Greg Johnson - Chairman and Chief Executive Officer Ken Lewis - Chief Financial Officer.

Michael Carrier - Bank of America Merrill Lynch Craig Siegenthaler - Credit Suisse Bill Katz - Citigroup Michael Kim - Sandler O’Neill Ken Worthington - JPMorgan Ken Hill - Barclays Dan Fannon - Jefferies Brennan Hawken - UBS Brian Bedell - Deutsche Bank Robert Lee - Keefe, Bruyette & Woods Eric Berg - RBC Capital Markets Gregory Warren - Morningstar Michael Cyprys - Morgan Stanley.

Good morning and welcome to Franklin Resources Earnings Conference Call for the Quarter Ended December 31, 2015. Statements made in this conference call 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 filing 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..

Thank you everyone. My name is Manny and I’ll be your call operator today. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.

At this time, I would like to turn the call over to Franklin Resources’ Chairman and Chief Executive Officer, Mr. Greg Johnson. Thank you, Mr. Johnson. You may now begin..

Well, good morning and thank you for joining Ken Lewis and me today to discuss first quarter earnings. Although we faced a number of headwinds impacting investment performance and flows, we’ve been through periods like this before. And it’s one of the reasons we value diversification and a strong balance sheet.

As we work through these challenges, and maintain our focus on expense management, we will continue to invest in a number of long-term growth opportunities, including strategic beta ETF, liquid alternatives and related solutions while delivering our value-added services to a growing customer base around the world.

And now, Ken and I are happy to take your questions..

[Operator Instructions]. The first question is from Michael Carrier of Bank of America Merrill Lynch. Please go ahead..

All right, thanks guys. Greg, maybe first one for you, just on the flows in the quarter and the outlook, you hit a few things on the pre-recorded call. But it sounds like the institutional business continues to gain some traction. So just wanted to get an update on maybe the pipeline and what you’re seeing on that front.

And particularly given maybe some of the pressures in the market in where institutions are looking to put some money? And then on the retail side, it seems like the pressure on Franklin income and Global Bond, it has been out there, it seems like there is more outreach to the client base, and just any kind of reaction to that?.

Normal searches with Global Ag and global equities.

I think of note, and what has happened over the last say three to six months, some of the pressure on global currencies, affecting various countries and then looking for those countries to diversify, I think we’re seeing more opportunities in the Global Bond space in Asia right now, as those currencies have been hit and with further risk of some going down to diversify away from their local currency.

I think anytime you have periods where you face challenges and headwinds in performance, certainly a risk-off environment that any income funds that have heavy - high-yield exposure are going to be under pressure. And we just want to make sure we communicate the value and really the appropriate kind of understanding of risk in those funds.

And when you get the kind of spreads that you have today, from treasury, as you do have room for even some defaults and those and still continue to do very well against treasury. We think the markets have been under stress certainly in these areas as expected, Franklin Income Fund affects any high-yield funds like our high-income fund.

And we just want to make sure that we continue to get as much information out there and hand-holding to help advisors deal with their clients right now..

All right, thanks. When you hit on the institutional question, I don’t know, my phone wasn’t working I didn’t hear the start of that.

So, I didn’t know if you mentioned anything on the pipeline?.

Well, I think, I would say the pipeline, the opportunities in the pipeline would be more global bond opportunities like the win that we had in Asia over the quarter, we’re just seeing more interest whether it’s Sovereign Wealth Funds or government entities in diversifying from their own currencies that are under pressure right now..

Okay, got it, and then Ken, just a quick one for you. Given the pace of the buybacks, just wanted to see if you can give us an update on maybe the U.S. versus the non-U.S. cash balance.

And just given the level of cash flow you’re generating what’s the outlook on buybacks?.

Sure. So, the buyback activity is in relative to history, it’s been pretty elevated last two quarters. And I could essentially say that U.S. cash has remained unchanged. As a matter of fact, it’s remained unchanged year-over-year as well. So, we’ve been having plenty of U.S. cash generation to cover our needs..

