3 unchanged sentences
In this Annual Report, Franklin and its subsidiaries are collectively referred to as the “Company,” and words such as “we,” “us,” “our” and similar terms refer to the Company.
−Removed: We offer our services and products under our various distinct brand names, including, but not limited to, Franklin ® , Templeton ® , Legg Mason ® , Balanced Equity Management ® , Benefit Street Partners ® , Darby ® , Edinburgh Partners™, Fiduciary Trust™, Franklin Bissett ® , Franklin Mutual Series ® , K2 ® and LibertyShares ® .
−Removed: In addition, pursuant to our acquisition of Legg Mason, Inc.
−Removed: (“Legg Mason”) on July 31, 2020, as described further below, we acquired certain additional brand names including Brandywine Global Investment Management ® , Clarion Partners ® , ClearBridge Investments ® , Martin Currie ® , QS Investors ® , Royce ® Investment Partners and Western Asset Management Company ® .
+Added: We have one operating segment, investment management and related services.
+Added: We offer our services and products under our various distinct brand names, including, but not limited to, Franklin ® , Templeton ® , Legg Mason ® , Benefit Street Partners ® , Brandywine Global Investment Management ® , Clarion Partners ® , ClearBridge Investments ® , Fiduciary Trust International™, Franklin Bissett ® , Franklin Mutual Series ® , K2 ® , LibertyShares ® , Martin Currie ® , Royce ® Investment Partners and Western Asset Management Company ® .
Unless otherwise indicated, our “funds” means the funds offered under our various brand names.
We are a global investment management organization with $1,530.1 billion in assets under management (“AUM”) as of September 30, 2021.
−Removed: Our mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions.
−Removed: Through our investment adviser subsidiaries (“specialist investment managers”), including those acquired through our Legg Mason acquisition, we bring extensive capabilities in fixed income, equity, custom multi-asset solutions and alternatives.
−Removed: With more than 70 years of investment experience, we are committed to providing clients with exceptional investment management services and have developed a globally diversified business, including through strategic acquisitions.
−Removed: Our specialist investment managers offer diverse perspectives and specialized expertise across asset classes and strategies, distributed to both institutional and retail clients.
−Removed: Through our investment products, we provide investment management and related services to retail, institutional and high-net-worth investors in jurisdictions worldwide.
−Removed: We deliver our investment capabilities through a variety of products and vehicles and via multiple points of access, including directly to investors and through financial intermediaries.
+Added: Our mission is to help people all over the world achieve the most important milestones of their lives through investment management expertise, wealth management and technology solutions.
+Added: Through our specialist investment managers, we bring extensive capabilities in fixed income, equity, multi-asset solutions and alternatives.
+Added: For more than 70 years, we have been committed to providing clients with exceptional investment management services and have developed a globally diversified business, including through strategic acquisitions.
+Added: We provide our investment management and related services to retail, institutional and high-net-worth investors in jurisdictions worldwide.
+Added: We deliver our investment capabilities through a variety of products and vehicles and multiple points of access, including directly to investors and through financial intermediaries.
Our investment products include our sponsored funds, as well as institutional and high-net-worth separate accounts, retail separately managed account programs, sub-advised products, and other investment vehicles.
−Removed: Our sponsored funds include registered funds (including exchange-traded funds, or “ETFs”) and unregistered funds.
−Removed: We offer a broad product mix of fixed income, equity, multi-asset, alternative and cash management asset classes and solutions that meet a variety of investment goals and needs for investors.
+Added: Our funds include registered funds (including exchange-traded funds, or “ETFs”) and unregistered funds.
In addition to investment management, our services include fund administration, sales and distribution, and shareholder servicing.
+Added: Our sales and distribution services include distribution-related financial technology.
We may perform services directly or through third parties.
1 unchanged sentence
We offer our clients the combined experience of our investment professionals with expertise across asset classes and a sharp focus on managing risk.
−Removed: We aim to deliver strong investment performance for our clients by offering a broad range of strategies and drawing on the extensive experience and perspective gained through our long history in the investment management business.
+Added: We are committed to delivering strong investment performance for our clients by offering a broad range of strategies and drawing on the extensive experience and perspective gained through our long history in the investment management business.
We know that success demands smart and effective business innovation, solutions and technologies, and we remain focused on investment excellence, innovating to meet evolving client goals, and building strong partnerships by delivering superior client service.
2 unchanged sentences
We are subject to various laws, rules and regulations globally that impose restrictions, limitations, registration, reporting and disclosure requirements on our business, and add complexity to our global compliance operations.
−Removed: Acquisition of Legg Mason
−Removed: On July 31, 2020 , we completed our acquisition of Legg Mason pursuant to the terms and conditions of the Agreement and Plan of Merger, dated as of February 17, 2020, by and among Franklin, Legg Mason and Alpha Sub, Inc., a wholly-owned subsidiary of Franklin (the “Merger Agreement”), pursuant to which Legg Mason became a wholly-owned subsidiary of Franklin.
−Removed: Under the Merger Agreement, at the effective time of the acquisition, we acquired all of the outstanding common stock of Legg Mason for a purchase consideration of $4.5 billion in cash and $0.2 billion related to the settlement of historical compensation arrangements.
−Removed: Legg Mason has outstanding debt with an aggregate maturity value of $2.0 billion .
−Removed: The transaction increased our assets under management by $797.4 billion as of the date of the acquisition.
−Removed: The acquisition significantly deepens our presence in key geographies and creates an expansive investment platform that is well balanced between institutional and retail client AUM.
−Removed: Other Recent Development
−Removed: Effective October 1, 2020, the capabilities of QS Investors, which became one of our specialist investment managers through the Legg Mason acquisition, were combined with our Franklin Templeton Multi-Asset Solutions group to form Franklin Templeton Investment Solutions, a solutions platform designed to deliver an expanded range of investment capabilities to clients.
−Removed: Our combined teams of investment professionals oversee various multi-asset strategies, leveraging a broad spectrum of investment capabilities from fundamental to quantitative.
+Added: Incorporated herein by reference is certain financial information about our segment and geographic areas contained in Note 19 – Segment and Geographic Information in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report.
+Added: Recent Developments
+Added: As previously announced, on November 1, 2021, we entered into a definitive agreement to acquire Lexington Partners L.P.
+Added: (“Lexington”), a leading global manager of secondary private equity and co-investment funds.
+Added: We expect this acquisition to bolster our alternative asset capabilities, complementing our existing strengths in real estate, private credit, and hedge fund strategies.
+Added: The transaction is structured to provide continuity for Lexington’s experienced team and continued alignment with investors.
+Added: The transaction is subject to customary closing conditions and is expected to close by the end of the second fiscal quarter of 2022.
+Added: On September 30, 2021, we also announced that we will acquire O’Shaughnessy Asset Management, LLC (“OSAM”), a leading quantitative asset management firm.
+Added: Through this acquisition, we expect to add to our offerings in the separately managed account industry.
+Added: OSAM’s capabilities are expected to serve as an important expansion and enhancement of our existing strengths in separately managed account and custom solutions capabilities.
+Added: The transaction is subject to customary closing conditions and is expected to close in the first quarter of fiscal year 2022.
Company History
3 unchanged sentences
We have added, among others:
−Removed: (i) the Templeton family of funds, known for its global investing strategies and value style of investing, in 1992, (ii) the Franklin Mutual Series family of funds, known for its value-oriented equity funds, in 1996, (iii) the Franklin Bissett family of funds, known for its Canadian taxable fixed income funds and growth-oriented equity funds, in 2000, (iv) the Fiduciary Trust investment management, trust and fiduciary services firm, in 2001, (v) the Darby family of funds, known for its emerging markets investing strategies, in 2003, (vi) the Balanced Equity Management Pty.
−Removed: Limited specialty Australian equity manager, in 2011, (vii) the K2 Advisors hedge funds solutions provider, in 2012, (viii) the Edinburgh Partners global value investment manager based in the United Kingdom (the “U.K.”), in 2018, (ix) the Benefit Street Partners U.S.
−Removed: alternative credit manager, in 2019, (x) the Athena Capital Advisors investment and wealth management firm, in March 2020, (xi) The Pennsylvania Trust Company investment management,
−Removed: trust and fiduciary services firm, in May 2020, and (xii) the Legg Mason global investment management organization, including certain specialist investment managers, on July 31, 2020.
+Added: (i) the Templeton investment firm, known for its global investing strategies and value style of investing, in 1992, (ii) the Franklin Mutual Series investment firm, known for its value-oriented equity funds, in 1996, (iii) the Franklin Bissett investment firm, known for its Canadian fixed income funds and growth-oriented equity funds, in 2000, (iv) the Fiduciary Trust International investment, trust and fiduciary services firm, in 2001, (v) the K2 Advisors hedge funds solutions firm, in 2012, (vi) the Benefit Street Partners U.S.
