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Item 8. Financial Statements and Supplementary Data

2021-11-19 compared with 2020-11-23 · 538 added, 363 removed, 843 unchanged (52% of the section changed)

1 unchanged sentence

Index of Consolidated Financial Statements for the fiscal years ended September 30, 2021, 2020 and 2019.

CONTENTS Page

Management’s Report on Internal Control Over Financial Reporting

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and its consolidated subsidiaries:

Consolidated Statements of Income for the fiscal years ended September 30, 2020, 2019 and 2018

Consolidated Statements of Income for the fiscal years ended September 30, 2021 , 2020 an d 2019

Consolidated Statements of Comprehensive Income for the fiscal years ended September 30, 2021, 2020 and 2019

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All schedules have been omitted as the information is provided in the financial statements or in related notes thereto or is not required to be filed, as the information is not applicable.

Certain required quarterly information is included in Item 7 of Part II of this Annual Report under the heading “Selected Quarterly Financial Data (Unaudited)” and incorporated herein by reference.

MANAGEMENT ’ S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

On July 31, 2020, Franklin Resources, Inc.

completed its acquisition of Legg Mason, Inc.

(“Legg Mason”).

Consistent with guidance issued by the Securities and Exchange Commission that an assessment of a recently acquired business may be omitted from management’s report on internal control over financial reporting in the year of acquisition, management excluded an assessment of the effectiveness of the Company’s internal control over financial reporting related to Legg Mason.

Total assets and operating revenues of Legg Mason that were excluded from management’s assessment constitute 12% of the Company’s consolidated total assets as of September 30, 2020 and 9% of consolidated total operating revenues for the fiscal year ended September 30, 2020.

Management’s basis for exclusion included the size and complexity of the acquired business, the timing between acquisition and fiscal year end, and expected integration plans during the fiscal year ending September 30, 2021.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2021, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013).

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Legg Mason, Inc.

from its assessment of internal control over financial reporting as of September 30, 2020 because Legg Mason, Inc.

was acquired by the Company in a purchase business combination during 2020.

We have also excluded Legg Mason, Inc.

from our audit of internal control over financial reporting.

Legg Mason, Inc.

is a wholly-owned subsidiary whose total assets and total operating revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 12% and 9%, respectively, of the related consolidated financial statement amounts as of and for the year ended September 30, 2020.

Definition and Limitations of Internal Control over Financial Reporting

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A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Acquisition of Legg Mason, Inc.

- Fair Value of Indefinite-lived and Definite-lived Investment Management Contract Intangible Assets and One Redeemable Noncontrolling Interest

As described in Notes 1 and 3 to the consolidated financial statements, in July 2020, the Company completed its acquisition of Legg Mason, Inc.

for a purchase consideration of $4.7 billion , which resulted in management recording $2.7 billion of indefinite-lived investment management contract intangible assets, $1.1 billion of definite-lived investment management contract intangible assets, and $186.4 million of redeemable noncontrolling interests.

Fair values of acquired indefinite-lived and definite-lived investment management contract intangible assets are based on the net present value of estimated future cash flows attributable to the contracts, which include significant assumptions about forecasts of the assets under management (“AUM”) growth rate, pre-tax profit margin, discount rate, average effective fee rate and effective tax rate.

Fair values of redeemable noncontrolling interests are determined using discounted cash flows and guideline public company methods, which include significant assumptions about forecasts of the AUM growth rate, pre-tax profit margin, discount rate and public company earnings multiples.

The principal considerations for our determination that performing procedures relating to the fair value of indefinite-lived and definite-lived investment management contract intangible assets and redeemable noncontrolling interest from the acquisition of Legg Mason, Inc.

is a critical audit matter are the significant judgment by management when developing the estimated fair value of indefinite-lived and definite-lived investment management contract intangible assets and redeemable noncontrolling interest;

this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to (i) the AUM growth rate and discount rate assumptions utilized within the net present value of estimated future cash flows for the valuation of the investment management contract intangible assets and redeemable noncontrolling interest and (ii) the public company earnings multiples utilized within the guideline public company method for the valuation of the redeemable noncontrolling interest.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Realizability of Deferred Tax Assets

As described in Note 14 to the consolidated financial statements, the Company had gross deferred tax assets of $1,169.8 million as of September 30, 2021, reduced by a $319.3 million valuation allowance.

Management records a valuation allowance to reduce the carrying values of deferred tax assets to the amount that is more likely than not to be realized.

In assessing whether a valuation allowance should be established against a deferred income tax asset, management considers all positive and negative evidence, which includes timing of expiration, projected sources of taxable income, limitations on utilization under the statute, and effectiveness of prudent and feasible tax planning strategies.

The principal considerations for our determination that performing procedures relating to the realizability of deferred tax assets is a critical audit matter are the significant judgment by management when assessing the realizability of deferred tax assets, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to management’s assessment of the realizability of deferred tax assets and significant assumptions relating to the timing of expiration, projected sources of taxable income, limitations on utilization under the statute, and effectiveness of prudent and feasible tax planning strategies.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the fair value of indefinite-lived and definite-lived investment management contract intangible assets and redeemable noncontrolling interest in the acquisition of Legg Mason, Inc., including controls over development of (i) the AUM growth rate and discount rate assumptions utilized within the net present value of estimated future cash flows and (ii) the public company earnings multiples utilized within the guideline public company method.

These procedures also included, among others, identifying the acquired contracts by reading the purchase agreement and testing management’s process for estimating the fair value of the acquired indefinite-lived and definite-lived investment management contract intangible assets and

redeemable noncontrolling interest.

Testing management’s process included (i) evaluating the appropriateness of the methods, (ii) testing the completeness, accuracy, and relevance of underlying data used in the methods, and (iii) evaluating management’s significant assumptions related to the AUM growth rate and discount rate for the valuation of the investment management contract intangible assets and redeemable noncontrolling interest, and the public company earnings multiples for the valuation of the redeemable noncontrolling interest.

Evaluating the reasonableness of the AUM growth rate and public company earnings multiples involved considering the past performance of the acquired business, the consistency with external market and industry data and whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Company’s discounted cash flow method and guideline public company method and the reasonableness of the discount rate.

These procedures included testing the effectiveness of controls relating to the realizability of deferred tax assets, including controls over the completeness and accuracy of data relevant to the analysis, determination of projected sources of taxable income and expected utilization of deferred tax assets.

These procedures also included, among others:

(i) evaluating management’s assessment of the realizability of deferred tax assets and the need for a valuation allowance, (ii) evaluating the reasonableness of management’s significant assumptions related to timing of expiration, projected sources of taxable income, limitations on utilization under the statute and effectiveness of prudent and feasible tax planning strategies, (iii) evaluating the prudence and feasibility of the implementation of available tax planning strategies, and (iv) testing the completeness and accuracy of the data utilized in the assessment of the realizability of deferred tax assets.

/s/ PricewaterhouseCoopers LLP

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Shareholder servicing fees 211.2 195.1 216.3

Other 37.2 27.7 23.3

Total operating revenues 8,425.5 5,566.5 5,669.4

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Information systems and technology 486.1 288.4 258.5

Occupancy 218.1 147.9 133.6

Amortization of intangible assets 232.0 54.0 14.7

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Taxes on income 349.6 230.8 442.3

Net income 2,094.6 787.1 1,205.5

net income (loss) attributable to

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Net Income Attributable to Franklin Resources, Inc.

$ 1,831.2 $ 798.9 $ 1,195.7

Earnings per Share

Basic $ 3.58 $ 1.59 $ 2.35

Diluted 3.57 1.59 2.35

See Notes to Consolidated Financial Statements.

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for the fiscal years ended September 30, 2021 2020 2019

Net Income $ 2,094.6 $ 787.1 $ 1,205.5

Other Comprehensive Income (Loss)

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Comprehensive Income Attributable to Franklin Resources, Inc.

$ 1,861.2 $ 822.9 $ 1,142.7

See Notes to Consolidated Financial Statements.

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Cash and cash equivalents $ 4,357.8 $ 3,026.8

Receivables 1,428.2 1,233.1

Investments (including $ 588.3 and $ 504.8 at fair value at September 30, 2021 and 2020)

1,510.3 1,304.5

Assets of consolidated investment products

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Property and equipment, net 770.0 813.8

Goodwill 4,457.7 4,500.8

Intangible assets, net 4,710.2 4,914.2

Operating lease right-of-use assets 448.4 534.8

Other 376.3 319.5

Total Assets $ 24,168.4 $ 21,684.5

Compensation and benefits $ 1,179.3 $ 1,064.0

Accounts payable and accrued expenses 479.3 426.9

Commissions 259.8 268.0

Income taxes 693.6 703.3

Debt 3,399.4 3,017.1

Liabilities of consolidated investment products

Accounts payable and accrued expenses 558.0 611.2

Debt 3,671.0 2,800.6

Deferred tax liabilities 311.7 305.3

Operating lease liabilities 518.4 621.0

Other 354.3 456.1

Total liabilities 11,424.8 10,273.5

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Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity

$ 24,168.4 $ 21,684.5

See Notes to Consolidated Financial Statements.

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Franklin Resources, Inc.