Okay, thanks a lot..

Thank you. The next question is from Craig Siegenthaler of Credit Suisse. Please go ahead..

Thanks, good morning. I just want to follow-up on the Weddell news yesterday because you guys also have a high composition of A-class mutual funds.

So, I’m just wondering, do you have any load waved A-s that currently sit in fee-based accounts?.

Yes, we do. And that’s been a growing portion of our sales as more advisors have gone to the wrap advisory fee accounts..

Do you see need in the future of those transitioning from a low-wave A to I-class or is your rev-share less?.

I don’t, I mean I think part of the reaction I don’t want to speak for Weddell. But for us, remains to be seen on the fiduciary rule which we have I think - we’re expecting something out in 90 days on that. But we don’t think it would affect our existing A-shares in any way.

And if, there are different rules around use of those in advisory programs, we already the no 12b-1 class available. So it would be easy. It’s really, I mean, for us, it’s up to the broker dealers and advisors to interpret those rules to best fit their business models, but I think we would have all the share classes and we do that right now..

And then, I don’t know if you have this number handy, but if I look at your U.S.

mutual fund business, do you have the mix that sits in fee based accounts and the mix that sits in commission based accounts?.

I don’t right now. I think the, I just looked at the number, on the top of my head, it said right now we have about 40% of sales going into the no 12b-1 share class. And that’s grown from 30% in the prior year.

I would still say that our A-share count is higher with the 12b-1 just due to our distribution model and our strong partnership with Edward Jones that still favors that class..

And can I just add that it does also vary by fund on that mix..

Got it. Thanks for taking my questions..

Thanks..

Thank you. The next question is from Bill Katz of Citigroup. Please go ahead..

Okay, thanks, I appreciate guys taking the questions, good morning. Ken, I’ll start with you, you’ve given a little bit of expense updated expense guidance in the pre-recorded call, I appreciate that. Could you talk a little bit about I guess some disclosure was given through the 10-Q.

Some of the disclosure, where the severance is occurring and if the markets, and what are your underlying assumptions for markets with this guidance and I guess the markets would have continued to still work themselves lower.

What kind of incremental flexibility would you have to try and protect margins?.

Well, I think, regarding where the expenses been incurred, I think geographically maybe the majority of the expense is U.S. based. Across business lines, it hasn’t, we haven’t really impacted the investment management sector of our business. It’s been spread out pretty much across the board other than investment management.

So, the assumptions regarding, we talked about a target of 3% to 4%, and that was few months ago.

What this market volatility has led us to conclude is that we should just be looking at all of our business and seeing where we can increase efficiencies, leverage efficiencies and that’s what we’re doing and that’s going to be a theme for probably the next nine months.

And that’s just based on the volatility we’re not assuming that market is going to go up or down. But it’s obvious to let that volatile so we need to be looking at our expenses closely..

So, is there, if the markets were, just to clarify, if the markets were to sort of continue to work their way lower away from volatility, so down returning for the short-term, could you, is there more levers to pull to sort of protect the margin?.

Well, we think there are more levers to pull but as I said, it’s just - we’re looking at the entire business almost without regard to the markets.

So it’s just an opportunity for us to make sure that initiatives that we started years ago, we still believe in investing things that we believe in now, and just try to kind of reengineer all of our processes..

Got you. And just to follow-up to Craig’s question, your thoughts here. Your very big picture, you’re doing a nice job in some of these ancillary businesses, K2 continues to grow, you’re sort of investing in I guess smart data portfolios.

But when you step back and look at your portfolio, you do have a lot of relatively sizeable flagship retail funds with some choppy sort of short intermediate term performance.

What measures are you taking to try and protect those assets particularly in the retail channel? And then, sort of corollary, any thoughts of maybe ramping up the marketing spend, or was that just sort of wasted dollars as given the backdrop with the only way down?.

I think it’s a good question, and one that was really performance driven like anything in this business. And we’re on our 10th year now of growth outperforming value. And you kind of look for a glimmer of light out there hope. And certainly in January, it’s been very choppy market value did outperform growth for the first time.