+Added: alternative credit manager firm, in 2019, (vii) the Athena Capital Advisors investment and wealth management firm, in March 2020, (viii) The Pennsylvania Trust Company investment, trust and fiduciary services firm, in May 2020, and (ix) the Legg Mason global investment firm, including certain specialist investment managers, on July 31, 2020.
OUR BUSINESS STRUCTURE
−Removed: We believe in the value of active investment management.
Through our subsidiaries, we are committed to helping investors navigate global markets, as well as continuing to evolve and build on our strengths to meet the needs of our clients.
−Removed: Through our investment products, including our expanded products acquired through the Legg Mason transaction, we serve a variety of clients including retail, institutional and high-net-worth investors in regions and jurisdictions worldwide.
−Removed: We generally derive our revenues and net income from providing investment management and related services to our products and sub-advised products.
−Removed: Our investment management fees, which represent the majority of our revenues, depend to a large extent on the level and relative mix of our AUM and the types of services provided.
−Removed: These fees and arrangements change from time to time.
−Removed: Our business is conducted through our subsidiaries, including those specialist investment managers registered with the U.S.
−Removed: Securities and Exchange Commission (the “SEC”) as investment advisers under the Investment Advisers Act of 1940 (the “Advisers Act”), those registered as investment adviser equivalents in jurisdictions including Australia, Brazil, Canada, China, Hong Kong, Ireland, India, Japan, Luxembourg, Malaysia, Mexico, Singapore, Switzerland, South Korea, Commonwealth of The Bahamas, the United Arab Emirates, the U.K., and certain other subsidiaries.
+Added: We generally derive our revenues and income from providing investment management and related services to our products and the products we sub-advise.
+Added: Our investment management fees, which represent the majority of our revenues, depend to a large extent on the level and relative mix of our AUM and the types of services provided, which are subject to change.
+Added: Our business is conducted through our subsidiaries, including our specialist investment managers.
+Added: Our specialist investment managers include subsidiaries registered with the U.S.
+Added: Securities and Exchange Commission (the “SEC”) as investment advisers under the Investment Advisers Act of 1940 (the “Advisers Act”), as well as subsidiaries registered as investment adviser equivalents in jurisdictions including Australia, Brazil, Canada, China, Hong Kong, Ireland, India, Japan, Luxembourg, Malaysia, Mexico, Singapore, Switzerland, South Korea, Commonwealth of The Bahamas, the United Arab Emirates and the United Kingdom (“U.K.”).
Our U.S.-registered funds and most of our non-U.S.-registered funds operate as independent companies subject to the supervision and oversight of the funds’ own boards of directors or trustees.
−Removed: Most of our funds are registered open-end funds that continuously offer their shares to investors.
−Removed: We also offer registered closed-end funds that issue a set number of shares to investors in a public offering which shares are then traded on a public stock exchange.
+Added: Most of our funds are registered open-end funds, or mutual funds, that continuously offer their shares to investors.
+Added: We also offer or manage registered or listed closed-end funds that issue a set number of shares to investors in a public offering which shares are then traded on a public stock exchange.
Our specialist investment managers manage a fund’s portfolio of securities in accordance with the fund’s stated objectives.
−Removed: The funds themselves do not have employees.
To support the funds’ operations, our subsidiaries either provide or arrange for the investment and other management, shareholder servicing and administrative services required by the funds.
−Removed: We have outsourced certain administration services for our funds to third-party providers.
−Removed: An investor may purchase shares of an open-end fund through a broker-dealer, financial adviser, bank or other similar financial intermediary that provides investment advice to the investor, or an investor may purchase shares of a closed-end fund on the stock exchange where the fund is traded.
+Added: We outsource certain administration and other services for our funds to third-party providers.
+Added: An investor may purchase shares of a mutual fund directly from us or through a broker-dealer, financial adviser, bank or other similar financial intermediary that provides investment advice to the investor, or an investor may purchase shares of a closed-end fund or ETF on the stock exchange where the fund is traded.
Financial intermediaries may earn fees and commissions and receive other compensation with respect to fund shares sold to investors.
−Removed: Our AUM by Asset Class
−Removed: We offer a broad product mix under our fixed income, equity, multi-asset, alternative and cash management asset classes and solutions to meet a variety of investment goals.
−Removed: Our fees for providing investment management services are generally based on a percentage of AUM in the accounts that we advise, the asset classes of the accounts, and the types of services that we provide for the accounts.
−Removed: As of September 30, 2020 , our total AUM by asset class on a worldwide basis was as follows:
−Removed: Cash Management
−Removed: See “Assets under Management” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this Annual Report for additional information.
−Removed: Broadly speaking, other than changes in net assets due to acquisitions or dispositions by us (such as our acquisition of Legg Mason), the change in the net assets of our products depends primarily upon two factors:
−Removed: (i) the increase or decrease in the market value of the securities and instruments held in the portfolio of investments, and (ii) the level of inflows as compared to the level of outflows.
−Removed: We are subject to the risk of asset volatility resulting from changes in the global capital markets.
−Removed: In addition, changing market conditions and the evolving needs of our clients may cause a shift in our asset mix, potentially resulting in an increase or decrease in our revenues and income depending upon the nature of our AUM and the level of management fees we earn based on our AUM.
−Removed: Our AUM by Product Type
+Added: Our AUM by Asset Class and Product Type
+Added: We offer a broad product mix under our fixed income, equity, multi-asset, alternative and cash management asset classes and solutions.
+Added: Our fixed income capabilities include government, municipals, corporate credit, bank loans, securitized, multi-sector, currencies and other investments.
+Added: Our equity capabilities include value, deep value, core value, blend, growth at a reasonable price (GARP), growth, convertibles, sector, Shariah, smart beta and thematic investments.
+Added: Our multi-asset solutions capabilities include income, real return, balanced/hybrid, total return, target data/risk, absolute return, tactical asset allocation and managed volatility investments.
+Added: Our alternative capabilities include private debt, hedge funds, private equity, real estate and infrastructure investments.
We believe, despite market risks, that we have a competitive advantage as a result of the economic and geographic diversity of our products available to our clients.
−Removed: As of September 30, 2020 , our total AUM by product type was as follows:
+Added: funds include U.S.
+Added: mutual funds, closed-end funds, ETFs and other products.
+Added: funds include a variety of cross-border funds principally domiciled in Luxembourg or Ireland, registered for sale to non-U.S.
+Added: investors in certain other countries, and international locally domiciled funds and products for the particular local market.
+Added: Our institutional separate account services are provided to various institutions for which we serve as an investment adviser.
+Added: Our retail separately managed accounts, commonly known as managed accounts or wrap programs, are sponsored by various financial institutions.
+Added: We also offer and serve as investment adviser to various other products.
+Added: Our fees for providing investment management services are generally based on a percentage of AUM in the accounts that we advise, the asset classes of the accounts, and the types of services that we provide.
+Added: AUM by asset class and product type was as follows (primarily based on where product is domiciled):
(in billions)
−Removed: Institutional Separate Accounts
−Removed: Retail Separately Managed Accounts
−Removed: Other Accounts,
−Removed: Alternative Investment
−Removed: Products and Trusts
+Added: as of September 30, 2021
+Added: Funds Non-U.S.
+Added: Funds Institutional Separate Accounts Retail Separately Managed Accounts Other Total Percentage
+Added: Fixed Income $ 206.3 $ 55.5 $ 338.6 $ 34.3 $ 15.6 $ 650.3 43 %
+Added: Equity 260.1 87.3 66.3 87.8 22.1 523.6 34 %
+Added: Multi-Asset 96.5 8.7 4.3 2.9 40.0 152.4 10 %
+Added: Alternative 7.4 10.8 34.2 — 92.8 145.2 9 %
Cash Management
−Removed: funds include U.S.-registered open-end and closed-end funds, ETFs and other products.
−Removed: As of September 30, 2020 , our five largest U.S.
−Removed: funds represented, in the aggregate, 11% of total AUM.
−Removed: funds include a variety of funds principally domiciled in Luxembourg or Ireland, registered for sale to non-U.S.
−Removed: investors in certain other countries, and products for the particular local market.
−Removed: Institutional Separate Accounts.
−Removed: Our institutional separate accounts are for various institutions for which we serve as an investment adviser.
−Removed: Retail Separately Managed Accounts.
−Removed: Our retail separately managed accounts, commonly known as managed accounts or wrap programs, are sponsored by various financial institutions.
−Removed: Other Accounts, Alternative Investment Products and Trusts.
−Removed: We also offer and serve as investment adviser to other accounts, alternative investment products and trusts.