Stockholders’

Interests Total

Stockholders’

Common Stock Capital

Value Retained

Earnings Accum-

Loss Stockholders’

(in millions)

as of and for the fiscal years ended

September 30, 2020, 2019 and 2018

September 30, 2021, 2020 and 2019 Shares Amount

Balance at October 1, 2018 519.1 $ 51.9 $ — $ 10,217.9 $ ( 370.6 ) $ 9,899.2 $ 308.7 $ 10,207.9

Adoption of new accounting guidance

Net income (loss)

22.9 ( 8.0 ) 14.9 14.9

Net income 1,195.7 1,195.7 3.6 1,199.3

Other comprehensive loss ( 53.0 ) ( 53.0 ) ( 53.0 )

Dividends declared on common stock ($ 1.04 per share)

( 528.3 ) ( 528.3 ) ( 528.3 )

Repurchase of common stock

( 24.6 ) ( 2.5 ) ( 133.8 ) ( 620.0 ) ( 756.3 ) ( 756.3 )

Issuance of common stock

4.8 0.5 129.8 130.3 130.3

Stock-based compensation

Net distributions and other

Net subscriptions and other 103.6 103.6

Net consolidation of investment product 24.3 24.3

Purchase of noncontrolling interest

Acquisition 194.8 194.8

Balance at September 30, 2019 499.3 $ 49.9 $ — $ 10,288.2 $ ( 431.6 ) $ 9,906.5 $ 635.0 $ 10,541.5

Adoption of new accounting guidance

Other comprehensive loss

Net income (loss) 798.9 798.9 ( 60.4 ) 738.5

Other comprehensive income 24.0 24.0 24.0

Dividends declared on common stock ($ 1.08 per share)

( 539.0 ) ( 539.0 ) ( 539.0 )

Repurchase of common stock

( 9.0 ) ( 0.9 ) ( 143.0 ) ( 75.5 ) ( 219.4 ) ( 219.4 )

Issuance of common stock

4.8 0.5 126.7 127.2 127.2

Stock-based compensation

16.3 16.3 16.3

Net subscriptions and other 164.4 164.4

Net consolidation of investment product

Net deconsolidation of investment products ( 6.8 ) ( 6.8 )

Acquisitions 39.1 39.1

Wind-down of a subsidiary ( 16.7 ) ( 16.7 )

Balance at September 30, 2020 495.1 $ 49.5 $ — $ 10,472.6 $ ( 407.6 ) $ 10,114.5 $ 754.6 $ 10,869.1

Net income (loss)

Adoption of new accounting guidance

( 3.3 ) ( 3.3 ) ( 3.3 )

Net income 1,831.2 1,831.2 169.3 2,000.5

Other comprehensive income 30.0 30.0 30.0

Dividends declared on common stock ($ 1.12 per share)

( 573.7 ) ( 573.7 ) ( 573.7 )

Repurchase of common stock

( 7.3 ) ( 0.7 ) ( 192.8 ) ( 14.7 ) ( 208.2 ) ( 208.2 )

Issuance of common stock

14.0 1.4 132.0 133.4 133.4

Stock-based compensation

60.8 60.8 60.8

Net subscriptions and other ( 2.1 ) ( 2.1 ) 215.7 213.6

Deconsolidation of investment products

Wind-down of a subsidiary

Net deconsolidation of investment products ( 552.4 ) ( 552.4 )

Adjustment to fair value of redeemable noncontrolling interests ( 159.2 ) ( 159.2 ) ( 159.2 )

Balance at September 30, 2021 501.8 $ 50.2 $ — $ 11,550.8 $ ( 377.6 ) $ 11,223.4 $ 587.2 $ 11,810.6

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for the fiscal years ended September 30, 2021 2020 2019

Net Income $ 2,094.6 $ 787.1 $ 1,205.5

Adjustments to reconcile net income to net cash provided by operating activities:

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Impairments of intangible assets and goodwill — 55.4 13.3

Net (gains) losses on investments ( 75.5 ) 15.5 9.7

Losses (income) from investments in equity method investees ( 154.3 ) 98.1 10.4

Net losses on investments of consolidated investment products

Net (purchase) liquidation of investments by consolidated investment products

Net (gains) losses on investments of consolidated investment products ( 316.4 ) 36.8 26.3

Net purchase of investments by consolidated investment products ( 781.0 ) ( 682.8 ) ( 1,451.8 )

Deferred income taxes 3.7 ( 7.1 ) ( 1.3 )

Other 16.0 ( 28.7 ) 17.2

Changes in operating assets and liabilities:

Decrease (increase) in receivables and other assets ( 182.5 ) 134.7 ( 63.5 )

Decrease (increase) in receivables of consolidated investment products

Decrease (increase) in investments, net

Decrease in operating lease right-of-use assets

Decrease in investments, net 12.8 537.3 142.4

Increase (decrease) in accrued compensation and benefits 114.8 ( 10.5 ) 89.4

Decrease in commissions payable ( 8.2 ) ( 33.8 ) ( 43.9 )

Increase (decrease) in income taxes payable

Decrease in income taxes payable ( 12.5 ) ( 123.0 ) ( 210.1 )

Increase (decrease) in accounts payable, accrued expenses and other liabilities ( 89.1 ) ( 97.4 ) 126.0

Increase in accounts payable and accrued expenses of consolidated investment products 62.3 70.6 108.2

Decrease in operating lease liabilities

Net cash provided by operating activities 1,245.4 1,083.3 268.5

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Liquidation of investments

594.0 880.0 343.2

Purchase of investments by consolidated collateralized loan obligations

( 3,654.7 ) ( 1,530.3 ) ( 469.6 )

Liquidation of investments by consolidated collateralized loan obligations

Purchase of investments by consolidated investment products

Liquidation of investments by consolidated investment products

Issuance of loans receivable, net

1,624.2 448.3 88.6

Decrease (increase) in loan receivables, net 42.7 ( 40.6 ) —

Additions of property and equipment, net

( 79.3 ) ( 103.7 ) ( 233.7 )

Acquisitions, net of cash acquired

Net consolidation (deconsolidation) of investment products

( 9.0 ) ( 3,821.4 ) ( 493.5 )

Payments of contingent consideration asset 20.3 — —

Net (deconsolidation) consolidation of investment products ( 383.7 ) 587.2 ( 108.5 )

Net cash used in investing activities ( 2,615.9 ) ( 4,061.9 ) ( 1,275.4 )

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Dividends paid on common stock

( 559.7 ) ( 533.2 ) ( 518.6 )

Repurchase of common stock

( 208.2 ) ( 218.2 ) ( 754.5 )

Proceeds from issuance of debt 1,193.9 — —

Payment of debt issuance costs ( 11.8 ) — —

Payments on debt

( 750.0 ) — —

Proceeds from loan

Payments on loan

— ( 0.4 ) ( 1.5 )

Proceeds from debt of consolidated investment products

2,937.9 1,390.7 681.1

Payments on debt by consolidated investment products

( 1,315.7 ) ( 334.2 ) ( 221.4 )

Payments on contingent consideration liabilities

— ( 0.6 ) ( 20.4 )

Noncontrolling interests

Net cash provided by (used in) financing activities

721.4 409.5 1,150.2

Net cash provided by financing activities 2,030.1 734.4 339.9

Effect of exchange rate changes on cash and cash equivalents

Decrease in cash and cash equivalents

( 2.2 ) 27.4 ( 37.0 )

Increase (decrease) in cash and cash equivalents 657.4 ( 2,216.8 ) ( 704.0 )

Cash and cash equivalents, beginning of year

3,989.8 6,206.6 6,910.6

Cash and Cash Equivalents, End of Year

$ 4,647.2 $ 3,989.8 $ 6,206.6

Supplemental Disclosure of Cash Flow Information

Cash paid for income taxes

$ 498.0 $ 359.4 $ 520.8

Cash paid for interest

116.6 18.9 27.4

Cash paid for interest by consolidated investment products

102.8 65.6 2.3

See Notes to Consolidated Financial Statements.

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Note 1 – Significant Accounting Policies

Franklin Resources, Inc.

(“Franklin”) is a holding company with subsidiaries (collectively, the “Company”) operating under its Franklin Templeton and/or subsidiary brand names.

The Company provides investment management and related services in jurisdictions worldwide for investors in investment products which include sponsored funds, as well as institutional and high-net-worth separate accounts, retail separately managed account programs, sub-advised products, and other investment vehicles.

Franklin is a holding company with subsidiaries operating under its Franklin Templeton and/or subsidiary brand names.

The Company provides investment management and related services to investors in jurisdictions worldwide through investment products which include sponsored funds, as well as institutional and high-net-worth separate accounts, retail separately managed account programs, sub-advised products, and other investment vehicles.

In addition to investment management, the Company’s services include fund administration, sales and distribution, and shareholder servicing.

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Certain comparative amounts for prior fiscal years have been reclassified to conform to the financial statement presentation as of and for the fiscal year ended September 30, 2021 (“fiscal year 2021”).

In the quarter ended September 30, 2020, the Company changed the presentation of its consolidated statements of income to include dividend and investment income and expenses of consolidated investment products in other income, net.

Amounts for the comparative prior fiscal year periods have been reclassified to conform to the current year presentation.

These reclassifications had no impact on previously reported net income or financial position.