So I mean that would be the kind of the key driver to get more attention to some of these flagship funds that have been lagging. And we looked at some of the big laggers that have been in January, made some ground, back with rising dividends, mutual shares and mutual quests had a very strong January.

So I think if that trend continues, that would be important. I think the other part, as Ken said is really looking at our entire business and validating everything we’re doing.

And I think part of the changing distribution landscape advisors, looking at our industry and what they need differently, I think if you have redundancy with certain funds or it’s just not clear, what that fund offers in various categories that advisors need, we may need to tune some of the line-up or merge some of the line-up.

And that’s something that we really are looking at now. And that can drive some cost savings ultimately longer-term as well..

All right, thank you guys..

Thanks..

Thank you. The next question is from Michael Kim, Sandler O’Neill. Please go ahead..

Hi, guys, good morning. So, first, Greg, on the pre-recorded call, you highlighted some initiatives to better position the institutional business by building out some infrastructure optimizing the product line-up. You also alluded to pricing.

So I’m just wondering if you could give us a bit more color in terms of how you might be thinking about either the level or structural fees in that channel and just kind of the potential impact from an economic standpoint as you move through that process..

I think that’s always a challenge on the pricing side especially when you have funds in the marketplace and sensitivity to making sure we have consistent pricing across.

I think the comment was just more on some of the development that we’ve been doing also with the Smart beta ETF as I said before, I mean, I think that allows us to get some lower cost vehicles out there that have market beta at a much lower cost.

And that’s going to be attractive to certain institutions as well as within our solutions and outcome group. But I think the, I don’t think there is anything really to call out on the pricing side that we look at, I think we continue to study the markets and try to be competitive. And then we all know the pressure on lower fees continues.

And we’re trying to meet that or develop new capabilities that don’t conflict with some of the retail styles that we can build-out capabilities..

Got it, that’s helpful. And then also on last quarter’s call, I think you mentioned about a third of the $17 billion in sort of the sub-advisory variable annuity channel was at risk.

So, just following sort of the $5 billion redemption last quarter, does that suggest that sort of related AUM at risk from here is the minimums or immaterial at this point?.

I think there is still probably another $5 billion at risk right now with one of them, but, and from there, I think we have today low 40s, $42 billion in those sub-advised assets, that’s 6% of our base. And I think of risk, I’d put another $5 billion for the changes that are taking place in that market.

Hopefully the other side of that is we are because of build-out we have with our solutions group and some of the development, and we just got our first mandate of managed volatility fund, so that is an area that hopefully we can more than make up the loss of the $5 billion coming up..

Got it, okay. Thanks for taking my questions..

Thank you. The next question is from Ken Worthington of JPMorgan. Please go ahead..

Hi, just first simply on the new marketing materials that you gave out on Global Bond and the Income Fund. When was that rolled out and then you said in the prepared remarks that there was good engagement and interest by clients.

What does that really mean? Are you actually seeing any indication that redemptions are slowing or sales are increasing? Thank you..

I think we rolled it out right around the end of the year, around January 1. So, early to quantify any behavioral changes there.

I think what we’re trying to do is get the tools in the advisors’ hands so they can quickly sit down with their clients and walk them through logic on why you would stay put in a period where there is a lot of headlines around high-yield and stress and liquidity and make sure that they have a broad understanding of what is going on with those funds.

I think the other point I would make just around, because I think that’s the question I would look at is when would, you see your flagship flows returning. And I think when I look at the income fund, its long history and it is a well-diversified portfolio. But it’s always one that doesn’t fit neatly in any category.

It will always have high-yield exposure and it will always be the, what the highest yielding in its category. So, it would be naturally a little bit more risky than its peer group. So you will expect to have periods where it lags performance.

I think the other side of fixed income I’ve said before, when the market settle and high-yield settles, and you’ll have very attractive spreads to what certainly treasuries are today. And you’ll have a 6 plus yield on a fund that’s done very well long-term.