−Removed: Certain Specialist Investment Managers Acquired Through the Legg Mason Transaction
−Removed: We acquired certain specialist investment managers through the Legg Mason transaction.
−Removed: Our specialist investment managers generally focus on a portion of the asset management industry in terms of the types of assets managed (primarily fixed income, equity or alternatives) and each differs in the types of products and services offered, the investment styles utilized, the distribution channels used, and the types and geographic locations of its clients.
+Added: 34.9 22.9 0.8 — — 58.6 4 %
+Added: Total $ 605.2 $ 185.2 $ 444.2 $ 125.0 $ 170.5 $ 1,530.1 100 %
+Added: See “Assets under Management” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this Annual Report for additional information about our AUM.
+Added: Broadly speaking, other than changes in AUM due to acquisitions or dispositions by us, changes in our AUM depend primarily upon two factors:
+Added: (i) the increase or decrease in the market value of the securities and instruments held in the portfolio of investments, and (ii) the level of inflows as compared to the level of outflows.
+Added: Changing market conditions and the evolving needs of our clients may cause asset volatility and a shift in our asset mix, potentially resulting in an increase or decrease in our revenues and income depending upon the nature of our AUM and the level of management fees we earn based on our AUM.
+Added: Our Specialist Investment Managers
+Added: Our specialist investment managers offer diverse perspectives and specialized expertise across asset classes and strategies.
+Added: Across our business, our specialist investment managers generally focus on a portion of the asset management industry in terms of the types of assets managed (primarily fixed income, equity or alternatives) and each may differ in the types of products and services offered, the investment styles utilized, and the types and geographic locations of its clients.
Each typically markets its products and services under its own brand name, with certain distribution functions provided by our corporate distribution subsidiaries.
−Removed: We have in place revenue sharing arrangements with certain of our specialist investment managers acquired through the Legg Mason transaction.
−Removed: Below is a brief overview of our specialist investment managers acquired through the Legg Mason transaction.
−Removed: Brandywine Global Investment Management is a global asset manager based in Philadelphia, with additional offices in the U.K., Canada and Singapore.
−Removed: It provides investment advisory services primarily to separately managed accounts for institutional clients in a range of fixed income, including global and international fixed income, and equity investment strategies.
−Removed: It also provides investment advisory services to U.S.
−Removed: mutual funds, international locally domiciled funds, cross-border funds, privately offered funds, and separately managed account programs sponsored by third parties.
−Removed: Clarion Partners is a manager of real estate investment funds based in New York, with additional offices in Dallas, Los Angeles, Boston, Washington, DC, the U.K.
−Removed: It provides a broad range of equity and debt real estate strategies across the risk/return spectrum through separate accounts as well as private funds primarily aimed at institutional investors and acts as sub-adviser to a publicly offered Franklin Templeton real estate income fund aimed at retail investors.
−Removed: ClearBridge Investments is an equity asset manager based in New York, with additional offices in Baltimore, Wilmington and Australia.
−Removed: It provides asset management services to certain equity funds (including balanced funds and closed-end funds), retail separately managed account programs, and to institutional clients primarily through separate accounts.
−Removed: In addition, the capabilities of RARE® Infrastructure, a specialist investment manager acquired through the Legg Mason transaction based in Australia, have been integrated into ClearBridge.
−Removed: Martin Currie is an international equity specialist based in Scotland, with additional offices in other locations in the U.K., Australia and Singapore.
−Removed: It manages U.S.
−Removed: and international equity portfolios for a global client base of financial institutions, foundations, endowments, pension funds, family offices, government agencies and investment funds.
−Removed: QS Investors is a customized solutions and global quantitative equities investment manager based in New York, with an additional office in Boston.
−Removed: It provides asset management and advisory services to a diverse array of institutional clients.
−Removed: Effective October 1, 2020, the capabilities of QS Investors were combined with our multi-asset solutions group to form our Franklin Templeton Investment Solutions platform.
−Removed: QS Investors remains an indirect subsidiary of Franklin.
−Removed: Royce Investment Partners is the investment adviser to The Royce Funds, a proprietary range of equity U.S.
−Removed: mutual funds, and to certain of our international funds.
−Removed: In addition, it manages other pooled and separately managed accounts, primarily for institutional clients.
−Removed: Based in New York, Royce generally invests in smaller company stocks using a value approach.
−Removed: Western Asset Management Company is a fixed income asset manager based in Pasadena with additional offices and operations around the globe.
−Removed: Its focus is on long-term value investing across a range of fixed income sectors.
−Removed: Western Asset offers fixed income strategies across the liquidity, maturity and risk spectrums.
−Removed: Our Range of Services and Capabilities
+Added: We have in place revenue sharing arrangements with certain of our specialist investment managers.
+Added: Our specialist investment managers include:
+Added: Benefit Street Partners, Brandywine Global, Clarion Partners, ClearBridge Investments, Fiduciary Trust International, Franklin Templeton Equity, Franklin Templeton Fixed Income, Franklin Templeton Investment Solutions, Martin Currie, Royce Investment Partners, Templeton Global Macro, and Western Asset Management.
+Added: Our Broad Range of Services and Capabilities
Investment Management Services
−Removed: We are committed to providing active investment management and strategic advice for our clients.
−Removed: Our specialist investment managers offer fixed income, equity, multi-asset and alternative strategies through various investment products.
−Removed: Through our investment products, we provide a broad array of investment management services to retail, institutional and high-net-worth clients.
−Removed: Our investment products include registered open-end and closed-end funds, private funds, institutional separate accounts, retail separately managed accounts, and other accounts, alternative investment products and trusts.
−Removed: Our clients include institutions, corporations, endowments, charitable foundations, pension and defined contribution plans, and individuals.
−Removed: We distribute and market globally our different capabilities under our brand names through various subsidiaries.
−Removed: We primarily attract new institutional business through our relationships with pension, defined contribution and management consultants, direct sales efforts and additional mandates from our existing client relationships, as well as from our responses to requests for proposals.
+Added: Through our specialist investment managers, we offer a broad range of services and capabilities under our fixed income, equity, multi-asset, alternative and cash management asset classes.
+Added: We also offer diverse strategies across active, smart beta and passive approaches, in a broad range of vehicles.
+Added: Our investment products are offered globally to retail, institutional and high-net-worth clients, which may include, among others, individual investors, institutional investors, sovereign wealth funds, defined benefit and contribution plans, endowments and charitable foundations, healthcare systems and insurance companies.
+Added: Our investment products include mutual funds, closed-end funds, private funds, institutional separate accounts, retail separately managed accounts, and other products.
+Added: Our products and capabilities are designed to accommodate a variety of investment goals and preferences, from capital appreciation to capital preservation, as well as certain environmental, social and governance (“ESG”) preferences.
+Added: We are committed to partnering closely with our clients to understand their challenges and aspirations, and drawing on our investment capabilities and resources to offer and/or design the right investment solutions for them.
+Added: We distribute and market globally our different capabilities under our brand names through various subsidiaries and multiple points of access, including directly to investors and through financial intermediaries.
+Added: We primarily engage new institutional business through our relationships with pension, defined contribution and management consultants, direct sales efforts and additional mandates from our existing client relationships, as well as from our responses to requests for proposals.
We also market and distribute our products through various subsidiaries to institutional investors with separate accounts.
−Removed: A few of our subsidiaries also serve as direct marketing broker-dealers for institutional investors for certain of our private funds, and some of our private funds may utilize third-party placement agents.
+Added: our subsidiaries also serve as direct marketing broker-dealers for institutional investors for certain of our private funds, and some of our private funds may utilize third-party placement agents.
Our services also include management of our ETF platforms.
1 unchanged sentence
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below the ETF’s net asset value.
−Removed: Our specialist investment managers provide investment management services pursuant to agreements in effect with each of our investment products and the products for which we provide sub-advisory services.
+Added: Our specialist investment managers provide investment management services pursuant to agreements in effect with each of our investment products and/or clients, including products for which we provide sub-advisory services.
Investment management fees are generally determined as a percentage of AUM pursuant to such contractual arrangements.
2 unchanged sentences
Our management fee on an account varies with the types of services that we provide for the account, among other things.
−Removed: Our subsidiaries that provide discretionary investment management services for our products and sub-advised products either perform or obtain investment research, and determine which securities the products will purchase, hold or sell under the supervision and oversight of the funds’ boards of directors or trustees, as applicable.
−Removed: In addition, these subsidiaries may take all appropriate steps to implement such decisions, including arranging for the selection of broker-dealers and the execution and settlement of trades in accordance with applicable criteria set forth in the management agreements, internal policies, and applicable law and practice.
−Removed: Our subsidiaries that provide non-discretionary investment management services perform investment research for our clients and make recommendations as to which securities the clients purchase, hold or sell, and may or may not perform trading activities for the products.
