is happening to the phone but I think we have to -- we reiterate that this is consistent with our approach previously, in that we had an opportunity and you know, we were -- we took advantage of it so --

Okay.

And just one last question for you.

Would this be sort of more of a commentary from either you or Greg about some of the proposed legislative changes for the mutual fund industry, around cost transparency, disclosure and revenue sharing?

Any thoughts you might have.

I realize it's early on and nothing's definitive but how some of that -- how you are thinking of some those proposed business vis-a-vis your own business?

The mutual fund industry is a great industry and great track record of success.

We still think it is some of the greatest vehicles out there.

It is, we think it is really transparent right now but support and increase transparency if it helps investors I think that's the most important thing and it's just a good dialogue to have and you know, I think there's been just a lot of focus on the whole financial services industry because of the very difficult time that we've been through.

And I think it's you know a fine dialogue.

But hopefully it doesn't get overdone, and ultimately increase cost to shareholders by putting things in place that are not productive.

I don't know what would you add to that.

I would just add that I think I'm somewhat encouraged by where we are as far as there's been a lot of different discussions around various legislation that is needed for the industry.

And I think at the end of the day, if it's just more disclosure around commissions and cost, you know, I think that's a good thing.

Versus some of the other discussion, you know.

So we feel that a lot of the uncertainty around the legislation has improved as far as, you know, the outlook and the risk it poses for the industry.

Thank you.

Thank you.

Just one more question if we could.

Your final question comes from Robert Lee with KBW.

Thanks guys.

Just a couple of two really quick questions.

First if you gave this earlier I apologize but could you give some characterization of what percentage of your sales sort of coming from outside the U.S. in the quarter and maybe second question bring us up to date on where the bill related to repatriating capital stand?

Maybe I'll take the second one.

That bill for repatriating capital is still moving around in Washington.

And there's some expectation that you know, it could get, you know, brought forward in the next few months and you know, clearly we're watching it closely.

And I don't know that we could give any other greater insight to it than that.

But it is still -- it's still there.

Okay, great.

And I guess the question just the flows from outside, what portion of the business is come coming from outside the business and even within that get some color in terms of geographically where it's from?

As I mentioned earlier in the call, approximately a third of our sales on a net flow basis are coming from investors outside of the U.S.

And the areas where we continue to be very successful, Germany, Korea, Canada, Taiwan, Japan's probably been our strongest story year to date, as far as a relatively new market for us on a retail base where we've introduced the Franklin U.S. government fund and crossed over 1.5 billion in a relatively short period there and have a very good momentum in a very difficult market.

Outside of that, it's really the -- Europe has been primarily, you know, in Germany that's an area we've been in for a long time.

We've had successes in other areas in southern Europe but Germany would be the dominant flow source there and Asia has been stronger for us than Europe as a whole.

Great, thanks a lot guys.

Thank you.

Both Greg and I would like to thank everybody for joining us.

To summarize we thought it was a strong quarter, strong investment, strong flows across the complex.

And just to reiterate we are positive for the company's strategic positioning for the long term but we’ll continue to stay focused and aware of the market volatility and how that might impact our operating results.

Look forward to talking to everybody next quarter and have a good evening.

Thank you for participating in today's conference call.

This call will be available for replay beginning today at 7.30 p.m. eastern time through 11.59 p.m.

August seventh.

The conference number replay is 1538370.

The conference number for the replay is 158370.

I'm sorry 1538370.

The number to play is 800632, 1 three 17.