Nov. 17, 2004 — Franklin Resources (BEN) will pay $18 million to settle charges that it paid brokers to promote its mutual funds, the California Attorney General said on Wednesday.

Under the settlement, Franklin Templeton Distributors Inc., a Franklin Resources unit that distributes Franklin, Templeton and Mutual Series funds, will disgorge $14 million back to the funds. It will also pay $2 million in civil penalties for violating the California Corporate Securities Law, and another $2 million to cover costs.

The settlement resolves a lawsuit charging that the unit violated state securities laws by not adequately informing investors about agreements to pay broker-dealers to recommend and sell Franklin’s funds.

In addition to the monetary penalties, the distributor agreed to implement reforms to better inform investors about so-called shelf-space arrangements it enters into with broker-dealers to sell or recommend the funds, Attorney General Bill Lockyer said.

An independent consultant, agreed to by Lockyer, will develop and implement a plan to allocate the $14 million to the funds.

Contact Bob Keane with questions and comments at: bkeane@investmentadvisor.com.