Management believes the revised presentation is more useful to readers of its financial statements and more accurately portrays the nature of the consolidated investment products (“CIP”) revenue and expenses as the operations of CIPs are not related to the Company’s core business.

The following table presents the effects of the change in the presentation of operating revenues, operating expenses and other income, net to the Company’s previously reported consolidated statements of income:

During the quarter ended June 30, 2021, the Company identified an error related to the accounting of its indirect interests in certain collateralized loan obligations (“CLOs”) held through a limited partnership and the Company’s conclusion to consolidate that limited partnership.

In accordance with U.S.

GAAP, the Company should have consolidated the CLOs as the Company is the primary beneficiary of these entities and should not have consolidated the limited partnership.

The error resulted in the misstatement of previously reported assets and liabilities and resulting cash flows.

The consolidation of the CLOs results in increases to total assets and liabilities partially offset by the deconsolidation of the limited partnership which results in a reduction to total assets and stockholders’ equity.

The error had no impact to net income attributable to the Company, earnings per share, retained earnings, or total Franklin Resources, Inc.

stockholders’ equity.

The Company determined that the error did not result in a material misstatement to its previously issued consolidated financial statements.

Nonetheless, for comparability, the Company has revised the comparative prior period amounts included in the consolidated balance sheets, consolidated statements of cash flows, and related footnote disclosures.

The impact of the error on the consolidated balance sheet as of September 30, 2020 is as follows:

(in millions) As Reported Adjustments As Revised

Receivables $ 1,200.6 $ 32.5 $ 1,233.1

Investments 1,270.5 34.0 1,304.5

Assets of consolidated investment products

Cash and cash equivalents 930.7 32.3 963.0

Investments, at fair value 2,709.2 1,364.8 4,074.0

Total Assets 20,220.9 1,463.6 21,684.5

Liabilities of consolidated investment products

Accounts payable and accrued expenses $ 510.1 $ 101.1 $ 611.2

Debt 1,333.4 1,467.2 2,800.6

Total Liabilities 8,705.2 1,568.3 10,273.5

Nonredeemable noncontrolling interests $ 859.3 $ ( 104.7 ) $ 754.6

Stockholders’ equity 10,973.8 ( 104.7 ) 10,869.1

Total Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity 20,220.9 1,463.6 21,684.5

The impact of the error on the consolidated statements of cash flows for the fiscal year ended September 30, 2020 and September 30, 2019 is as follows:

(in millions)

for the fiscal years ended September 30,

Operating Revenues

Operating Expenses

General, administrative and other 1

Other Income (Expenses)

Investment and other income (losses), net

Interest expense

Investment and other income of consolidated investment products, net

Expenses of consolidated investment products

Other income (expenses), net

______________

General, administrative and other includes amortization of intangible assets.

As Reported Adjustments As Revised As Reported Adjustments As Revised

Net cash provided by operating activities $ 1,021.4 $ 61.9 $ 1,083.3 $ 201.6 $ 66.9 $ 268.5

Net cash used in investing activities ( 3,243.1 ) ( 818.8 ) ( 4,061.9 ) ( 1,077.1 ) ( 198.3 ) ( 1,275.4 )

Net cash provided by (used in) financing activities 194.2 540.2 734.4 ( 40.5 ) 380.4 339.9

Consolidation.

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A VIE is an entity in which the equity investment holders have not contributed sufficient capital to finance its activities or do not have defined rights and obligations normally associated with an equity investment.

Substantially all of the Company ’ s VIEs are investment products, and its variable interests consist of its equity ownership interests in and investment management fees earned from these products.

The Company ’ s VIEs are primarily investment products, and its variable interests consist of its equity ownership interests in and investment management fees earned from these products.

The Company is the primary beneficiary of a VIE if it has the power to direct the activities that most significantly impact the VIE ’ s economic performance and the obligation to absorb losses of or right to receive benefits from the VIE that could potentially be significant to the VIE.

Investment management fees earned from VIEs are excluded from the primary beneficiary determination if they are deemed to be at market and commensurate with service.

The key estimates and assumptions used in the analyses include the amount of assets under management (“AUM”) and the life of the investment product.

The key assumption used in the analysis includes the amount of assets under management (“AUM”).

Related Parties include sponsored funds and equity method investees.

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A quantitative impairment test is performed if the results of the qualitative assessment indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying value or an indefinite-lived intangible asset is impaired, or if a qualitative assessment is not performed.

If a quantitative goodwill impairment test indicates that the carrying value of the goodwill exceeds the fair value of the reporting unit, impairment is recognized in the amount of the excess of the carrying value over the implied fair value of the goodwill, which considers the fair value assigned to all other assets and liabilities of the reporting unit.

If a quantitative indefinite-lived intangible assets impairment test indicates that the carrying value of the asset exceeds the fair value, impairment is recognized in the amount of the difference in values.

The fair values of the reporting unit and indefinite-lived intangible assets are based on the net present value of estimated future cash flows, which include assumptions about the AUM growth rate, pre-tax profit margin, discount rate, average effective fee rate and effective tax rate.

If a quantitative goodwill impairment test indicates that the carrying value of the reporting unit exceeds its fair value, impairment is recognized in the amount of the difference in values not to exceed the total amount of goodwill allocated to the reporting unit.

Definite-lived intangible assets are tested for impairment quarterly.

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The assessment of the hierarchy level of the assets or liabilities measured at fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Unadjusted quoted prices in active markets for identical assets or liabilities, which may include published net asset values (“NAV”) for fund products.

Observable inputs other than Level 1 quoted prices, such as non-binding quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, or model-based valuation methodologies that utilize significant assumptions that are observable or corroborated by observable market data.

Unobservable inputs that are supported by little or no market activity.

Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities, which may include published net asset values (“NAV”) for fund products.

Level 2 Observable inputs other than Level 1 quoted prices, such as non-binding quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, or model-based valuation methodologies that utilize significant assumptions that are observable or corroborated by observable market data.

Level 3 Unobservable inputs that are supported by little or no market activity.

These inputs require significant management judgment and reflect the Company’s estimation of assumptions that market participants would use in pricing the asset or liability.

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The price adjustments are primarily determined based on third-party factors derived from model-based valuation techniques for which the significant assumptions are observable in the market.

A substantial amount of the Company’s investments is recorded at fair value or amounts that approximate fair value on a recurring basis.

The Company’s investments are primarily recorded at fair value or amounts that approximate fair value on a recurring basis.

Investments in fund products for which fair value is estimated using NAV as a practical expedient (when the NAV is available to the Company as an investor but is not publicly available) are not classified in the fair value hierarchy.

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Sponsored funds and separate accounts are carried at fair value with changes in the fair value recognized as gains and losses in earnings.

The fair values of funds are determined based on their published NAV or estimated using NAV as a practical expedient.

The fair values of separate accounts are determined using quoted market prices, or independent third-party broker or dealer price quotes if quoted market prices are not available.

The fair values of fund products are determined based on their published NAV or estimated using NAV as a practical expedient.

The fair values of the underlying investments of the separate accounts are determined using quoted market prices, or independent third-party broker or dealer price quotes if quoted market prices are not available.

Investments related to long-term incentive plans consist primarily of investments in sponsored funds related to certain compensation plans that have vesting provision and are carried at fair value.

Changes in fair value are recognized as gains and losses in earnings.

The fair values of the investments are determined based on the funds’ published NAV or estimated using NAV as a practical expedient.

Other equity and debt securities consist of equity investment securities and debt securities classified as trading or available-for-sale and are carried at fair value.

Changes in the fair value of trading securities are recognized as gains and losses in earnings.

Unrealized gains and losses on available-for-sale securities are recorded net of tax as part of accumulated other comprehensive income (loss) until realized, at which time they are recognized in earnings using the average cost method.

The fair values of equity securities are determined using independent third-party broker or dealer price quotes or based on discounted cash flows using significant unobservable inputs.

The fair values of debt securities are determined using independent third-party broker or dealer price quotes or based on discounted cash flows using significant unobservable inputs.

The fair values of the investments are determined based on the sponsored funds’ published NAV or estimated using NAV as a practical expedient.

Other equity and debt securities consist of equity investment securities and debt securities carried at fair value.

Changes in the fair value of equity securities are recognized as gains and losses in earnings.

The fair values of equity and debt securities are determined using independent third-party broker or dealer price quotes or based on discounted cash flows using significant unobservable inputs.

Investments in Equity Method Investees consist of equity investments in entities, including sponsored funds, over which the Company is able to exercise significant influence, but not control.

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The time deposits are carried at cost, which approximates fair value due to their short-term nature and liquidity.

Life settlement contracts, which were disposed during fiscal year 2020, were carried at fair value, determined based on discounted cash flows using significant unobservable inputs.

Impairment of Investments.

Investments in available-for-sale securities, equity method investees and equity investments that do not have a readily determinable fair value are evaluated for impairment on a quarterly basis.

Investments in equity method investees and equity investments that do not have a readily determinable fair value are evaluated for impairment on a quarterly basis.

The evaluation of equity investments considers qualitative factors, including the financial condition and specific events related to an investee, that may indicate the fair value of the investment is less than its carrying value.

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ROU assets are tested for impairment when there is an indication that the carrying value of an asset may not be recoverable.