I think it’s very easy to get momentum back in flows, little bit easier than an equity fund that just the attractiveness of that coupon and the history. And that’s where I would expect to see a turn.

So, I think it’s really just when the market settle, when the high-yield bond market settles in, I would expect to see that fund start to get lower redemptions and hopefully better sales..

Great, thank you. And then on the, I guess from now $5.5 billion mandate which I believe all that funded this quarter. There was the initial amount then there was like a stub piece that was added.

What is the potential here for more money being mandated from this investor? It would seem like there is a lot of money out there, change in strategy, I guess my erroneous view is that that was kind of a one-time thing.

But does this have the potential to be the gift that keeps on giving here for couple of years?.

Yes, and I think not only that, that relationship but other institutional mandates in that market as well. And it’s a high-profile relationship there that gives us better visibility in that market. So, hopefully we can extend that into a few more relationships. But it’s one that we hope we’ll grow..

Okay, awesome. Thank you..

Thank you. The next question is from Ken Hill of Barclays. Please go ahead..

Hi, good morning guys..

Good morning..

Hello..

In the pre-recorded comments you mentioned a new head of global ETFs and then the registration of the strategic beta ETFs.

I was just wondering if you could talk a little bit more about how you’re looking to package those with some of your active products and what you’re hearing from clients, maybe the demand for it ahead of a launch like that?.

Well, I think the need whether we use someone else’s ETF or our own between, in our own line-up we know we have the need for lower cost beta in outcome oriented or solutions type products. So that’s something that we feel we have an immediate place for those ETFs.

And then, I think it will take more time and marketing to develop more presence and probably a broader line-up. But it’s just our first step into the ones that we think, internally, we don’t have to go out and use somebody else’s ETF, we can use these and that there is some demand from the retail channel as well.

I wouldn’t try to quantify that right now but enough immediately to make it meaningful to us..

Okay. And then last quarter you guys spoke about potential acquisitions. Just wondering how the thought process there might have evolved, given how you look at repurchases and capital returns with the stock price and then also the value of other companies you might be looking to purchase there to fill in perceived gaps maybe.

Does that look better or worse than it did last quarter and how are you thinking about that for the course of the year?.

I wouldn’t, I think it is unchanged, kind of the strategy, how we look at M&A, I don’t think it’s changed. I don’t think the level of repurchases changes that. As we always say, and we say we’re opportunistic, one of the facts is the share price and the market.

But the other factor is what are the uses of cash, if we were identify a target then we would probably scout back on the repurchases to balance it out. But, we continue to look for opportunities in M&A and that hasn’t changed..

And I would say from my perspective, it’s more probable just based on what’s happened in the marketplace. Unfortunately we’ve been sitting with a lot of cash and that puts you in a unique position.

And I think with the sell-off and a lot of asset managers and the sell-off in currencies around the globe, the potential for doing something I think is a lot more attractive today, just looking at currency moves around the globe than it was before.

So, we are actively out there and are hopeful that something will come that enhances the line-up and adds value long-term..

Okay, great. Thanks for taking my questions..

Thank you. The next question is from Dan Fannon of Jefferies. Please go ahead..

Thanks; good morning. Ken, I guess a couple of specific modeling items. The G&A you mentioned on the pre-recorded call, there was a one-time item that boosted it.

If you could give us a sense of what the starting point is normalized going forward?.

Yes, I think we would expect that line to be more like it was in 2015 on a quarterly basis than what it was this quarter. Maybe that implies I don’t know the exact number of the item but probably in the neighborhood of $10 million..

Okay. And then just to follow-up on the last comment on M&A.

Can you talk about some of the things you find interesting, whether it be from a product perspective, geography or is it just scale? Like how do we think about what you view as realistic in terms of adding to your existing suite of products?.

I think it’s really all the above, I mean, it could be a large scale that you get efficiencies from distribution and servicing, it could be parts expanding the high net-worth business, it could be the solutions’ outcome, it could be real-estate, I mean, it’s a lot of areas that we’re looking at.

