Franklin Sees Profit Below Estimates, Trims Execs’ Pay

Franklin Resources Inc., the nation’s sixth-largest mutual fund company, warned Wednesday that earnings will be below Wall Street’s expectations this quarter, as investors have continued to shy away from value-oriented stock funds and foreign funds--Franklin’s specialties.

The San Mateo, Calif.-based firm also said it is trimming executives’ pay.

Franklin’s earnings warning wasn’t specific. It blamed, in part, “increased expenses and a continuing shift in the asset mix toward lower-margin fixed-income products” such as bond funds and money market funds.

The company’s stock tumbled $4.81 to close at $38.13 on the New York Stock Exchange. It has slumped 34% from its 52-week high.

Franklin, which manages $223 billion, has seen its stock funds’ share fall to $133 billion from $134 billion a year ago--even as major U.S. stock indexes have rocketed in recent months.

Franklin’s Templeton and Mutual-Series fund groups mostly employ a value approach to stock selection at a time when growth funds are producing fatter returns. Similarly, Templeton specializes in foreign markets, many of which have been hammered this year.

The company disclosed in its annual proxy statement that it has mandated pay reductions of $25,000 for each of its five most highly compensated executives, including Chief Executive Charles B. Johnson. The firm also trimmed the salaries of other senior managers and gave no pay increases to its remaining 8,500 employees.

The executive salary cuts represent a modest step, given that Johnson and the other top officers took home salaries of as much as $803,412 for the fiscal year ended Sept. 30, and cash bonuses that ranged from $460,000 to more than $550,000.