Deferred Sales Commissions consist of upfront commissions paid to financial advisers and broker-dealers on shares of sponsored funds sold without a front-end sales charge, and are amortized over the periods in which they are generally recovered from related revenues, which range from 18 months to seven years .

Deferred sales commissions are included in other assets in the consolidated balance sheet.

Debt consists of senior notes and junior notes which are carried at amortized cost.

The fair value is estimated using quoted market prices, independent third-party broker or dealer price quotes, or prices of publicly traded debt with similar maturities, credit risk and interest rates.

Amortization of debt premium and discount are recognized in interest expense.

Amortization of debt premium and discount are recognized over the terms of the notes in interest expense.

Debt of CIPs is carried at amortized cost.

The fair value is estimated using a discounted cash flow model that considers current interest rate levels, the quality of the underlying collateral and current economic conditions.

At September 30, 2020 , debt of CIPs also included debt of consolidated collateralized loan obligations (“CLOs”) which was measured primarily based on the fair value of the assets of the CLOs less the fair value of the Company’s own economic interests in the CLOs.

Debt of CIPs also included debt of consolidated collateralized loan obligations (“CLOs”) which was measured primarily based on the fair value of the assets of the CLOs less the fair value of the Company’s own economic interests in the CLOs.

Noncontrolling Interests consist of third-party equity interests in CIPs and minority interests in certain subsidiaries.

31 unchanged sentences

Forfeitures are accounted for as they occur.

The fair value of cash-settled phantom stock awards is amortized to compensation expense on a straight-line basis over the related vesting period, which is generally four years, and the related liability is carried at fair value.

Postretirement Benefits .

4 unchanged sentences

A valuation allowance is recorded to reduce the carrying values of deferred tax assets to the amount that is more likely than not to be realized.

For each tax position taken or expected to be taken in a tax return, the Company determines whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation.

In assessing whether a valuation allowance should be established against a deferred income tax asset, the Company considers all positive and negative evidence, which includes timing of expiration, projected sources of taxable income, limitations on utilization under the statute and the effectiveness of prudent and feasible tax planning strategies among other factors.

For each tax position taken or expected to be taken in a tax return, the Company utilizes significant judgment related to the range of possible favorable or unfavorable outcomes to determine whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation.

A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement.

Interest on tax matters is recognized in interest expense and penalties in other operating expenses.

As a multinational corporation, the Company operates in various locations outside the U.S.

and generates earnings worldwide.

The Company repatriates its foreign earnings that are in excess of regulatory, capital or operational requirements of all of its non-U.S.

The Company operates in numerous countries, states and other taxing jurisdictions.

The income tax laws are complex and subject to different interpretations by the taxpayer and the relevant taxing authorities.

Significant judgment is required in the determination of the Company’s annual income tax provisions, which includes the assessment of deferred tax assets and uncertain tax positions, as well as the interpretation and application of existing and newly enacted tax laws, regulation changes, and new judicial rulings.

The Company repatriates foreign earnings that are in excess of regulatory, capital or operational requirements of all of its non-U.S.

subsidiaries.

7 unchanged sentences

Recently Adopted Accounting Guidance

On October 1, 2019 , the Company adopted new guidance issued by the Financial Accounting Standards Board (“FASB”) for leases.

The new guidance requires lessees to recognize assets and liabilities arising from substantially all leases.

The guidance also requires an evaluation at the inception of a contract to determine whether the contract is or contains a lease.

The Company adopted the new guidance using the modified retrospective approach and recognized right-of-use assets of $ 274.5 million and lease liabilities of $ 315.2 million , substantially all of which relate to real estate leases.

The right-of-use assets recognized as of October 1, 2019 were net of $ 40.7 million of deferred rent previously included in other liabilities on the consolidated balance sheet.

See Note 15 – Leases for additional disclosures.

Accounting Guidance Not Yet Adopted

The FASB issued new guidance for the accounting for credit losses in June 2016.

On October 1, 2020, the Company adopted new guidance issued by the Financial Accounting Standards Board (“FASB”) for credit losses.

The new guidance requires the application of a current expected credit loss model for financial assets measured at amortized cost, including receivables, and an allowance for credit loss model for available-for-sale debt securities.

The Company will adopt the guidance on October 1, 2020 and expects to recognize a cumulative effect adjustment to retained earnings of approximately $ 6 million .

Note 3 – Acquisitions

The Company adopted the new guidance using the modified retrospective approach and recognized a cumulative effect adjustment resulting in a decrease of $ 4.1 million in receivables, net, offset by decreases of $ 0.8 million in deferred tax liabilities and $ 3.3 million in retained earnings as of October 1, 2020 .

Note 3 – Acquisition

Legg Mason, Inc.

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(“Legg Mason”) common stock for a purchase consideration of $ 4.5 billion in cash and $ 0.2 billion related to the settlement of historical compensation arrangements.

Legg Mason has outstanding debt with an aggregate principal amount due of $ 2.0 billion .

The acquisition of Legg Mason, a global investment management organization, establishes the Company as of one of the world’s largest independent, specialized global investment managers, significantly deepens the Company’s presence in key geographies and creates an expansive investment platform that is well balanced between institutional and retail client AUM.

Legg Mason had outstanding debt with an aggregate principal amount due of $ 2.0 billion on the acquisition date.

The acquisition of Legg Mason, a global investment management organization, established the Company as of one of the world’s largest independent, specialized global investment managers, significantly deepened the Company’s presence in key geographies and created an expansive investment platform that is well balanced between institutional and retail client AUM.

The EnTrust business was acquired by its management concurrent with the closing of the acquisition.

The purchase price allocation is preliminary and subject to change during the measurement period, which is not to exceed one year from the acquisition date.

At this time, the Company does not expect material changes to the assets acquired or liabilities assumed with the exception of deferred tax assets and liabilities which were valued using preliminary assumptions.

The initial estimated fair values of the assets acquired and liabilities and noncontrolling interests assumed were as follows:

(in millions)

The initial and revised estimated fair values of the assets acquired and liabilities and noncontrolling interests assumed were as follows:

(in millions) Initial Estimated

Fair Value Adjustments Revised Estimated

as of July 31, 2020

1 unchanged sentence

Cash and cash equivalents of consolidated investment products 253.4 — 253.4

Investments 471.8 — 471.8

Investments of consolidated investment products 402.9 — 402.9

Receivables 525.7 — 525.7

Indefinite-lived intangible assets 2,727.8 — 2,727.8

Definite-lived intangible assets 1

1,353.8 — 1,353.8

Goodwill 2,325.0 ( 52.4 ) 2,272.6

Deferred tax assets 148.4 57.6 206.0

Other assets 530.7 — 530.7

Debt ( 2,324.4 ) — ( 2,324.4 )

Debt of consolidated investment products ( 330.8 ) — ( 330.8 )

7 unchanged sentences

1 Includes $ 1,123.2 million related to management contracts and $ 230.6 million related to trade names.

The adjustments to the initial estimated fair values are a result of new information obtained about facts that existed as of the acquisition date.

The goodwill is primarily attributable to expected growth opportunities and synergies from the combined operations and is not deductible for tax purposes.

2 unchanged sentences

Definite-lived intangible assets are amortized over their estimated useful lives, which range from 5.0 years to 7.0 years for those related to the contracts and 5.0 years to 20.0 years for those related to trade names.

The definite-lived intangible assets related to the contracts and trade names have estimated weighted-average useful lives of 5.9 years and 14.5 years , respectively.

The Legg Mason debt is recorded at fair value on acquisition-date and includes a premium of $ 324.4 million .

Transaction costs incurred in connection with the acquisition were $ 57.4 million in fiscal year 2020.

The definite-lived intangible assets related to the contracts and trade names had estimated weighted-average useful lives of 5.9 years and 14.5 years, respectively, at acquisition.

The Legg Mason debt was recorded at fair value on acquisition-date and included a premium of $ 324.4 million .

Transaction costs incurred in connection with the acquisition were $ 6.7 million and $ 57.4 million in fiscal years 2021 and 2020.

These costs were primarily comprised of professional fees, recorded in general, administrative and other expenses.

The Company also incurred $ 119.6 million of acquisition-related compensation and benefits expense in fiscal year 2020, primarily related to the acceleration of expense for historical Legg Mason compensation arrangements and retention bonuses.

Revenue and net loss of Legg Mason included in total operating revenues and net income attributable to Franklin Resources, Inc.

in the accompanying consolidated statements of income from the acquisition date through September 30, 2020 were $ 475.7 million and $ 28.7 million , respectively.

The Company also incurred $ 13.0 million and $ 119.6 million of acquisition-related compensation and benefits expense in fiscal years 2021 and 2020, primarily related to the acceleration of expense for historical Legg Mason compensation arrangements and retention bonuses.

Revenue and net income (loss) of Legg Mason included in total operating revenues and net income attributable to Franklin Resources, Inc.

in the accompanying consolidated statements of income were $ 1,500.8 million and $ 291.4 million for the six month period ended March 31, 2021 and were $ 475.7 million and $( 28.7 ) million from the acquisition date through September 30, 2020.

Due to the continued integration of the combined businesses, it is no longer practicable to separately report total revenue and net income of Legg Mason for periods subsequent to March 31, 2021.