But I think the probability of the rate situation offshore, even with Asia type funds that are very much at a favor right now I think would look attractive for us long-term..

Great. Thank you..

Thanks..

Thank you. The next question is from Brennan Hawken of UBS. Please go ahead..

Yes, hi, good morning. Just a follow-up on the comments you made about the, I think you said 40% of the sales are in I-class and the rest carry some kind of distribution.

With those that carry distribution, do you happen to have visibility into what portion is in retirement accounts at this point?.

No, I don’t have that number. And obviously that’s the relevant one as far as the potential with the fiduciary rule..

Okay..

We can certainly get that for you..

That would be great. Any additional, I know in the last quarter’s call you were asked on DOL and at that point it didn’t seem like you wanted to make many comments, given it is not final. But now that we have the rule in OMB, right? So, we’re a couple months, at most, away from final and it’s expected to be largely unchanged.

Do you have any sense of the extent to which this might impact your AUM, rather, through the broker-sold channel?.

No, I think it’s still too early. And I don’t think it has an immediate impact, I think what it does is, it has an impact on your future sales in those markets.

And I think you’re absolutely right in every indication, despite record comments and concerns raised, it’s something that looks like it’s going to move pretty quickly and try to be enacted before next January. And whether that results in lawsuits, I think that’s still very much out there as a possibility to take this up.

But we are going to work with our partners and try to work through what will be a very complex transition to deal with this new rule. But again, I couldn’t quantify what that means other than it’s not a positive..

Sure. Yes. No doubt it is going to be difficult. Thanks for the color..

Thank you. The next question is from Brian Bedell of Deutsche Bank. Please go ahead..

Thanks. Good morning, folks, just a little bit more on the strategic beta initiative.

I mean, first, how substantial or how, what kind of breadth of product do you want to ultimately develop in this area? And then if you can talk a little bit about the distribution game plan for the products and also is this partly in response to potential DOL with these products, they obviously become more attractive in a DOL or in a kind of fiduciary rules?.

No, I mean, I don’t think it’s in response to the DOL world, I think it’s just in response to where we see growth and needs in our line-up. Again, as I said before just getting a cheaper beta that doesn’t conflict with your other funds will be important for us.

I think the question on how big this market and whether or not at some point there is a vehicle that makes it more efficient than you typical 40-act and transfer agent type driven product, I think those are all questions that are still very much out there.

So, we just felt like the business is too large for an asset management company to ignore and whether it’s again through acquisitions or organic growth, that’s going to affect our plan on how we roll this out. We think it has to be a separate effort but also part of - you get the leverage from your existing wholesaler group as well.

And how big, I think again, I think we’re starting kind of small but we will continue to roll-out or acquire new ones as we see fit, it’s just kind of getting that space and building a team there and growing it..

Is there any desire to develop actively-managed nontransparent ETFs, you have obviously a number of applications in the SEC for that to de-leverage your own investment management products?.

I think that’s a possibility that we are looking at. So, I think that like everyone we’re studying that and it is certainly a possibility to do that if you get the right regulatory relief on that and if it makes sense in that specific vehicle. It’s something we certainly would consider because there are efficiencies you can gain..

And then just lastly on the, question for you, Ken, on the costs, obviously if you - regarding the flexibility, if we are in a longer term difficult market environment, does it cause you to look at the out-sourcing of fund accounting, administration and back office as one of those potential longer term cost saves versus maybe looking at more deeply at the investment management segment of the business?.

Yes, so, and I think I’ve mentioned, we talked about this subject before. That topic regardless of market conditions has come up over the years. And we’ve done a lot of analysis on it.

But so, I wouldn’t say, I think that market volatility as I mentioned causes to just look at our entire business, all the business processes, all the business lines and rationalize everything. And I would include outsourcing of any type..

You would include that?.

I would include that, yes. We would look at that again..

Okay. And yes, that’s a little bit of a change from you guys, I think, have been more steadfast on keeping that in-house in the past.

Is that sort of, little bit of a change in view or was it always something you’re considering?.