−Removed: For our U.S.-registered funds, the board of directors or trustees of each fund and our management personnel regularly review the investment management fee structures for the funds in light of fund performance, the level and range of services provided, industry conditions and other relevant factors.
−Removed: Most of our investment management agreements between our subsidiaries and our funds must be renewed each year (after an initial two-year term), and must be specifically approved at least annually by a vote of each fund’s board of directors or trustees as a whole and separately by a majority of its directors or trustees who are not interested persons of the fund under the Investment Company Act of 1940 (the “Investment Company Act”), or by a vote of the holders of a majority of the fund’s outstanding voting securities.
−Removed: agreements automatically terminate in the event of their “assignment,” as defined in the Investment Company Act.
−Removed: In addition, either party may terminate such agreement without penalty after prior written notice.
−Removed: If agreements representing a significant portion of our AUM were terminated, it would have a material adverse impact on us.
−Removed: Under our investment management agreements with our funds and accounts, our monthly and annual fee rates may vary by asset class and type of services provided.
−Removed: Our agreements generally permit us to provide services to more than one fund or account and to other clients so long as our ability to render services to each fund/account is not impaired, and so long as purchases and sales of portfolio securities for various advised funds/accounts are made on an equitable basis.
−Removed: We use a “master/feeder” fund structure in certain situations.
−Removed: This structure allows an investment adviser to manage a single portfolio of securities at the “master fund” level and have multiple “feeder funds” that invest substantially all of their respective assets into the master fund.
−Removed: Individual and institutional shareholders generally invest in the “feeder funds,” which can offer a variety of tax, service and distribution options.
−Removed: Our non-U.S.-registered funds, private funds, institutional and high-net-worth separate accounts, and the products for which we provide sub-advisory services are typically subject to various termination rights and/or renewal provisions.
−Removed: Investment management fees are at times waived or voluntarily reduced when a new fund/account is established, and then increased to contractual levels within an established timeline or as net asset values reach certain levels.
+Added: mutual funds, the board of directors or trustees of each fund and our management personnel regularly review the investment management fee structures for the funds in light of fund performance, the level and range of services provided, industry conditions and other relevant factors.
+Added: Most of our investment management agreements between our subsidiaries and our U.S.
+Added: mutual funds must be renewed each year after an initial two-year term, and must be specifically approved at least annually by a vote of each fund’s board of directors or trustees as a whole and separately by a majority of its directors or trustees who are not interested persons of the fund under the Investment Company Act of 1940 (the “Investment Company Act”), or by a vote of the holders of a majority of the fund’s outstanding voting securities.
+Added: In addition, our U.S.
+Added: agreements generally may be terminated by either party without penalty after prior written notice.
+Added: mutual funds, private funds, institutional and high-net-worth separate accounts, and the products for which we provide sub-advisory services, are typically subject to various termination rights and/or renewal provisions, which often provide for termination upon relatively short notice with little or no penalty.
+Added: Investment management fees are at times waived or voluntarily reduced when, for example, a new fund/account is established, and then increased to contractual levels within an established timeline or as net asset values reach certain levels.
Retail Separately Managed Account Programs
−Removed: Certain of our specialist investment managers provide asset management services to certain retail separately managed account programs sponsored by various financial institutions.
−Removed: These programs typically allow securities brokers or other financial intermediaries to offer their clients the opportunity to choose from a number of asset management services pursuing different investment strategies provided by one or more asset managers, and generally charge an all-inclusive fee that covers asset management, trade execution, asset allocation and custodial and administrative services.
+Added: Certain of our specialist investment managers provide asset management services to retail separately managed account programs sponsored by various financial institutions.
+Added: These programs typically allow securities brokers or other financial intermediaries to offer their clients the opportunity to choose from a number of asset management services pursuing different investment strategies provided by one or more investment managers, and generally charge an all-inclusive fee that can cover asset management, trade execution, asset allocation and custodial and administrative services.
Alternative Strategies
4 unchanged sentences
High-Net-Worth Investment Management, Trust and Custody
−Removed: Through our subsidiary Fiduciary Trust Company International (“Fiduciary Trust”), including its trust company and investment adviser subsidiaries, and through certain other of our subsidiaries, we provide investment management and related services to, among others, high-net-worth individuals and families, family offices, foundations and institutional clients.
−Removed: Fiduciary Trust offers investment management and advisory services across different investment styles and asset classes.
+Added: Through our subsidiary Fiduciary Trust Company International (“Fiduciary Trust International”), including its trust company and investment adviser subsidiaries, and through certain other of our subsidiaries, we provide investment management and related services to, among others, high-net-worth individuals and families, family offices, foundations and institutional clients.
+Added: Fiduciary Trust International offers investment management and advisory services across different investment styles and asset classes.
The majority of these client assets are actively managed by individual portfolio managers, while a significant number of clients also seek multi-manager, multi-asset class solutions.
−Removed: Through our trust company subsidiaries, including Fiduciary Trust, we also may provide separately managed accounts, private funds, and trust, custody and related services, including administration, performance measurement, estate planning and tax planning.
+Added: Through our trust company subsidiaries, including Fiduciary Trust International, we also may provide separately managed accounts, private funds, and trust, custody and related services, including administration, performance measurement, estate planning and tax planning.
In addition, through our subsidiary Fiduciary Trust Company of Canada (“FTCC”), we provide investment management, wealth planning, and trust and estate services, and offer products to high-net-worth individuals and families and institutional clients in Canada.
Sales and Distribution
+Added: Our global distribution framework is organized into two groups.
+Added: Our global advisory services group is responsible for sales, marketing and business development, and maintains a regional distribution model.
+Added: Our global alliances and new business strategies group oversees our digital wealth management and distribution-related financial technology, joint ventures, seed capital allocations, and direct-to-consumer initiatives.
+Added: Our groups work closely together to meet the needs of our advisors, clients and investors.
+Added: There are many sales channels across each region, which may include retail, institutional, private wealth, retirement, insurance, and other specialty sales.
+Added: Our global footprint and breadth of investment capability provides the opportunity for us to work with global financial institutions to add value through and beyond investing, including by building business relationships and global economic partnerships.
+Added: In addition, certain of our specialist investment managers have their own sales and marketing teams that distribute their products and services, primarily to institutional investors, both directly and through consultants.
+Added: Consultants play a large role in institutional investment management by helping clients select and retain investment managers.
+Added: Institutional investment management clients and their consultants tend to be highly sophisticated and investment performance-driven.
Our sales and distribution capabilities and related efforts are critical components of our business and may be impacted by global distribution trends and changes within the financial services industry.
−Removed: In the U.S., our corporate distribution subsidiaries generally serve as the principal underwriters and distributors of shares of most of our sponsored U.S.-registered open-end funds, or U.S.
−Removed: mutual funds.
+Added: In the U.S., our corporate distribution subsidiaries generally serve as the principal underwriters and distributors of shares of most of our mutual funds.
Outside the U.S., certain of our non-U.S.
−Removed: subsidiaries provide sales, distribution and marketing services to our non-U.S.-registered funds.
−Removed: Some of our non-U.S.-registered funds, particularly our Luxembourg and Irish domiciled fund ranges, are distributed globally on a cross-border basis, while others are distributed exclusively in local markets.
−Removed: We earn sales and distribution fees primarily by distributing our funds pursuant to distribution agreements with the funds.
−Removed: mutual funds generally pay us distribution fees in return for sales, marketing and distribution efforts on their behalf.
+Added: subsidiaries provide sales, distribution and marketing services to our non-U.S.
+Added: mutual funds.
+Added: Some of our non-U.S.
+Added: mutual funds, particularly our Luxembourg and Irish domiciled fund ranges, are distributed globally on a cross-border basis, while others are distributed exclusively in local markets.
+Added: We earn sales and distribution fees primarily by distributing our mutual funds pursuant to distribution agreements with the funds.
Under our distribution agreements with our U.S.
mutual funds, we offer and sell the fund shares on a continuous basis and pay certain costs associated with selling, marketing and distributing the fund shares, including the costs of developing and producing sales literature, shareholder reports and prospectuses.
−Removed: Sales and distribution fees primarily consist of upfront sales commissions and ongoing distribution fees.
+Added: Our sales and distribution fees primarily consist of upfront sales commissions and ongoing distribution fees.
Sales commissions are earned from the sale of certain classes of sponsored funds at the time of purchase and may be reduced or eliminated depending on the amount invested and the type of investor.
−Removed: Therefore, sales fees generally will change with the overall level of gross sales, the size of individual transactions, and the relative mix of sales between different share classes and types of investors.
−Removed: Our sales and marketing teams generally are housed in separate subsidiaries from our asset manager subsidiaries.
+Added: Therefore, our sales fees generally will change with the overall level of gross sales, the size of individual transactions, and the relative mix of sales between different share classes and types of investors.