The following unaudited pro forma summary presents combined results of operations of the Company as if the Legg Mason acquisition and concurrent divestiture of EnTrust business had occurred on October 1, 2018.

3 unchanged sentences

for the fiscal year ended September 30, 2020 2019

Revenues $ 7,862.0 $ 8,436.0

Net Income Attributable to Franklin Resources, Inc.

Benefit Street Partners L.L.C.

On February 1, 2019 , the Company acquired all of the outstanding ownership interests in Benefit Street Partners L.L.C.

(“BSP”), a U.S.

alternative credit manager, for a purchase consideration of $ 720.1 million in cash, of which $ 135.0 million was used to retire debt.

The acquisition provides the Company private credit capabilities that complement its alternative and fixed income strategies available to clients.

The estimated fair values of the assets acquired and liabilities and noncontrolling interests assumed were as follows:

(in millions)

as of February 1, 2019

Investments of consolidated investment products

Indefinite-lived intangible assets

Definite-lived intangible assets

Other liabilities

Nonredeemable noncontrolling interests

Total Identifiable Net Assets

The goodwill is primarily attributable to expected growth from the private credit asset class.

The amount of goodwill expected to be deductible for tax purposes is $ 453.2 million , which includes deferred payments that are recognized as compensation expense for accounting purposes.

Costs incurred in connection with the acquisition were $ 6.8 million in the fiscal year ended September 30, 2019 (“fiscal year 2019 ”).

The Company has not presented pro forma combined results of operations for the acquisition of BSP, because the results of operations as reported in the accompanying consolidated statements of income would not have been materially different.

Note 4 – Earnings per Share

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Net income attributable to Franklin Resources, Inc.

$ 1,831.2 $ 798.9 $ 1,195.7

allocation of earnings to participating nonvested stock and stock unit awards

77.7 15.3 10.9

Net Income Available to Common Stockholders $ 1,753.5 $ 783.6 $ 1,184.8

Weighted-average shares outstanding – basic

489.9 491.9 503.6

Dilutive effect of nonparticipating nonvested stock unit awards

1 unchanged sentence

Earnings per Share

Nonparticipating nonvested stock unit awards excluded from the calculation of diluted earnings per share because their effect would have been antidilutive were 0.5 million for fiscal year 2020 , 0.2 million for fiscal year 2019 , and 0.3 million for the fiscal year ended September 30, 2018 (“fiscal year 2018 ”).

Basic $ 3.58 $ 1.59 $ 2.35

Diluted 3.57 1.59 2.35

Nonparticipating nonvested stock unit awards excluded from the calculation of diluted earnings per share because their effect would have been antidilutive were 0.5 million for fiscal year 2020, and 0.2 million for the fiscal year ended September 30, 2019 (“fiscal year 2019”).

No nonparticipating nonvested stock unit awards were excluded for fiscal 2021.

Note 5 – Revenues

Operating revenues by geographic area were as follows:

(in millions)

(in millions) United

States Luxembourg Americas

Pacific Europe,

Luxembourg Total

for the fiscal year ended

1 unchanged sentence

Investment management fees

$ 4,647.7 $ 1,075.0 $ 285.6 $ 333.3 $ 200.0 $ 6,541.6

Sales and distribution fees

1,137.4 395.8 52.5 46.1 3.7 1,635.5

Shareholder servicing fees

(in millions)

164.7 36.1 0.2 6.6 3.6 211.2

29.2 1.0 — 1.9 5.1 37.2

$ 5,979.0 $ 1,507.9 $ 338.3 $ 387.9 $ 212.4 $ 8,425.5

(in millions) United

States Luxembourg Americas

Pacific Europe,

Luxembourg Total

for the fiscal year ended

1 unchanged sentence

Investment management fees

$ 2,482.5 $ 910.1 $ 269.2 $ 217.6 $ 102.3 $ 3,981.7

Sales and distribution fees

928.8 366.1 51.9 13.6 1.6 1,362.0

Shareholder servicing fees

(in millions)

158.6 25.5 0.3 8.4 2.3 195.1

24.9 1.2 — 0.6 1.0 27.7

$ 3,594.8 $ 1,302.9 $ 321.4 $ 240.2 $ 107.2 $ 5,566.5

(in millions) United

States Luxembourg Americas

Pacific Europe,

Luxembourg Total

for the fiscal year ended

1 unchanged sentence

Investment management fees

$ 2,260.6 $ 1,064.7 $ 325.4 $ 241.8 $ 92.7 $ 3,985.2

Sales and distribution fees

941.3 437.2 63.3 1.3 1.5 1,444.6

Shareholder servicing fees

175.7 30.1 0.1 10.4 — 216.3

18.6 1.5 — 1.0 2.2 23.3

$ 3,396.2 $ 1,533.5 $ 388.8 $ 254.5 $ 96.4 $ 5,669.4

Operating revenues are attributed to geographic areas based on the locations of the subsidiaries that provide the services, which may differ from the regions in which the related investment products are sold.

Revenues earned from sponsored funds were 81 %, 89 % and 92 % of the Company’s total operating revenues for the fiscal years 2021, 2020 and 2019.

Note 6 – Investments

8 unchanged sentences

Other equity and debt investments 60.0 54.8

Life settlement contracts

Total investments, at fair value 588.3 504.8

1 unchanged sentence

Other investments 107.7 83.5

The Company recognized other-than-temporary impairment of $ 9.7 million during fiscal year 2020 , and $ 10.5 million and $ 1.7 million during fiscal years 2019 and 2018 .

Total $ 1,510.3 $ 1,304.5

Note 7 – Fair Value Measurements

2 unchanged sentences

The assets and liabilities measured at fair value on a recurring basis were as follows:

(in millions)

(in millions) Level 1 Level 2 Level 3 NAV as a

Expedient Total

as of September 30, 2021

1 unchanged sentence

Sponsored funds and separate accounts

$ 176.3 $ 40.9 $ 17.4 $ 68.8 $ 303.4

Investments related to long-term incentive plans

145.5 — — 1.1 146.6

Other equity and debt investments

Life settlement contracts

2.1 1.5 — 51.2 54.8

Contingent consideration asset — — 39.7 — 39.7

Total Assets Measured at Fair Value $ 323.9 $ 42.4 $ 57.1 $ 121.1 $ 544.5

Investments for which fair value was estimated using reported NAV as a practical expedient primarily consist of nonredeemable private debt, equity and infrastructure funds, and redeemable global equity funds and investments related to long-term incentive plans.

The investments in nonredeemable funds are expected to be returned through distributions over the life of the funds as a result of liquidations of the funds’ underlying assets.

Investments with known liquidation periods were $ 51.2 million with an expected weighted-average life of 1.9 years at September 30, 2020 , and $ 46.9 million with an expected weighted-average life of 1.3 years at September 30, 2019 .

The liquidation period for an investment in a private debt fund of $ 40.2 million and $ 48.6 million at September 30, 2020 and 2019 is unknown.

The Company’s unfunded commitments to the funds totaled $ 9.5 million and $ 4.7 million at September 30, 2020 and 2019 .

The redeemable global equity funds investment of $ 25.3 million and $ 10.1 million at September 30, 2020 and 2019 can be redeemed monthly, and investments related to long-term incentive plans of $ 1.1 million at September 30, 2020 can be redeemed semi-monthly.

Changes in the Level 3 assets and liabilities were as follows:

Contingent consideration liabilities $ — $ — $ 25.3 $ — $ 25.3

These investments were as follows:

(in millions)

as of September 30, 2021 2020

Nonredeemable investments 1

Investments with known liquidation periods $ 53.9 $ 51.2

Investments with unknown liquidation periods 46.6 42.6

Redeemable investments 2

Unfunded commitments 51.8 9.5

_______________

1 The investments are expected to be returned through distributions over the life of the funds as a result of liquidations of the funds’ underlying assets.

Investments with known liquidation periods have an expected weighted-average life of 4.0 years and 1.9 years at September 30, 2021 and 2020.

2 Investments are redeemable on a monthly and quarterly basis.

Changes in the Level 3 assets and liabilities were as follows:

(in millions) Investments Contingent

Consideration

Asset Contingent

Consideration

Liabilities Investments Contingent

Consideration

Asset Contingent

Consideration

for the fiscal years ended September 30,

Balance at beginning of year

$ 17.4 $ 39.7 $ ( 25.3 ) $ 32.1 $ — $ —

— — ( 13.0 ) — 39.7 ( 27.9 )

Total realized and unrealized gains (losses)

1 unchanged sentence

Included in general, administrative and other expense

— — ( 4.1 ) — — 2.0

17.6 — — 22.6 — —

( 6.0 ) — — ( 19.0 ) — —

( 3.5 ) ( 20.3 ) — ( 8.4 ) — 0.6

Consolidation of investment product — — — ( 10.0 ) — —

Transfers into Level 3

1.9 — — 0.1 — —

Transfers out of Level 3

( 3.1 ) — — — — —

Balance at End of Year $ 24.6 $ 19.4 $ ( 42.4 ) $ 17.4 $ 39.7 $ ( 25.3 )

1 unchanged sentence

Financial instruments that were not measured at fair value were as follows:

(in millions)

Level 2021 2020

(in millions) Carrying

Value Estimated

Fair Value Carrying

Value Estimated

as of September 30,

6 unchanged sentences

Financial Liability

Debt 2 $ 3,399.4 $ 3,434.1 $ 3,017.1 $ 3,086.5

Note 8 – Property and Equipment

Property and equipment, net consisted of the following:

(in millions)

(in millions) Useful Lives

as of September 30, 2021 2020

Buildings and leasehold improvements $ 868.2 $ 877.4 5 - 35

Software 609.4 576.2 3 - 10

Equipment and furniture 390.6 374.0 3 - 10

Land 82.5 83.0 N/A

Total cost 1,950.7 1,910.6

accumulated depreciation and amortization ( 1,180.7 ) ( 1,096.8 )

1 unchanged sentence

Depreciation and amortization expense related to property and equipment was $ 124.4 million, $ 95.2 million and $ 83.2 million in fiscal years 2021, 2020 and 2019.