Well, I think it’s not a change of view to look at it the conclusion may or may not be different this time. There are very valid reasons for us to do some of these things in-house, some of - our business is very, customized and very difficult to outsource everything.

So, I don’t know that philosophically we’ve changed what we think is important to our customers and our business but we will look at it..

And I would just add, I mean, again, in any environment this is something that we would look at. And because of our structure and capabilities in lower cost regions like India, we’re very, cost competitive to the market in those services. If we were not, then that’s something that we have to consider.

So those groups know that that’s something they need to validate, they need to press cost down and they’ve done that effectively. So it really hasn’t given us a reason to go out and outsource it..

Right, understood. Okay, thank you very much..

Thank you. The next question is from Robert Lee of Keefe, Bruyette & Woods. Please go ahead..

Thanks. Good morning, guys. Two questions, going back to the M&A question, I’m just curious.

A couple of your peers have done some acquisitions and I guess I’ll call it the FinTex space, so whether you want to call it Robo Advisors or something else, and I was just curious, your thoughts about maybe not those specifically, but kind of your thoughts of opportunities to enhance or strategically position your business with acquisitions that maybe we wouldn’t normally think about for you guys..

Well, I think certainly the industry is exploring that space. And looking at lower cost alternatives, it can reach broader groups through digital marketing and the capabilities that exist trying to get to the millennial in a different way than the traditional broker-dealer advisor model.

So, for us, that’s another one that with the FinTex space and looking at Robo Advisors is something we certainly are studying whether or not we need to go acquire one or to build that capability, I think that’s a question that we’re looking at today.

And I think the opportunity for the industry as distribution landscape changes, as we go to more advisory driven models as in traditional barriers between a broker-dealer funds sold group versus a direct group, continue to erode and disappear at a pretty quick pace. I think the opportunity is what does that mean, for investment management firms.

And I think that’s why a lot of groups are looking at. And for us, I mentioned, the partnership that we’re doing with a large global bank and using our solutions capabilities targeting the emerging affluent market through digital marketing to existing customers in the bank. And that’s very similar to what a Robo Advisor can do.

And these are funds that are multi-asset and have a lot of different, they have other managers than Franklin Templeton in them and we can do that. So, that’s somewhat of what a Robo Advisor can deliver. And to me, there is not a lot of magic there to what a Robo Advisor can do versus a solutions group can do or anybody modeling out.

And I think the direct space, the Vanguards and the traditional people in that space or swab have a pretty good head-start of dealing with them in a marketplace as far as Robo Advisors..

Okay, great. And then, maybe just one follow-up, just trying to, the macro business which I guess is housed within the Global Bond business. I mean, that’s a place you got that big mandate, hopefully more, you kind of talked about as a place of success.

I’m just kind of curious, could you kind of size maybe how big that book of business is? And kind of give us a feel for, in addition to this $5 billion-plus mandate, kind of the growth trajectory of that?.

Well, no, I mean, it would be very difficult. I think it’s still well it’s called a global macro mandate from that group. It’s really more aligned with your traditional global bond. It has a separate account. And I think the opportunity we still feel is a significant one.

And I think there has just been some recent pressures around global currencies and a short-term lag in performance but we still feel that’s kind of a pure alternative category to rates rising or equity markets dropping that it really does provide a nice cushion to a portfolio. So, we think it’s still, it has a very large potential in a market.

And I think like last time, when did it do well, it did well when the equity market sold off and other markets were under pressure. And it had good relative standout numbers. And I think when you have that you’ll see large flows there.

And I think as I said before, I think the feedback we’re getting from the institutional side in Asia if that opportunity is real today, in getting other separate accounts in that space. But I don’t know if I could quantify that..

Great. Okay, I appreciate it. Thank you..

Thank you. The next question is from Eric Berg of RBC Capital Markets. Please go ahead..

Thanks much..

Good morning..

A number of your competitors in the alternative area have described the rapid widening of credit spreads in the energy area and in the high-yield area in general.