+Added: Our mutual funds generally pay us distribution fees in return for sales, marketing and distribution efforts on their behalf.
The majority of our U.S.
1 unchanged sentence
The Rule 12b-1 Plans permit the funds to pay us for marketing, marketing support, advertising, printing and sales promotion services relating to the distribution of their shares, subject to the Rule 12b-1 Plans’ limitations on amounts based on daily average AUM.
−Removed: Similar arrangements exist for the distribution of non-U.S.-registered funds.
+Added: Similar arrangements exist for the distribution of non-U.S.
+Added: mutual funds.
The Rule 12b-1 Plans are established for one-year terms and must be approved annually by a vote of each fund’s board of directors or trustees as a whole and separately by a majority of its directors or trustees who are not interested persons of the fund under the Investment Company Act.
4 unchanged sentences
These financial intermediaries receive various sales commissions and other fees for services in matching investors with funds whose asset classes match such investors’ goals and risk profiles.
−Removed: Such intermediaries also may receive fees for their assistance in explaining the operations of the funds and in servicing and maintaining investors’ accounts, and for reporting and various other distribution services.
+Added: The intermediaries also may receive fees for their assistance in explaining the operations of the funds and in servicing and maintaining investors’ accounts, and for reporting and various other distribution services.
+Added: Other compensation may be offered to the extent not prohibited by federal or state laws or any self-regulatory agency, such as the Financial Industry Regulatory Authority (“FINRA”), applicable to our business.
We are heavily dependent upon these third-party distribution and sales channels and business relationships.
There is increasing competition for access to these channels, which has caused our distribution costs to rise and could cause further increases in the future as competition continues and service expectations increase.
−Removed: Similar arrangements exist with the distribution of our non-U.S.-registered funds where, generally, our subsidiary that distributes the funds receives maintenance fees from the funds and pays commissions and certain other fees to financial advisers, banks and other intermediaries.
−Removed: In addition, our distribution subsidiaries may make additional payments to broker-dealers or other intermediaries that sell or arrange for the sale of shares of our U.S.
−Removed: mutual funds, including for marketing support.
−Removed: We also may make payments for other ancillary services, such as setting up funds on a broker-dealer’s fund trading system.
−Removed: subsidiaries may make similar marketing support and other payments to third-party intermediaries located outside the U.S.
−Removed: with respect to investments in, or the distribution of, our non-U.S.-registered funds.
−Removed: Other compensation may be offered to the extent not prohibited by federal or state laws or any self-regulatory agency, such as the Financial Industry Regulatory Authority (“FINRA”).
+Added: Similar arrangements exist with the distribution of our non-U.S.
+Added: mutual funds where, generally, our subsidiary that distributes the funds receives maintenance fees from the funds and pays commissions and certain other fees to financial advisers, banks and other intermediaries.
Shareholder Servicing
We perform our shareholder servicing services directly or through third parties.
−Removed: Substantially all shareholder servicing fees are earned from our sponsored funds for providing transfer agency services, which include providing shareholder statements, transaction processing, customer service and tax reporting.
+Added: Substantially all shareholder servicing fees are earned from our funds for providing transfer agency services, which include providing shareholder statements, transaction processing, customer service and tax reporting.
Fees for U.S.
funds are based on the level of AUM and the number of transactions in shareholder accounts, while outside of the U.S., the fees are based on the level of AUM and/or the number of shareholder accounts.
−Removed: Our subsidiary Franklin Templeton Investor Services, LLC (“FTIS”) serves as our primary shareholder servicing and dividend-paying agent for certain of our U.S.-registered open-end funds.
−Removed: FTIS is registered with the SEC as a transfer agent under the Securities Exchange Act of 1934 (the “Exchange Act”).
−Removed: FTIS may pay servicing fees to third-party intermediaries primarily to help offset costs associated with client account maintenance support, statement preparation and transaction processing.
−Removed: Such third parties maintain omnibus accounts with funds in the institution’s name on behalf of numerous beneficial owners of fund shares, or provide support for fund shareholder accounts.
−Removed: The funds reimburse FTIS for these third-party payments, subject to certain limitations, as well as other out-of-pocket expenses.
−Removed: Our Range of Investment Products
−Removed: Through our specialist investment managers, we offer active, passive and smart beta strategies and a broad range of products under our fixed income, equity, multi-asset, alternative and cash management asset classes and solutions.
−Removed: Our investment products are offered globally to retail, institutional and high-net-worth investors, which include individual investors, qualified groups, trustees, tax-deferred plans (such as individual retirement accounts, or IRAs, in the U.S.
−Removed: and registered retirement saving plans, or RRSPs, in Canada) or money purchase plans, employee benefit and profit sharing plans, trust companies, bank trust departments and institutional investors.
−Removed: Our products include portfolios managed for some of the world’s largest corporations, endowments, charitable foundations, pension funds and sovereign wealth funds, as well as wealthy individuals and other institutions.
−Removed: We use various investment techniques to focus on specific client objectives for these specialized portfolios.
−Removed: The products and capabilities that we offer accommodate a variety of investment goals, spanning the spectrum of our clients’ risk tolerance from capital appreciation (with our more growth-oriented products) to capital preservation (with our fixed income offerings).
−Removed: In seeking to achieve such objectives, each portfolio emphasizes different strategies and invests in different types of instruments.
−Removed: Our equity investment products include some that are considered value-oriented, others that are considered growth-oriented, and some that use a combination of growth and value characteristics, generally identified as blend or core products.
−Removed: Value investing focuses on identifying companies that our research analysts and portfolio managers believe are undervalued based on a number of different factors, usually put in the context of historical ratios such as price-to-earnings or price-to-book value;
−Removed: however, we also consider the future earnings potential of each individual company on a multi-year basis.
−Removed: Growth investing focuses on identifying companies that our research analysts and portfolio managers believe have sustainable growth characteristics, meeting our criteria for sustainable growth potential, quality and valuation.
−Removed: In this effort, the key variables we examine include:
−Removed: (i) market opportunity (overall size and growth), (ii) competitive positioning of the company, (iii) assessment of management (strength, breadth, depth, and integrity) and execution of plans, and (iv) the general financial strength and profitability of the enterprise, to determine whether the growth and quality aspects are properly reflected in the current share price.
−Removed: Paramount to all of our different equity products is the incorporation of independent, fundamental research through our own collaborative in-house group of investment professionals.
−Removed: Our approach across the variety of equity products we manage
−Removed: emphasizes bottom-up stock selection within a disciplined portfolio construction process, and is complemented by our ongoing assessment of risk at both the security and portfolio levels.
−Removed: Portfolios seeking income generally focus on one or more of the following securities:
−Removed: (i) taxable and tax-exempt money market instruments, (ii) tax-exempt municipal bonds, (iii) global or regional fixed income securities, and (iv) fixed income debt securities of corporations, of the U.S.
−Removed: government and its sponsored agencies and instrumentalities, or of the various states in the U.S.
−Removed: Others focus on investments in particular countries and regions.
−Removed: In addition, our alternative investment strategies provide our clients with alternatives to traditional equity and fixed income products and services.
The financial services industry is a highly competitive global industry.
2 unchanged sentences
We offer a broad product mix that meets a variety of investment goals and needs for different investors, and we may periodically introduce new products to provide investors with additional investment options.
−Removed: 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 asset managers based in the U.S.
−Removed: We believe that our fixed income and equity asset mix, coupled with our global presence, will serve our competitive needs well over the long term.
+Added: 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 based in the U.S.
+Added: We believe that our fixed income, equity, multi-asset and alternative asset mix, coupled with our global presence, will serve our competitive needs well over the long term.
We continue to focus on the long-term performance of our investment products, service to clients and extensive marketing activities through our strong broker-dealer and other financial institution distribution network as well as with high-net-worth and institutional clients.
3 unchanged sentences
In addition, consolidation in the financial services industry has created stronger competitors, some with greater financial resources and broader distribution channels than our own.
−Removed: FINANCIAL INFORMATION ABOUT SEGMENT AND GEOGRAPHIC AREAS
−Removed: Incorporated herein by reference is certain financial information about our business segment and geographic areas contained in Note 19 – Segment and Geographic Information in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report.
We are subject to extensive regulation.
5 unchanged sentences
The rules and regulations applicable to investment management organizations are very detailed and technical.
−Removed: Accordingly, the discussion below is general in nature, does not purport to be complete and is current only as of the date of this Annual Report.
+Added: Accordingly, the discussion below is general in nature and does not purport to be complete.
With our global operations, certain of our subsidiaries are registered with or licensed by various U.S.
2 unchanged sentences
and/or non-U.S.