The Company recognized $ 6.6 million of equipment impairment during fiscal year 2018 , and insignificant impairment amounts during fiscal year 2019 .

No impairment of equipment was recorded in fiscal year 2020.

The Company recognized no impairment of property and equipment in fiscal years 2021 and 2020 and an insignificant impairment during the fiscal year ended 2019.

Note 9 – Goodwill and Other Intangible Assets

2 unchanged sentences

as of September 30, 2021 2020

Goodwill $ 4,457.7 $ 4,500.8

Indefinite-lived intangible assets 3,527.8 3,500.8

5 unchanged sentences

Balance at beginning of year $ 4,500.8 $ 2,130.3

Acquisitions — 2,389.1

Impairment — ( 23.7 )

Purchase price allocation adjustment 1

Foreign exchange revaluation 9.3 5.1

Balance at End of Year $ 4,457.7 $ 4,500.8

During the fiscal year 2020 , a $ 23.7 million impairment of goodwill was recognized due to the decision to wind-down operations of Onsa Inc.

(formally known as TokenVault, Inc.) which was acquired in fiscal year 2020 .

______________

1 Refer to Note 3 - Acquisitions

During fiscal years 2021 and 2019, no impairment of goodwill was recognized.

During the fiscal year 2020, a $ 23.7 million impairment of goodwill was recognized due to the decision to wind-down operations of Onsa Inc (formerly known as TokenVault, Inc.).

No impairment of indefinite-lived intangible assets was recognized during fiscal year 2021.

The Company recognized impairments of indefinite-lived intangible assets of $ 30.0 million and $ 9.3 million during fiscal years 2020 and 2019.

The impairment in fiscal year 2020 was primarily attributable to a BSP related management contract due to declines in revenue growth rates.

The impairment in fiscal year 2020 was primarily attributable to a Benefit Street Partners L.L.C.

related management contract due to declines in revenue growth rates.

The impairment in fiscal year 2019 was related to Canadian management contracts due to revised estimates of future pre-tax profit margins and AUM growth rates for the associated fund products.

No impairment of indefinite-lived intangible assets was recognized during fiscal year 2018 .

Definite-lived intangible assets were as follows:

(in millions)

(in millions) Gross

Value Accumulated

Amortization Net

Value Accumulated

Amortization Net

as of September 30,

Management contracts $ 1,232.0 $ ( 262.6 ) $ 969.4 $ 1,231.2 $ ( 57.6 ) $ 1,173.6

Trade names 230.7 ( 28.0 ) 202.7 230.6 ( 4.0 ) 226.6

Developed software 14.4 ( 4.1 ) 10.3 14.4 ( 1.2 ) 13.2

The Company recognized impairment of definite-lived intangible assets of $ 1.7 million , $ 4.0 million and $ 5.7 million during fiscal years 2020 , 2019 and 2018 , primarily due to investor redemptions.

Total $ 1,477.1 $ ( 294.7 ) $ 1,182.4 $ 1,476.2 $ ( 62.8 ) $ 1,413.4

No impairment of definite-lived intangible assets was recognized during fiscal year 2021.

The Company recognized impairment of definite-lived intangible assets of $ 1.7 million and $ 4.0 million during fiscal years 2020 and 2019, primarily due to investor redemptions.

Definite-lived intangible assets had a weighted-average remaining useful life of 6.7 years at September 30, 2021, with estimated remaining amortization expense as follows:

(in millions)

for the fiscal years ending September 30,

for the fiscal years ending September 30, Amount

Thereafter 136.2

Total $ 1,182.4

Note 10 – Debt

2 unchanged sentences

Debt consisted of the following:

(in millions)

Interest Rate

(in millions) 2021 Effective

Interest Rate 2020 Effective

Interest Rate

2 unchanged sentences

$ 300 million 2.800 % senior notes due September 2022

$ 299.9 2.93 % $ 299.8 2.93 %

$ 400 million 2.850 % senior notes due March 2025

399.7 2.97 % 399.7 2.97 %

$ 850 million 1.600 % senior notes due October 2030

846.3 1.74 % — N/A

$ 350 million 2.950 % senior notes due August 2051

347.8 3.00 % — N/A

Total notes issued by Franklin Resources, Inc.

1,893.7 699.5

Notes issued by Legg Mason (a subsidiary of Franklin)

$ 250 million 3.950 % senior notes due July 2024

266.5 1.53 % 272.4 1.53 %

$ 450 million 4.750 % senior notes due March 2026

509.6 1.80 % 523.0 1.80 %

$ 550 million 5.625 % senior notes due January 2044

742.2 3.38 % 747.5 3.38 %

$ 250 million 6.375 % junior notes due March 2056

— N/A 260.7 6.08 %

$ 500 million 5.450 % junior notes due September 2056

— N/A 516.1 5.25 %

Total notes issued by Legg Mason 1,518.3 2,319.7

Loan due December 2019

Debt issuance costs ( 12.6 ) ( 2.1 )

Total $ 3,399.4 $ 3,017.1

On September 15, 2021, the Company redeemed all of the outstanding $ 500.0 million 5.450 % junior notes due in September 2056 issued by Legg Mason at the principal amount plus accrued and unpaid interest of $ 6.8 million.

On August 12, 2021, the Company completed its offering and sale of $ 350.0 million in aggregate principal amount of 2.950 % senior unsecured unsubordinated notes due August 2051.

The Company incurred $ 4.1 million of debt issuance costs and the notes were issued at a discount of $ 2.2 million.

On March 15, 2021, the Company redeemed all of the outstanding $ 250.0 million 6.375 % junior notes due in March 2056 issued by Legg Mason at the principal amount plus accrued and unpaid interest of $ 4.0 million.

On October 19, 2020, the Company completed its offering and sale of $ 750.0 million in aggregate principal amount of 1.600 % senior unsecured unsubordinated notes due October 2030 (“1.600% Senior Notes”).

On August 12, 2021, the Company issued an additional $ 100.0 million in aggregate principal of 1.600 % Senior Notes.

The Company incurred $ 7.7 million in debt issuance costs in total and the notes were issued at an aggregate discount of $ 3.9 million.

At September 30, 2021, Franklin’s outstanding senior unsecured unsubordinated notes had an aggregate principal amount due of $ 1,900.0 million.

The notes have fixed interest rates with interest payable semi-annually.

At September 30, 2020 , Legg Mason’s outstanding senior and junior unsecured unsubordinated notes had an aggregate principal amount due of $ 2,000.0 million .

The notes have fixed interest rates with interest payable semi-annually for senior notes and quarterly for junior notes.

The senior notes contain an optional redemption feature that allows the Company to redeem each series of notes prior to maturity in whole or in part at any time, at a make-whole redemption price.

The junior notes due March 2056 and September 2056 may only be redeemed in whole prior to March 2021 and September 2021, respectively.

At September 30, 2021, Legg Mason’s outstanding senior unsecured unsubordinated notes had an aggregate principal amount due of $ 1,250.0 million.

The notes have fixed interest rates with interest payable semi-annually.

Effective August 2, 2021, Franklin has agreed to unconditionally and irrevocably guarantee all of the outstanding notes issued by Legg Mason.

The Franklin and Legg Mason senior notes contain an optional redemption feature that allows the Company to redeem each series of notes prior to maturity in whole or in part at any time, at a make-whole redemption price.

The indentures governing the senior notes contain limitations on the Company’s ability and the ability of its subsidiaries to pledge voting stock or profit participating equity interests in its subsidiaries to secure other debt without similarly securing the notes equally and ratably.

2 unchanged sentences

At September 30, 2021, the Company had $ 500.0 million of short-term commercial paper available for issuance under an uncommitted private placement program which has been inactive since 2012.

On October 19, 2020, the Company completed its offering and sale of the 1.600 % Notes due 2030 with a principal amount of $ 750.0 million .

See Note 22 – Subsequent Event for additional information.

Note 11 – Consolidated Investment Products

CIPs consist of mutual and other investment funds, limited partnerships and similar structures, and CLOs, all of which are sponsored by the Company, and include both VOEs and VIEs.

CLOs are asset-backed financing entities collateralized by a pool of corporate loans.

The Company had 72 CIPs, including four CLOs, as of September 30, 2020 and 60 CIPs, none of which were CLOs, as of September 30, 2019 .

The Company had 60 CIPs, including ten CLOs, as of September 30, 2021 and 75 CIPs, including eight CLOs, as of September 30, 2020.

