December 08, 2003 03:19 PM US Eastern Timezone

Franklin Mutual Advisers, LLC, Announces Voting Intentions for Upcoming Farmer Brothers Annual Meeting

SHORT HILLS, N.J.--(BUSINESS WIRE)--Dec. 8, 2003--Franklin Mutual Advisers, LLC, (FMA), the largest institutional shareholder of Farmer Brothers Co. (NASDAQ: FARM), made the following announcement today regarding how FMA intends to vote its shares in Farmer Brothers at the company's upcoming annual meeting of shareholders, currently scheduled to be held on January 5, 2004.

As the holder, on behalf of our advisory clients, of 184,688 common shares of Farmer Brothers, representing 9.6% of the outstanding shares, FMA is the largest institutional shareholder of the company and the largest shareholder not affiliated with the company's founding family. As a result, we feel it incumbent upon us to disclose to the company's management, our fellow shareholders, the investing public generally and other interested parties how FMA intends to vote its Farmer Brothers shares at the company's upcoming annual meeting, and the reasons for our vote.

We understand that the company's board of directors will be seeking shareholder approval at the annual meeting for the reincorporation of the company from California to Delaware.

We intend to vote all of our Farmer Brothers shares against the reincorporation proposal. We intend to do so for the following reasons.

FMA's clients have been investors in Farmer Brothers for many years. We have believed for many years that the company's board of directors, management and controlling shareholders have paid little heed to the legitimate interests of its public shareholders. In our opinion, they have consistently demonstrated an attitude toward corporate governance inappropriate to a publicly held corporation and this attitude has been reflected in the company's governance practices and in the conduct of the company's affairs. It is our view that the proposed reincorporation is the latest evidence of this attitude, with potentially dire results for the company's public shareholders if it is adopted.

The proposed transformation of Farmer Brothers would result in a very substantial curtailment of the rights of the company's public shareholders which, in our opinion, would serve to entrench the interests of the company's current management and those members of the Farmer family who have long been the company's dominant shareholders.

We note that the reincorporation as proposed by the Board would result, among other changes, in the elimination of the right currently enjoyed by shareholders to act by written consent, the elimination of the right currently enjoyed by shareholders owning at least 10% of the company to call a special meeting of shareholders, the creation of a "staggered" board of directors and the elimination of the right currently enjoyed by shareholders to remove the board of directors without cause, the imposition of advance notice procedures for shareholder nominations and other proposals, the imposition of a "supermajority" (80%) vote for shareholder amendments to the company's bylaws and the elimination of the possibility of cumulative voting for directors. In our view each of these changes is detrimental to the interests of public shareholders.

We note that many of the changes eliminating or limiting shareholder rights that would result from the proposed reincorporation (for example, the "staggered" board) are not the automatic result of differences between Delaware and California corporation law but reflect choices made by the company's Board of Directors as to what provisions to include in the new company's charter and bylaws.

We also note that the reincorporation proposal has been put forward by the Board at a time when a pending lawsuit from a branch of the Farmer family challenges the ultimate control of the company enjoyed by its current and past chief executives and management as a result of their voting control over a narrow but absolute majority of the company's shares. We believe this timing to be significant.

In our opinion the reasons given by the Board of Directors in the company's preliminary proxy statement in support of the reincorporation fail to address at all the particular changes being proposed and are totally unconvincing.

For all of these reasons and others, FMA intends to vote all shares it beneficially owns against the reincorporation proposal.

In addition to the reincorporation proposal, we understand that a shareholder proposal to restore cumulative voting is to be presented at the annual meeting. FMA believes that this proposal would, if adopted, increase the rights of the company's public shareholders and the accountability of the company's management to them. For this reason, FMA intends to vote all of its Farmer Brothers shares in favor of the shareholder proposal.

Franklin Mutual Advisers, LLC is a subsidiary of Franklin Resources, Inc. (NYSE:BEN), a global investment organization operating as Franklin Templeton Investments. Franklin Templeton provides global and domestic investment management services through its Franklin, Templeton, Mutual Series and Fiduciary Trust subsidiaries. The San Mateo, CA-based company has over 50 years of investment experience and more than $314 billion in assets under management as of October 31, 2003. For more information, please call 1-800/DIAL BEN(R) or visit franklintempleton.com.