−Removed: In particular, we are subject to various securities, compliance, corporate governance, disclosure, privacy, anti-bribery and anti-corruption, anti-money laundering, anti-terrorist financing, and economic, trade and sanctions laws and regulations, both domestically and internationally, as well as to various cross-border rules and regulations, such as the data protection rules under the General Data Protection Regulation (“GDPR”)
−Removed: of the European Union (“EU”).
+Added: In particular, we are subject to various securities, compliance, corporate governance, disclosure, privacy, anti-bribery and anti-corruption, anti-money laundering, anti-terrorist financing, and economic, trade and sanctions laws and regulations, both domestically and internationally, as well as to various cross-border rules and regulations, such as the anti-bribery and anti-corruption rules under the Foreign Corrupt Practices Act of 1977 (“FCPA”) and the data protection rules under the General Data Protection Regulation (“GDPR”) of the European Union (“EU”).
We are subject to sanctions programs administered by the Office of Foreign Assets Control of the U.S.
4 unchanged sentences
jurisdictions regarding the reporting and escheatment of unclaimed or abandoned property.
−Removed: We must also comply with complex tax regimes in the jurisdictions where we operate our business.
+Added: We also must comply with complex and changing tax regimes in the jurisdictions where we operate our business.
Failure to comply with applicable U.S.
laws, regulations, rules, codes, notices, directives, guidelines, orders, circulars and/or conditions in the various jurisdictions where we operate could result in a wide range of disciplinary actions against us, our subsidiaries and/or our business.
−Removed: Breaches of applicable laws and rules could result in the imposition of various sanctions and penalties, including, among other things, fines, disgorgements, cease and desist orders, censures, reprimands and the revocation, cancellation, suspension or restriction of licenses, registration status or approvals held by us or our business.
+Added: Breaches of applicable laws and rules could result in regulatory enforcement, civil liability, criminal liability and/or the imposition of a range of sanctions or orders against us, including, as applicable, monetary damages, injunctions, disgorgements, fines, penalties, cease and desist orders, censures, reprimands, and the revocation, cancellation, suspension or restriction of licenses, registration status or approvals held by us or our business in a jurisdiction or market.
+Added: In addition, a public regulatory issue can have a negative impact on our reputation, and as a result have indirect impacts on our business or growth.
See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this Annual Report, for financial information about our business, including certain regulatory financial impacts disclosed therein.
5 unchanged sentences
We are also subject to various other U.S.
−Removed: federal and state laws, including those affecting corporate governance and disclosure, such as the Securities Act of 1933, the Exchange Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), the Sarbanes-Oxley Act of 2002 and the USA PATRIOT Act of 2001.
+Added: federal and state laws, including those affecting corporate governance and disclosure, such as the Securities Act of 1933, the Securities Exchange Act of 1934 (“Exchange Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), the Sarbanes-Oxley Act of 2002 and the USA PATRIOT Act of 2001.
As a NYSE-listed company, we are also subject to NYSE listing and disclosure requirements.
5 unchanged sentences
operations also may be subject to regulation by U.S.
−Removed: regulators, including the SEC, the CFTC and the DOJ (for example with respect to the Foreign Corrupt Practices Act of 1977).
+Added: regulators, including the SEC, the CFTC and the DOJ (for example with respect to the FCPA).
Certain of our subsidiaries are registered with the SEC under the Advisers Act and/or the CFTC, and many of our funds are registered with the SEC under the Investment Company Act.
9 unchanged sentences
that impact or relate to our business, and may cause, or continue to cause, us to incur additional obligations, include:
−Removed: In July 2010, Dodd-Frank was adopted in the U.S.
−Removed: Dodd-Frank is expansive in scope and has required the adoption of extensive regulations and the issuance of numerous regulatory decisions.
Systemically Important Financial Institutions.
4 unchanged sentences
The FSOC may designate certain non-bank financial companies as systemically important financial institutions (“SIFIs”), which are subject to supervision and regulation by the Board of Governors of the Federal Reserve System.
−Removed: The FSB may designate certain non-bank financial companies as
−Removed: global systemically important financial institutions (“G-SIFIs”);
+Added: The FSB may designate certain non-bank financial companies as global systemically important financial institutions (“G-SIFIs”);
the additional regulatory requirements triggered by any such designation are not yet established.
4 unchanged sentences
Dodd-Frank, as well as other legislation and regulations, impose restrictions and limitations on us related to our financial services and products, resulting in increased scrutiny and oversight.
−Removed: Under such regulations governing derivative transactions, certain categories of swaps are subject to the exchange of margin, while others are required to be submitted for clearing by a regulated clearing organization.
−Removed: In both cases, swaps must be reported on a swap execution facility.
−Removed: The EU and other countries have implemented, or are in the process of implementing, similar requirements.
+Added: Regulators continue to review practices and regulations relating to the use of futures, swaps and other derivatives, which could result in further restrictions and limitations on the use of such products.
+Added: In October 2020, the SEC adopted new rules governing the use of derivatives by certain registered investment companies, including certain mutual funds, designed to address investor protection concerns.
+Added: Subject to its August 2022 compliance date, key aspects of the new framework will include, among other things, value at risk limits on a fund entering into derivatives transactions, required risk management program, and further fund board oversight, reporting and compliance requirements.
+Added: The EU and other countries have adopted and implemented, or are in the process of adopting or implementing, similar and additional requirements.
There is some risk that full mutual recognition may not be achieved between the various regulators, which may cause us to incur duplicate regulation and transaction costs.
−Removed: The SEC has also proposed a rule that would impose restrictions on the use of derivatives by registered funds.
−Removed: In addition, SEC rules have changed the structure and operation for certain types of money market funds, and certain U.S.-registered funds are required to adopt liquidity management programs.
+Added: Money Market Funds .
+Added: SEC rules have changed the structure and operation for certain types of money market funds, and certain U.S.-registered funds are required to adopt liquidity management programs.
+Added: In 2016, the regulatory structure governing U.S.
+Added: money market funds was reformed to address perceived systemic risks of money market funds relating to fund stability and investor risks, including allowing certain funds to impose liquidity fees and redemption gates under certain circumstances.
+Added: In addition, following market liquidity issues in March 2020 related to the COVID-19 pandemic, regulatory authorities remain focused on whether to implement further reform measures to improve the resiliency of money market funds and the broader short-term funding markets, which, if adopted, could significantly impact the money market fund industry.
Privacy and Data Protection.
2 unchanged sentences
As the regulatory focus on privacy continues to intensify and laws and regulations concerning the management of personal data continue to expand, risks related to privacy and data collection within our business will increase.
−Removed: In addition to the EU’s GDPR data protection rules (discussed below), we also are or may become subject to or affected by additional country, federal and state laws, regulations and guidance impacting consumer privacy, such as the California Consumer Privacy Act (“CCPA”) that took effect in January 2020, and provides for enhanced consumer protections for California residents, enforcement authority by the California Attorney General for CCPA violations, and the potential for private litigation, including statutory damages for data security breaches.
−Removed: There are also new laws that have been adopted this year, including, for example, Brazil’s Lei Geral de Proteção de Dados with regulatory enforcement commencing in August 2021, and the California Privacy Rights Act with an effective date of January 1, 2023.
−Removed: Noncompliance with our legal obligations relating to privacy and data protection could result in fines, penalties, legal proceedings by governmental entities or affected individuals, prohibitions on our use of personal data in one or more countries, and other significant legal and financial exposure.
+Added: In addition to the EU’s GDPR data protection rules, we also are or may become subject to or affected by additional country,
+Added: federal and state laws, regulations and guidance impacting consumer privacy, such as the California Consumer Privacy Act (“CCPA”) that provides for enhanced consumer protections for California residents, enforcement authority by the California Attorney General for CCPA violations, and the potential for private litigation, including statutory damages for data security breaches.
+Added: The EU’s GDPR strengthened and unified data protection rules for individuals within the EU and addresses export of personal data outside the EU.
+Added: The primary objectives of GDPR are to give citizens control of their personal data and to simplify the regulatory environment for international business by unifying data protection regulation within the EU.
+Added: Compliance with the stringent data protection rules under GDPR requires ongoing review of our global data processing systems.
+Added: There are also new laws that have been adopted in recent years, including, for example, Brazil’s Lei Geral de Proteção de Dados with regulatory enforcement as of August 2021, and the California Privacy Rights Act with an effective date of January 1, 2023.
SEC Regulation Best Interest.
In June 2019, the SEC adopted a package of new rules, amendments and interpretations, including Regulation Best Interest and a new form of relationship summary, designed to enhance investor protections for all retail customers.