The balances related to CIPs included in the Company’s consolidated balance sheets were as follows:

2 unchanged sentences

Cash and cash equivalents $ 289.4 $ 963.0

Receivables 127.8 118.3

Investments, at fair value 5,820.1 4,074.0

Total Assets $ 6,237.3 $ 5,155.3

Accounts payable and accrued expenses

$ 558.0 $ 611.2

Debt 3,671.0 2,800.6

Other liabilities 13.8 12.1

3 unchanged sentences

Franklin Resources, Inc.’s interests

1,000.7 754.4

Nonredeemable noncontrolling interests

1 unchanged sentence

Total Liabilities, Redeemable Noncontrolling Interests and Stockholders ’ Equity

$ 6,237.3 $ 5,155.3

The CIPs did not have a significant impact on net income attributable to the Company in fiscal years 2021, 2020 and 2019.

2 unchanged sentences

Fair Value Measurements

Assets and liabilities of CIPs measured at fair value on a recurring basis were as follows:

(in millions)

Assets of CIPs measured at fair value on a recurring basis were as follows:

(in millions) Level 1 Level 2 Level 3 NAV as a

Expedient Total

as of September 30, 2021

2 unchanged sentences

Equity and debt securities 310.8 647.3 453.3 343.5 1,754.9

Loans — 3,955.3 20.5 — 3,975.8

Real Estate — — 89.4 — 89.4

Total Assets Measured at Fair Value $ 456.2 $ 4,686.6 $ 563.2 $ 343.5 $ 6,049.5

(in millions)

(in millions) Level 1 Level 2 Level 3 NAV as a

Expedient Total

as of September 30, 2020

Cash and cash equivalents of CLOs $ 527.3 $ — $ — $ — $ 527.3

Receivables of CLOs — 57.8 — — 57.8

Equity and debt securities 177.6 285.7 322.3 261.1 1,046.7

Loans — 2,663.2 24.9 — 2,688.1

Real estate — — 339.2 — 339.2

Total Assets Measured at Fair Value $ 704.9 $ 3,006.7 $ 686.4 $ 261.1 $ 4,659.1

Investments for which fair value was estimated using reported NAV as a practical expedient consist of nonredeemable real estate and private equity funds.

These investments are expected to be returned through distributions over the life of the funds as a result of liquidations of the funds’ underlying assets over a weighted-average period of 4.2 years and 4.4 years at September 30, 2020 and 2019 .

The CIPs’ unfunded commitments to these funds totaled $ 94.0 million and $ 168.7 million , of which the Company was contractually obligated to fund $ 11.4 million and $ 20.6 million based on its ownership percentage in the CIPs, at September 30, 2020 and 2019 .

Changes in Level 3 assets were as follows:

Investments for which fair value was estimated using reported NAV as a practical expedient consist of redeemable global hedge fund, nonredeemable private equity funds and redeemable U.S.

These investments were as follows:

(in millions)

Equity and Debt

as of September 30, 2021 2020

Nonredeemable investments 1

Investments with known liquidation periods $ 141.4 $ 261.1

Redeemable investments 2

Unfunded commitments 3

_______________

1 The investments are expected to be returned through distributions over the life of the funds as a result of liquidations of the funds’ underlying assets.

Investments have an expected weighted-average life of 1.3 years and 4.2 years at September 30, 2021 and 2020.

2 Investments are redeemable on a monthly basis and liquidation periods are unknown.

3 Of the total unfunded commitments, the Company was contractually obligated to fund $ 0.2 million and $ 11.4 million based on its ownership percentage in the CIPs, at September 30, 2021 and 2020.

Changes in Level 3 assets were as follows:

(in millions) Equity and Debt

Securities Real Estate Loans Total

for the fiscal year ended September 30, 2021

Balance at beginning of year $ 322.3 $ 339.2 $ 24.9 $ 686.4

Realized and unrealized losses included in investment and other income of consolidated investment products, net

Realized and unrealized gains included in investment and other income of consolidated investment products, net 122.8 8.3 0.3 131.4

Purchases 105.7 161.7 — 267.4

Sales and settlements ( 62.8 ) — ( 4.7 ) ( 67.5 )

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Balance at End of Year

Change in unrealized losses included in net income relating to assets held at end of year

(in millions)

Equity and Debt Securities

$ 453.3 $ 89.4 $ 20.5 $ 563.2

Change in unrealized gains included in net income relating to assets held at end of year $ 123.9 $ 5.4 $ 0.5 $ 129.8

(in millions) Equity and Debt

Securities Real Estate Loans Total

for the fiscal year ended September 30, 2020

Balance at beginning of year $ 333.8 $ 152.7 $ 16.6 $ 503.1

Realized and unrealized gains (losses) included in investment and other income of consolidated investment products, net

Acquisition — 20.3 17.6 37.9

Realized and unrealized losses included in investment and other income of consolidated investment products, net ( 47.2 ) ( 5.2 ) ( 1.8 ) ( 54.2 )

Purchases 84.0 154.9 — 238.9

Sales and settlements ( 5.0 ) — ( 7.5 ) ( 12.5 )

Deconsolidations ( 47.8 ) — — ( 47.8 )

Transfers into Level 3 2.2 — — 2.2

2 unchanged sentences

Balance at End of Year

Change in unrealized gains (losses) included in net income relating to assets held at end of year

$ 322.3 $ 339.2 $ 24.9 $ 686.4

Change in unrealized losses included in net income relating to assets held at end of year $ ( 47.2 ) $ ( 5.2 ) $ ( 1.8 ) $ ( 54.2 )

Valuation techniques and significant unobservable inputs used in Level 3 fair value measurements were as follows:

(in millions)

as of September 30, 2020

Valuation Technique

Significant Unobservable Inputs

Range (Weighted Average 1 )

Equity and debt securities

Discounted cash flow

Discount rate

4.0%–23.0% (11.5%)

Discount for lack of marketability

9.7%–19.3% (16.7%)

Market pricing

Private sale pricing

$0.02–$100.00 ($13.01) per share

Market comparable companies

Enterprise value/

as of September 30, 2021 Fair Value Valuation Technique Significant Unobservable Inputs Range (Weighted Average 1 )

Equity and debt securities $ 301.1 Market pricing Private sale pricing $ 0.39 –$ 100.00 ($ 19.34 ) per share

102.3 Market comparable companies Enterprise value/

EBITDA multiple 6.0 – 20.6 ( 13.7 )

7.0–19.1 (10.8)

Discount for lack of marketability 6.0 %– 25.5 % ( 17.6 %)

20.0%–25.2% (21.9%)

Enterprise value/

Revenue multiple 0.6 – 7.2 ( 5.1 )

Price-to-book value ratio 0.7 – 1.8 ( 1.4 )

Control premium 20 %

Price-to-earnings ratio 28.8

9.4–10.0 (9.7)

Discounted cash flow

Discount rate

4.5%–6.5% (5.2%)

49.9 Discounted cash flow Discount rate 3.3 %– 6.3 % ( 4.3 %)

Real estate 89.4 Discounted cash flow Discount rate 5.8 %– 6.0 % ( 5.9 %)

Exit capitalization rate 5.0 %– 5.3 % ( 5.1 %)

Yield capitalization

Equivalent yield

4.3%–6.1% (5.2%)

(in millions)

as of September 30, 2019

Valuation Technique

Significant Unobservable Inputs

Range (Weighted Average 1 )

Equity and debt securities

Discounted cash flow

Discount rate

4.8%–17.4% (10.0%)

as of September 30, 2020 Fair Value Valuation Technique Significant Unobservable Inputs Range (Weighted Average 1 )

Equity and debt securities $ 119.8 Discounted cash flow Discount rate 4.0 %– 23.0 % ( 11.4 %)

Discount for lack of marketability 17.0 %

17.0%–24.7% (20.0%)

Market comparable companies

Enterprise value/

Risk premium 9.7 %– 19.3 % ( 16.7 %)

108.5 Market comparable companies Enterprise value/

EBITDA multiple 7.0 – 19.1 ( 10.8 )

4.5–21.9 (10.8)

Discount for lack of marketability 20.0 %– 25.2 % ( 21.9 %)

15.0%–30.0% (23.1%)

Price-to-earnings ratio 9.4 – 10.0 ( 9.7 )

Risk premium 55.0 %

Enterprise value/

Revenue multiple 7.5

Market pricing

Private sale pricing

$0.25–$20.13 ($2.06) per share

Discounted cash flow

Discount rate

6.4%–7.4% (7.1%)

Yield capitalization

Equivalent yield

4.3%–6.1% (5.4%)

94.0 Market pricing Private sale pricing $ 0.02 –$ 100.00 ($ 13.01 ) per share

Real estate 231.8 Discounted cash flow Discount rate 4.5 %– 6.5 % ( 5.2 %)

Exit capitalization rate 6.0 %

107.4 Yield capitalization Equivalent yield 4.3 %– 6.1 % ( 5.2 %)

__________________

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Financial instruments of CIPs that were not measured at fair value were as follows:

(in millions)

(in millions) Fair Value

Level 2021 2020

Value Estimated

Fair Value Carrying

Value Estimated

as of September 30,

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Financial Liabilities

Debt of CLOs 1

2 or 3 3,634.1 3,610.6 2,646.9 2,683.2

Other debt 3 36.9 36.6 153.7 155.2

__________________

1 Substantially all was Level 2.

Debt of CIPs consisted of the following:

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as of September 30,

Interest Rate

The debt of CLOs had floating interest rates based on LIBOR ranging from 1.48 % to 8.19 % at September 30, 2020 .

