Franklin Resources,'Inc.,'is a diversified'financial services'company,'which is
registered as a bank holding company under the Bank Holding'Company Act of 1956,'
as amended'(the "BHC'Act"),'and as a financial holding company under
the'Gramm-Leach-Bliley'Act (the "GLB Act").'Through our wholly-owned
direct and indirect subsidiary companies,'we provide a broad range of investment
advisory,'investment'management and related services to open-end investment'companies,'
including'our'own'family'of'retail'mutual'funds, institutional'accounts,'high'
net-worth'families,'individuals'and'separate accounts in the United States (the
"U.S.") and'internationally.
Our "sponsored investment products" include a broad range of domestic
and'global/international equity, hybrid/balanced,'fixed-income, and money market
mutual funds as well as other'investment'products,'which are sold to the public'
under the'Franklin, Templeton,'Mutual'Series,'Bissett'and'Fiduciary'Trust brand'
names.'In support of our primary business and operating segment,'investment'
management,'we also provide'certain'related'services,'including'transfer'agency,'
fund administration,'distribution,'shareholder processing,'custodial,'trustee
and other'fiduciary'services.'In our secondary'business and'operating'segment,
banking/finance, we provide clients with select retail-banking and consumer
loan services through our bank subsidiaries. The common stock of FRI is traded
in the U.S. primarily on the New York Stock Exchange and the Pacific Exchange
under the ticker'symbol'"BEN" and under the'ticker'symbol'"FRK"
on the'London'Stock Exchange.'The'term'"Franklin(R)'Templeton(R)'Investments"'
as'used in this document, refers to Franklin Resources, Inc. and its consolidated
subsidiaries.
INVESTMENT MANAGEMENT AND RELATED SERVICES
We derive'substantially all of our revenues from providing investment advisory,
investment management,'distribution and administrative'services to our various
family of funds,'high net-worth'clients,'institutional'accounts and separate
accounts.'Our'revenues'depend to a large extent on the amount of assets under
management.'Underwriting'and'distribution'revenues,'also a large'source of revenue,'
consist of sales'charges and'commissions'derived'from sales of our sponsored'
investment'products and'distribution and service fees.
Through various subsidiaries, we offer and support alternative investment products
and related management services for our clients. Our alternative investment
products include, among other capabilities, private equity, hedge funds, real
estate and commodities. For example, K2, a fund of hedge funds solutions provider,
offers and supports alternative investments and multi-asset solutions platforms
for institutional and other qualified investors. K2 provides risk management,
manager selection and asset allocation capabilities in various global jurisdictions.
Darby is primarily engaged in sponsoring and managing funds that invest in private
equity and mezzanine finance transactions in emerging markets in Asia, Latin
America and Central/Eastern Europe. Darby offers these investment funds through
private placements to institutional and high net-worth individual investors.
Templeton Asset Management Ltd., an investment adviser, sponsors and manages
a limited number of investment partnerships that also invest primarily in emerging
markets in Asia, Latin America and Central/Eastern Europe.
Franklin Templeton Institutional, LLC, an investment adviser, manages investment
partnerships that invest in funds with exposure to global real estate opportunities.
Franklin Advisers, Inc. (“FAI”), an investment adviser, manages
a privately offered fund that invests in derivatives across the global equity,
global government bond and currency markets. FAI creates tactical long and short
positions within the fund based on a daily review of macroeconomic and valuation
factors to determine the relative attractiveness of asset classes to each other
as well as the attractiveness of individual factors within asset classes.
Through various trust company subsidiaries, including Fiduciary Trust, we offer
trust, custody and related services, including administration, performance measurement,
estate planning, tax planning and private banking. We provide planned giving
administration and related custody services for non-profit organizations, including
pooled income funds, charitable remainder trusts, charitable lead trusts and
gift annuities, for which we may or may not act as trustee. Our other subsidiaries
involved in the trust business, either as trust companies or companies investing
in trust companies, have full trust powers. Our subsidiary Franklin Templeton
Bank & Trust, F.S.B. (“FTB&T”), a federally chartered FDIC
insured savings bank, among other functions, exercises full trust powers and
serves primarily as custodian of IRAs and business retirement plans invested
solely in Franklin Templeton funds. FTB&T also provides Advisor Directed
Trust®, a directed trust service.
BANKING/FINANCE OPERATIONS
Our'secondary'business'segment'is'banking/finance,'which'offers'select retail-banking
and consumer lending services.
Our subsidiary, Fiduciary Trust, is a New York state chartered bank and provides
private banking services primarily to high net-worth clients who maintain trust,
custody and/or investment'management'accounts with Fiduciary Trust.'Fiduciary
Trusts private banking and credit products include, among others, loans secured
by marketable securities,'foreign exchange services, deposit accounts and other
banking'services.'
COMPETITION
The'financial'services'industry is highly'competitive'and has'increasingly
become a global'industry.'There are'approximately'8,200 open-end'investment
companies of varying sizes,'investment policies and objectives whose shares
are being'offered to the public in the U.S. Due to our'international'presence
and varied'product mix, it is difficult to assess our market'position'relative
to other'investment'managers on a worldwide basis, but we believe that we are
one of the more widely diversified'investment'managers in the U.S. We believe
that our equity and'fixed-income'asset mix coupled'with our global'presence'
will serve our competitive needs well over the long term. We continue to focus
on the performance'of our'investment'products,'service to customers'and'extensive
marketing'activities'with'our'strong'broker/dealer'and'other'financial institution
distribution network as well as high net-worth customers.
We face strong competition from numerous investment management,'stock brokerage
and'investment'banking firms,'insurance'companies,'banks,'savings and loan associations'
and other'financial'institutions,'which'offer a wide'range of financial and
investment management services to the same institutional accounts, separate'
accounts and high net-worth'customers that we are seeking to attract. In'recent'
years,'there'has been a trend of'consolidation'in the'financial services'industry,'
resulting in stronger'competitors'with greater'financial resources than us.
We rely largely on'intermediaries'to sell and'distribute'Franklin'Templeton
mutual'fund'shares.'In'addition'to'offering'our'products,'many of these intermediaries'
also have'mutual'funds'under'their own'names'that'compete directly'with our'
products.'These'intermediaries'could'decide'to limit or restrict'the sale of
our fund'shares,'which could lower our future'sales and cause'our'revenues'to'
decline.'We'have'and'continue'to'pursue'sales relationships'with all types of'
intermediaries'to'broaden'our'distribution network.'We'have'experienced'increased'
costs'related'to'maintaining'our distribution channels and we anticipate that
this trend will continue.
We have'implemented'an award'winning'Internet'platform to compete'with the
rapidly developing and evolving capabilities being offered with this technology.
Together'with several large'financial'services'companies,'we made a capital
investment in the'development of an'industry-wide'Internet'portal,'known as
Advisorcentral.com,'which provides our broker,'dealer and'investment'adviser
customers with the ability to view their clients holdings using one log-in
ID.