−Removed: Effective June 30, 2020, such rules, among other things:
+Added: Since June 30, 2020, such rules, among other things:
(i) require broker-dealers to act in the best interest of their retail customers when recommending securities and account types, (ii) raise the broker-dealer standard of conduct beyond existing suitability obligations, and (iii) require broker-dealers and registered investment advisers to provide their retail clients with a new relationship summary disclosure document to inform such clients of the nature of their relationships with the clients’ investment professionals, including a description of services offered, the legal standards of conduct that apply to such services, the fees a client might pay, and conflicts of interest that may exist.
and Global Tax Compliance.
−Removed: Tax Cuts and Jobs Act includes various changes to the tax law, including a permanent reduction in the corporate income tax rate and one-time transition tax on certain non-U.S.
−Removed: See Note 14 – Taxes on Income in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report for more information.
−Removed: Further, pursuant to ongoing efforts to encourage global tax compliance, the Organization for Economic Co-operation and Development (“OECD”) has adopted a global common reporting standard for the automatic exchange of financial information among participating countries (“CRS”), aimed at ensuring that persons with financial assets located outside of their tax residence country pay required taxes.
−Removed: In many cases, intergovernmental agreements between the participating countries will govern implementation of the new CRS rules.
−Removed: CRS is being implemented over a multi-year period and we will continue to monitor the implementing regulations and corresponding intergovernmental agreements to determine our requirements.
−Removed: CRS may subject us to additional reporting, compliance and administrative costs, and burdens in jurisdictions where we operate as a qualifying financial institution.
−Removed: The OECD has also undertaken a new project focused on “Addressing the Tax Challenges of the Digitalization of the Economy.” This project may impact all multinational businesses by allocating a greater share of taxing rights to countries where consumers are located regardless of the current physical presence of a business, and by implementing a global minimum tax.
−Removed: There is significant uncertainty regarding such proposal and any unfavorable resolution could have an adverse effect on our effective tax rate.
+Added: Our business may be directly or indirectly affected by tax legislation and regulation, or the modification of existing tax laws, by applicable tax and other governmental authorities.
+Added: The Organization for Economic Co-operation and Development, an intergovernmental organization, has focused on addressing the tax challenges of the digitalization of the economy, which may further impact multinational businesses by allocating a greater share of taxing rights to countries where consumers are located regardless of the current physical presence of a business, and by implementing a global minimum tax.
+Added: We will continue to monitor developments regarding such matters and any significant impacts on our effective tax rate.
Our operations outside the U.S.
9 unchanged sentences
The CSSF’s rules include capital resource, governance and risk management requirements, business conduct rules, remuneration rules and oversight of systems and controls.
−Removed: In Ireland, the Central Bank of Ireland (“CBI”) currently regulates our Irish business activities, including our Irish- licensed UCITS and AIF management company and our Irish-domiciled UCITS range.
−Removed: The CBI’s rules include capital resource, governance and risk management requirements, business conduct rules, remuneration rules and oversight of systems and controls.
−Removed: Our international funds include two broad ranges of cross-border UCITS that are domiciled in Luxembourg and Ireland, respectively, and thereby subject to regulation by the CSSF and CBI.
+Added: Our international funds include two broad ranges of cross-border UCITS that are domiciled in Luxembourg and Ireland, respectively, and thereby subject to regulation by the CSSF and the Central Bank of Ireland.
Both UCITS are also registered for public sale in many countries around the world, both in the EU and beyond, and thus are also subject to the laws of, and certain supervision by, the governmental authorities of those countries.
8 unchanged sentences
have adopted the MiFID rules into national legislation, as have those other EU member states in which we have a presence.
−Removed: A review of MiFID by the European Commission led to the creation of a replacement directive and a new regulation (together “MiFID II”) that extend the scope of the original MiFID in response to issues raised by the financial crisis.
+Added: A review of MiFID by the European Commission led to the creation of a replacement directive and regulation (together “MiFID II”) that extend the scope of the original MiFID.
Changes apply to pre- and post-trade reporting obligations and there is an expansion of the types of instruments subject to these requirements, such as bonds, structured products and derivatives.
−Removed: A new concept of trading venue has been created and algorithmic trading is subject to specific regulations.
−Removed: There are also changes to business conduct requirements, including selling practices, intermediary inducements and client categorization, as well as the provision of investment advice and management within the EU by non-EU advisers, including ours.
+Added: A concept of trading venue was created and algorithmic trading is subject to specific regulations.
+Added: There were also changes to business conduct requirements, including selling practices, intermediary inducements and client categorization, as well as the provision of investment advice and management within the EU by non-EU advisers, including ours.
Powers have also been given to EU national regulators to ban certain services and products and to the European Securities and Markets Authority to restrict temporarily certain financial activities within the EU.
−Removed: One of the most significant developments in MiFID II is the ban on commission and other payments (“inducements”) to independent advisers and discretionary managers, which has changed the commercial relationships between fund providers and distributors.
+Added: MiFID II also includes a ban on commission and other payments (“inducements”) to independent advisers and discretionary managers, which has changed the commercial relationships between fund providers and distributors.
Arrangements with non-independent advisers have also been affected, as narrower rules around the requirement that any commission reflect an enhancement of the service to customers come into effect, along with a prescriptive list of permissible non-monetary benefits.
6 unchanged sentences
The AIFMD also regulates the marketing within the EU of all AIFs, including those domiciled outside the EU.
−Removed: The introduction of a third-country passport to non-EU AIFs/AIF managers has been delayed until further positive advice is delivered to the European Commission regarding a sufficient number of non-EU countries to better evaluate the impact, including with respect to the proposed withdrawal of the U.K.
+Added: The introduction of a third-country passport to non-EU AIFs/AIF managers has been delayed until further positive advice is delivered to the European Commission regarding a sufficient number of non-EU countries to better evaluate the impact, including with respect to the withdrawal of the U.K.
Compliance with the AIFMD’s requirements may restrict AIF marketing and imposes compliance obligations in the form of remuneration policies, capital requirements, reporting requirements, leverage oversight, valuation, stakes in EU companies, the domicile, duties and liability of custodians and liquidity management.
−Removed: The EU’s Market Abuse Regulation’s (“MAR”) primary aim is to increase market integrity and investor protection, enhancing the attractiveness of securities markets for raising capital.
−Removed: Under MAR, EU market abuse rules become extra-territorial as long as the instrument has a listing on an EEA regulated market.
The EU regulation on packaged retail investment and insurance products (“PRIIPs”) imposed new pre-contractual disclosure requirements under the form of a Key Information Document (“KID”) for the benefit of retail investors when they are considering the purchase of packaged retail investment products or insurance-based products.
It requires PRIIP manufacturers to draw up a KID that can be no longer than three pages in length and must be written in simple language.
−Removed: The regulation allows UCITS providers, who are already required to produce the UCITS Key Investor Information Document, a transitional period until December 2021, during which they will be exempt from its terms.
−Removed: The EU’s GDPR strengthened and unified data protection rules for individuals within the EU.
−Removed: GDPR also addresses export of personal data outside the EU.
−Removed: The primary objectives of GDPR are to give citizens control of their personal data and to simplify the regulatory environment for international business by unifying data protection regulation within the EU.
−Removed: Compliance with the stringent data protection rules under GDPR requires an extensive review of all of our global data processing systems.
−Removed: The failure to comply properly with GDPR rules on a timely basis and to maintain ongoing compliance with such rules may subject us to enforcement proceedings and significant fines and costs.
−Removed: For example, a failure to comply with GDPR could result in fines of up to 20 million Euros or 4% of our annual global revenues, whichever is higher.
+Added: The regulation allows UCITS providers, who are already required to produce the UCITS Key Investor Information Document, a transitional period until July 2022, during which period they will be exempt from its terms.
+Added: The EU’s Sustainable Finance Disclosure Regulation (“SFDR”) came into effect in March 2021, imposing mandatory ESG disclosure obligations on asset managers and other financial markets participants.
+Added: It requires all covered firms to disclose how financial products integrate sustainability risks in the investment process, including whether they consider adverse sustainability impacts, and, for those products promoting sustainable objectives, the provision of sustainability-related information.
+Added: Related amendments to the MiFID, UCITS and AIFMD legislation require that all covered investment managers must consider in their investment process any ESG risks which are likely to have a material impact on the value of the investment, and require investment advisers to inquire as to the investor’s desire for ESG-focused products in their portfolio when assessing suitability.
+Added: The availability of these sustainability disclosures may impact the investment decisions of European investors.
British Exit from the EU (“Brexit”).
−Removed: withdrew from the EU on January 31, 2020.
−Removed: The timeline to conclude a new U.K./EU trade agreement by December 31, 2020 has been challenged in recent months by the global economic and health crisis caused by the coronavirus disease 2019 (“COVID-19”), and the final terms and implementation date of a new trade agreement remain uncertain.
−Removed: While we are monitoring the consequences very closely for our clients from an investment perspective, we believe that Brexit will not have a material impact on the way our firm operates in the U.K.