And in the bond market in general, you have created just tremendous investment opportunities in the area of what they call stressed and distressed investing, rescue lending, these sorts of opportunities to invest in fixed income that is involving troubled companies. It’s, again, stressed or distressed.

Understanding that your primary business is traditional investing, to what extent do you have the capability, product capability and human resources to spend in this opportunity if, in fact, you think it if, in fact, you agree that it exists?.

Well, I think that’s a perfect question to lead to our introduction of our, the fund that we just rolled out in the last year, as our K2 long-short credit fund.

And really again to meet that need in an alternative category and we feel it really does offer a way to lower risk in a portfolio and really seize these opportunities that come because of stress in the marketplace, because of liquidity constraints and forced selling by some long-only holders that you want to have the ability to capture that.

On the other side, and that was a category of one of many categories but the one that we felt made the most sense to introduce now and we’re just in the process of rolling that out to complement our $2 billion plus in the global macro space with K2..

Very good; thank you..

Thanks..

Thank you. The next question is from Gregory Warren of Morningstar. Please go ahead..

Yes, thanks, good morning guys, for taking my question. I know we touched on share repurchase a little bit here, but I’m just wondering what sort of capacity do you feel you have to make share repurchases this year? I mean, from a cash perspective, there are limitations, given how much cash is held overseas.

And you spent $400 million in the first quarter and, arguably, the stock is cheaper right now.

Do you anticipate being able to spend as much in the current quarter? And what sort of quarterly run rates are we thinking about going forward?.

Yes, I would just say the quarterly run rate is dependent on several factors many of which we’ve talked about today, M&A, share markets etcetera. We continue to think the stock is at good value, we purchase shares in January, you could see that from our filing. And we don’t, we have many options in terms of capacity.

So I don’t see that as a near-term issue at all. I think future share repurchases are just dependent on many of the factors that we talked about previously..

Okay. That’s good to hear. Thanks for taking the question..

Thanks..

Thank you. The next question is from Michael Cyprys with Morgan Stanley. Please go ahead..

Hi, good morning. Thanks for taking the question. I just wanted to follow-up just for a moment, just on the expense side equation here.

The pre-recorded call you mentioned that you’re expecting expenses to be about 3% to 4% below 2015 levels, but it sounded like you wouldn’t necessarily expect all those to come through hit the bottom-line because of the execution relation cost on that.

So, I guess just want to make sure I heard that right and not those expense cost to be fully offset in ‘16 and how should we think about the run rate there into 2017 and the expenses coming through them?.

Yes, your question was a little garbled so I’m going to try to answer it, but if I didn’t hear it right, please correct me. So, right, so we are thinking if you compare ‘16 to ‘15, we were targeting 3% to 4%, we’re thinking it’s 4%.

That’s inclusive of some of the expenses it’s going to take, some of the restructuring expenses that I mentioned in the pre-recorded remarks. Our attention now is focusing on 2017.

So, we’ll do some modeling in 2017 and as I said, we continue to look at all the business lines and then once we come up, if we have additional guidance we’ll provide them in future quarters. But it’s an ongoing process..

Sort of 3% to 4% would fall down to the bottom-line that’s not offset because I think that’s inclusive of the?.

That’s correct, that’s inclusive..

Okay, great. And I guess just could you elaborate a little bit more on what sort of actions you’ve taken so far because expenses did come down in the quarter and sort of what you’re thinking about next? You did mention earlier some thoughts around out-sourcing.

But how high-up and realistic is that on your priority list?.

Sure. So we’ve had some staff reductions that’s part of it, we had voluntary retirement plan that we talked about in our filing.

So those were the examples to date and then looking forward I did mention, there was a question about out-sourcing but there are several things that we’re looking at, we’re looking at offices, we’re looking at business lines.

Of course the variable competition is a lever that we can use and did use this quarter to a degree and so, all of those things are on the table..

Okay, thank you..

Thank you. We have no further questions at this time. I would like to turn the conference back over to management for any closing comments..

Well, again thank you everyone for participating on the call. And we look forward to speaking next quarter. Thank you..

Thank you. Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation..