I. 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.
A. ASSETS UNDER MANAGEMENT ("AUM")
Investment management fees, our most substantial source of revenue, are based
upon the dollar value of assets under management, because we earn most of our
revenues from fees linked to the amount of assets in the accounts that we advise.
We earn investment management fee revenues by providing investment advisory
and management services pursuant to investment management agreements with each
fund. This business is primarily conducted through our wholly-owned direct and
indirect subsidiary companies, including, among others, the following:
Fiduciary International, Inc. ("FII"), a registered investment adviser
under the Investment Advisers Act of 1940 (the "Advisers Act"), provides
investment advisory and portfolio management to certain mutual funds and separate
accounts;
Franklin Advisers, Inc. ("FAV"), a registered investment adviser
under the Advisers Act, provides investment advisory, portfolio management and
administrative services to various Franklin Templeton mutual funds, sub-advisory
services to non-affiliated entities and advisory services to institutional
accounts;
Franklin Advisory Services, LLC ("FAS"), a registered investment
adviser under the Advisers Act, provides investment advisory and portfolio management
services to certain of the Franklin Templeton mutual funds and also provides
sub-advisory services to non-affiliated entities;
Franklin Mutual Advisers, LLC ("FMA"), a registered investment adviser
under the Advisers Act, provides investment and portfolio management services
to the Mutual Series funds and also to several of the Franklin Templeton Variable
Insurance Products Trust funds;
Franklin Templeton Alternative Strategies, Inc. ("FTAS"), a registered
investment adviser under the Advisers Act and a registered Commodity Pool Operator
under the Commodity Exchange Act, provides investment advisory, portfolio management
and administrative services to certain of our sponsored investment products
with mandates in alternative investments;
Franklin Templeton Institutional, LLC ("FTI"), a registered investment
adviser under the Advisers Act, provides investment advisory, portfolio management
and administrative services to institutional clients;
Franklin Templeton Investment Management Limited ("FTIML"), a registered
foreign equivalent investment adviser in the United Kingdom and a registered
investment adviser under the Advisers Act, serves as an investment adviser to
various of our investment companies registered in foreign jurisdictions, including
Europe;
Franklin Templeton Investment Trust Management Co., Ltd. ("FTITMC"),
a registered foreign equivalent investment adviser in Korea, provides investment
trust management services and also manages equity and fixed income products
in Korea;
Franklin Templeton Investments (Asia) Limited ("FTIL"), a registered
investment adviser under the Advisers Act and a foreign equivalent of an investment
adviser in Hong Kong, provides certain advisory services and distributes investment
products in Hong Kong;
Franklin Templeton Investments Corp. ("FTIC"), a registered foreign
equivalent investment adviser with many of the Canadian securities commissions,
a mutual fund dealer with the Ontario Securities Commission and Alberta Securities
Commission and an investment adviser under the Advisers Act, provides investment
advisory, portfolio management, distribution and administrative services for
Canadian registered retail funds and sub-advisory services to certain institutional
and private accounts;
Franklin Templeton Investments Japan Limited ("FTIJL"), a registered
foreign equivalent investment adviser in Japan, provides investment advisory,
portfolio management and administrative services to certain of our funds in
Japan and manages Japan equity funds that are sold in other regions;
Templeton Asset Management (India) Private Limited ("TAMPL"), an
"Asset Management Company" approved by the Securities and Exchange
Board of India, provides investment advisory, portfolio management and administrative
services to certain mutual funds in India;
Templeton Asset Management Ltd. ("TAML"), a registered investment
adviser under the Advisers Act and a registered foreign equivalent investment
adviser in Singapore and Hong Kong, provides investment advisory and related
services to certain Templeton developing markets funds and portfolios;
Templeton Global Advisors Limited ("TGAL"), a registered investment
adviser under the Advisers Act, provides investment advisory, portfolio management,
and administrative services to certain of the Templeton funds and advisory services
to institutional and private accounts; and
Templeton Investment Counsel, LLC ("TICL"), a registered investment
adviser under the Advisers Act, provides investment advisory, portfolio management
and administrative services to certain of the Templeton funds, sub-advisory
services to certain of the Franklin Funds and advisory services to institutional
and
private accounts.
Our subsidiary investment advisers conduct investment research and determine
which securities the U.S.-registered open-end and closed-end funds will purchase,
hold or sell under the supervision and oversight of the fund's board of trustees,
directors or administrative managers. In addition, the subsidiary companies
take all steps necessary to implement such decisions, including selecting brokers
and dealers, executing and settling trades in accordance with detailed criteria
set forth in the management agreement for each fund, internal policies, and
applicable law and practice. In addition, certain of our subsidiary companies
provide similar investment management and administrative services to a number
of non-U.S. open-end and closed-end investment companies, as well as other U.S.
and international private and institutional accounts, including certain of our
sponsored investment companies organized in Luxembourg and Ireland.
Our investment advisory services include fundamental investment research and
valuation analyses, including original economic, political, industry and company
research, company visits and inspections, and the utilization of such sources
as company public records and activities, management interviews, company prepared
information, and other publicly available information, as well as analyses of
suppliers, customers and competitors. In addition, research services provided
by brokerage firms are used to support our findings.
II. 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
Trust's private banking and credit products include, among others, loans secured
by marketable securities, foreign exchange services, deposit accounts and other
banking services. As discussed in Investment Management and Related Services,
Fiduciary Trust also offers investment management, trust and estate, custody
and related services to institutional accounts and high net-worth individuals
and
families.