+Added: withdrew from the EU on January 31, 2020, and a post-Brexit U.K./EU trade agreement was subsequently approved by the EU in April 2021.
+Added: While we are continuing to monitor the impact and related developments for our clients from an investment perspective, we believe that Brexit will not have a material impact on the way our firm operates in the U.K.
or within the EU.
2 unchanged sentences
and certain non-EU customers.
−Removed: Furthermore, we have regulated subsidiaries and branch offices across continental Europe such that, in the event of a future restriction on cross-border trade in financial services and products between the U.K.
−Removed: and the EU, Brexit would be likely to have a limited effect on our EU business.
+Added: Furthermore, we have regulated subsidiaries and branch offices across continental Europe to manage our EU business.
Moreover, our primary cross-border UCITS, the Franklin Templeton Investment Funds Société d’Investissement à Capital Variable, or SICAV, investment fund range, which is the most widely-distributed such range in the world, is based in Luxembourg, and a smaller cross-border UCITS, also distributed throughout the EU and beyond, is based in Ireland.
6 unchanged sentences
Securities regulatory authorities impose certain requirements on registrants, including a standard of conduct, capital and insurance, record keeping, regulatory financial reporting, conflict of interest management, compliance systems and security holder reporting.
−Removed: In addition, as a federally licensed trust company, FTCC is subject to regulation and supervision by the Office of the Superintendent of Financial Institutions Canada and another subsidiary, FTC Investor Services Inc., is a member of and regulated by the Mutual Fund Dealers Association of Canada.
+Added: In addition, as a federally licensed trust company, FTCC is subject to regulation and supervision by the Office of the Superintendent of Financial Institutions and another subsidiary, FTC Investor Services Inc., is a member of and regulated by the Mutual Fund Dealers Association of Canada.
These regulatory bodies have similar requirements to those of the securities regulatory authorities with a view to ensuring the capital adequacy and sound business practices of the subsidiaries and the appropriate treatment of their clients.
−Removed: In December 2019, rule amendments to implement the client focused reforms initiative of the Canadian Securities Administrators (“CSA”), the umbrella organization of provincial and territorial securities regulatory authorities, became effective and will be phased in during a two-year transition period.
+Added: In December 2019, rule amendments to implement the client focused reforms initiative of the Canadian Securities Administrators (“CSA”), the umbrella organization of provincial and territorial securities regulatory authorities, became effective, with reforms phased in during a two-year transition period.
These rule amendments, among other things, enhance current registrant requirements in the areas of know your client, know your product, suitability, conflicts of interest and relationship disclosure information.
−Removed: The purposes of such amendments are to better align the interests of Canadian registrants with the interests of their clients, to improve outcomes for clients and to make clearer to clients the nature and the terms of their relationship with registrants.
−Removed: In addition, in 2020, the CSA published final rule amendments regarding certain of its previously proposed policy changes from June 2018 in connection with its mutual fund fee reform project.
+Added: In addition, the CSA has published final rule amendments to become effective in June 2022 in connection with its mutual fund fee reform project.
The final amendments prohibit:
−Removed: (i) all forms of deferred sales charges (“DSC”) in connection with the purchase of mutual fund securities (except in Ontario which is proposing restrictions on the use of DSC), and (ii) the payment of trailing commissions to discount brokers in respect of their distribution of mutual fund securities.
−Removed: These rule amendments will become effective in June 2022.
+Added: (i) all forms of deferred sales charges in connection with the purchase of mutual fund securities, and (ii) the payment of trailing commissions to discount brokers in respect of their distribution of mutual fund securities.
Cayman Islands.
3 unchanged sentences
Open-end funds such as hedge funds continue to be regulated by the Mutual Funds Law in the Cayman Islands.
−Removed: The new registration requirements applicable to our private funds domiciled in the Cayman Islands have posed, and may continue to pose, additional compliance costs and burdens on our business.
−Removed: In Hong Kong, our subsidiary is subject to the Securities and Futures Ordinance (“SFO”) and its subsidiary legislation, which governs the securities and futures markets and regulates, among others, offers of investments to the public and provides for the licensing of dealing in securities and asset management activities and intermediaries.
+Added: The registration requirements applicable to our private funds domiciled in the Cayman Islands have posed, and may continue to pose, additional compliance costs and burdens on our business.
+Added: In Hong Kong, our applicable subsidiaries are subject to the Securities and Futures Ordinance (“SFO”) and its subsidiary legislation, which governs the securities and futures markets and regulates, among others, offers of investments to the public and provides for the licensing of dealing in securities and asset management activities and intermediaries.
This legislation is administered by the Securities and Futures Commission (“SFC”).
The SFC is also empowered under the SFO to establish standards for compliance as well as codes and guidelines.
−Removed: Our subsidiary and its employees conducting any of the regulated activities specified in the SFO are required to be licensed with the SFC, and are subject to the rules, codes and guidelines issued by the SFC from time to time.
+Added: Our subsidiaries and employees conducting any of the regulated activities specified in the SFO are required to be licensed with the SFC, and are subject to the rules, codes and guidelines issued by the SFC from time to time.
The Securities and Exchange Board of India, Reserve Bank of India, the Ministry of Corporate Affairs and the Department of Industrial Policy and Promotion are the major regulatory authorities that are capable of issuing directions of a binding nature to our subsidiaries in India.
10 unchanged sentences
We have used, registered, and/or applied to register certain trademarks, service marks and trade names to distinguish our sponsored products and services from those of our competitors in the U.S.
−Removed: and in other countries and jurisdictions, including, but not limited to, Franklin ® , Templeton ® , Legg Mason ® , Balanced Equity Management ® , Benefit Street Partners ® , Darby ® , Edinburgh Partners™, Fiduciary Trust™, Franklin Bissett ® , Franklin Mutual Series ® , K2 ® and LibertyShares ® .
−Removed: In addition, pursuant to our Legg Mason acquisition, our additional brand names include Brandywine Global Investment Management ® , Clarion Partners ® , ClearBridge Investments ® , Martin Currie ® , QS Investors ® , Royce ® Investment Partners and Western Asset Management Company ® .
+Added: and in other countries and jurisdictions, including, but not limited to, Franklin ® , Templeton ® , Legg Mason ® , Benefit Street Partners ® , Brandywine Global Investment Management ® , Clarion Partners ® , ClearBridge Investments ® , Fiduciary Trust International™, Franklin Bissett ® , Franklin Mutual Series ® , K2 ® , LibertyShares ® , Martin Currie ® , Royce ® Investment Partners and Western Asset Management Company ® .
Our trademarks, service marks and trade names are important to us and, accordingly, we enforce our trademark, service mark and trade name rights.
4 unchanged sentences
We depend upon our key personnel to manage our business, including our portfolio managers, investment analysts, investment advisers, sales and management personnel and other professionals as well as our executive officers and business unit heads.
+Added: Competition for experienced personnel is significant and from time to time we may experience a loss of valuable personnel.
The retention of our key investment personnel is material to the management of our business.
−Removed: The departure of our key investment personnel could cause us to lose clients, which could adversely affect our business.
+Added: At an enterprise level, we use employee surveys to understand sentiment and engagement in the organization.
+Added: At a team level, our performance management system supports ongoing, active discussion about goals and objectives.
+Added: We also host live forums for leaders to engage directly with employees to help reinforce our culture of open feedback.
+Added: Our employees have access to a valuable set of equitable and competitive total rewards, which consists of a mix of monetary and non-monetary rewards designed to recognize their time, talents and results.
+Added: We believe that our ability to attract, develop and cultivate a sense of belonging and retain a diverse, highly skilled workforce is important to our long-term success and that creating and maintaining all aspects of diversity, including backgrounds and perspectives, makes us a better place to work and a more resilient business.
+Added: To accomplish this, we have developed strategies and initiatives to diversify talent within our organization.
+Added: We consider an inclusive culture that actively leverages the expertise and perspectives of our diverse workforce an important factor in our ability to deliver innovative and relevant client solutions in a dynamic marketplace.
AVAILABLE INFORMATION
The SEC maintains a website that contains current and periodic reports, proxy and information statements, and other information regarding issuers, including Franklin, that file electronically with the SEC, at www.sec.gov.
−Removed: Additional information about Franklin’s filings can also be obtained through our website at www.franklinresources.com under “Investor Relations.” We make available free of charge on our website Franklin’s Annual Report on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
+Added: Additional information about Franklin’s filings can also be obtained through our website at www.franklinresources.com under “Investor Relations.” We make available free of charge on our website Franklin’s Annual Report on Form 10‑K, Quarterly
+Added: Reports on Form 10‑Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Franklin periodically provides other information for investors on its website, such as press releases, presentations and other information about financial performance.
1 unchanged sentence
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.