The other debt had fixed and floating interest rates primarily based on LIBOR ranging from 1.00 % to 5.81 % at September 30, 2020 , and from 2.08 % to 7.94 % at September 30, 2019 .

Amount Weighted-

Rate Amount Weighted-

$ 3,634.1 2.11 % $ 2,646.9 2.99 %

36.9 1.95 % 153.7 2.97 %

$ 3,671.0 $ 2,800.6

The debt of CLOs had fixed and floating interest rates ranging from 1.00 % to 8.22 % at September 30, 2021 and from 1.43 % to 8.34 % at September 30, 2020.

The other debt had floating interest rates ranging from 1.63 % to 2.42 % at September 30, 2021, and fixed and floating rates from 1.00 % to 5.81 % at September 30, 2020.

The floating rates were primarily based on LIBOR.

The contractual maturities for debt of CIPs at September 30, 2021 were as follows:

(in millions)

for the fiscal years ending September 30,

for the fiscal years ending September 30, Amount

Thereafter 3,588.3

Total $ 3,671.0

Collateralized Loan Obligations

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Difference between unpaid principal balance and fair value 20.9 ( 146.6 )

Investments 90 days or more past due were $ 3.9 million at September 30, 2020 .

The Company recognized $ 1.3 million of net losses during fiscal year 2020 related to its own economic interests in the CLOs.

The aggregate principal amount due of the debt of CLOs was $ 1,235.8 million at September 30, 2020 .

Fair Value $ 3,972.0 $ 2,663.2

There were no investments 90 days or more past due at September 30, 2021 and 2020.

During fiscal years 2021 and 2020, the Company recognized $ 15.4 million of net gains and $ 1.3 million of net losses related to its own economic interests in the CLOs.

The aggregate principal amount due of the debt of CLOs was $ 3,629.9 million and $ 2,803.1 million at September 30, 2021 and 2020.

Note 12 – Redeemable Noncontrolling Interests

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for the fiscal years ended September 30,

Minority Interests

2021 2020 2019 1

CIPs Minority Interests Total CIPs Minority Interests Total

Balance at beginning of year $ 397.3 $ 144.6 $ 541.9 $ 746.7 $ — $ 746.7 $ 1,043.6

Acquisition — — — 22.1 164.3 186.4 —

Business divestiture — — — — ( 21.3 ) ( 21.3 ) —

Net income (loss)

Net income 63.8 30.3 94.1 45.0 3.6 48.6 6.2

Net subscriptions (distributions) and other 531.4 ( 23.6 ) 507.8 247.1 ( 2.0 ) 245.1 1,046.6

Net deconsolidations ( 370.0 ) — ( 370.0 ) ( 663.6 ) — ( 663.6 ) ( 1,349.7 )

Adjustment to fair value — 159.2 159.2 — — — —

Balance at End of Year $ 622.5 $ 310.5 $ 933.0 $ 397.3 $ 144.6 $ 541.9 $ 746.7

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as of September 30, 2021 2020

Investments $ 639.2 $ 439.2

Receivables 172.1 168.0

Loans receivable — 42.4

Total $ 811.3 $ 649.6

While the Company has no legal or contractual obligation to do so, it routinely makes cash investments in the course of launching sponsored funds.

As it has done in the past, the Company also may voluntarily elect to provide its sponsored funds with additional direct or indirect financial support based on its business objectives.

In April 2020 , the Company authorized loans aggregating up to 5.0 billion Indian Rupees (approximately $ 66.2 million ) to certain sponsored funds in India that had experienced increased liquidity risks and redemptions.

The funds are subject to the decision of the funds’ trustee to wind up the funds.

In April 2020, the Company authorized loans aggregating up to 5.0 billion Indian Rupees (approximately $ 66.2 million) to certain sponsored funds in India that had experienced increased liquidity risks and redemptions and which are in the process of winding up.

See Note 16 – Commitments and Contingencies for further information.

The loans have a fixed interest rate of 8.0 % per annum, are secured by the funds’ assets and are due upon demand.

At September 30, 2020 , the loans have an aggregate outstanding balance of $ 42.4 million , and the remaining authorization available is approximately $ 4.9 million .

The Company did not provide financial or other support to its sponsored funds during fiscal year 2019 .

The Company did not provide financial or other support to its sponsored funds, except for the outstanding loans which were fully repaid during the second quarter of fiscal year 2021.

Note 14 – Taxes on Income

The Tax Cuts and Jobs Act (“the Tax Act”), which was enacted into law in the U.S.

in December 2017, includes various changes to the tax law, including a permanent reduction in the corporate income tax rate and assessment of a one-time transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiaries’ earnings.

The estimated related changes in the Company’s deferred tax assets and deferred tax liabilities resulted in a $ 35.6 million decrease in deferred tax assets, an $ 88.9 million decrease in deferred tax liabilities and a $ 53.3 million net tax benefit in fiscal year 2018.

The Company also reclassified $ 0.1 million from accumulated other comprehensive loss to retained earnings related to stranded tax effects resulting from the change in tax rate during fiscal year 2018.

The Company completed its analysis of the Tax Act impact during the first quarter of fiscal year 2019 with no significant adjustment to the provisional amounts previously recorded.

The estimated transition tax expense recognized in fiscal year 2018 of $ 983.2 million was net of an $ 87.6 million tax benefit related to U.S.

taxation of deemed foreign dividends.

This benefit was reversed during fiscal year 2019 upon issuance of final regulations by the U.S.

Department of Treasury, resulting in increased income tax expense and gross unrecognized tax benefits.

The remaining federal portion of the transition tax liability was $ 757.2 million at September 30, 2020 , and will be paid over the next six years, with 8 % of the original liability payable in each of the next three years, 15 % in year four, 20 % in year five and 25 % in year six.

The Tax Act reduced the federal corporate income tax rate from 35% to 21% effective January 1, 2018 .

The Company’s federal statutory rate for fiscal year 2018 was a blended rate of 24.5 % , based on the pre- and post-Tax Act rates.

Prior to the Tax Act, the Company had not provided for U.S.

income taxes on undistributed earnings and other outside basis differences of its non-U.S.

subsidiaries as it was the Company’s intention for these tax basis differences to remain indefinitely reinvested.

Following the Company’s change in policy effective April 1, 2020 to repatriate earnings of all non-U.S.

subsidiaries, other outside basis differences, which arose primarily from purchase accounting adjustments, undistributed earnings that are considered indefinitely reinvested and foreign earnings that are restricted by operational and regulatory requirements, remain indefinitely reinvested.

These basis differences could reverse through sales of the subsidiaries or the receipt of dividends from the subsidiaries, as well as various other events, none of which are considered probable as of September 30, 2020 .

The Company has made no provision for U.S.

income taxes on these outside basis differences, and determination of the amount of unrecognized deferred tax liability related to such basis differences is not practicable.

The Coronavirus Aid, Relief, and Economic Security Act, which includes several corporate tax provisions and was signed into law on March 27, 2020, did not have a material impact on the Company’s income taxes.

Taxes on income were as follows:

2 unchanged sentences

Current expense

Deferred benefit

Federal $ 226.7 $ 154.9 $ 343.4

State 50.3 28.8 37.0

68.9 54.2 66.8

Deferred expense (benefit) 3.7 ( 7.1 ) ( 4.9 )

Total $ 349.6 $ 230.8 $ 442.3

Income before taxes consisted of the following:

1 unchanged sentence

for the fiscal years ended September 30, 2021 2020 2019

$ 1,682.6 $ 771.7 $ 1,151.1

761.6 246.2 496.7

Total $ 2,444.2 $ 1,017.9 $ 1,647.8

The Company’s income in certain countries is subject to reduced tax rates due to tax rulings and incentives.

9 unchanged sentences

Foreign tax credit carry-forwards 128.0 103.0

Stock-based compensation

Unrealized foreign exchange losses

Debt premium 72.1 81.9

Other 131.4 148.7

Total deferred tax assets 1,169.8 1,137.3

3 unchanged sentences

Goodwill and other purchased intangibles 961.6 1,009.4

Depreciation on property and equipment

Other 68.7 68.5

Total deferred tax liabilities 1,030.3 1,077.9

4 unchanged sentences

as of September 30, 2021 2020

Other assets $ 131.9 $ 44.1

Deferred tax liabilities 311.7 305.3

Net Deferred Tax Liability $ 179.8 $ 261.2

The Company recorded on a preliminary basis the deferred tax effects associated with the fair value of assets acquired and liabilities assumed from the acquisition of Legg Mason and acquired attributes that carry over to post-acquisition tax periods, including U.S.

Included in the Company’s net deferred tax liability were the deferred tax effects associated with the fair value of assets acquired and liabilities assumed from the acquisition of Legg Mason and acquired attributes that carry over to post-acquisition tax periods, including U.S.

state and foreign net operating losses and foreign tax credits.

3 unchanged sentences

At September 30, 2021, there were $ 98.5 million of non-U.S.

tax effected net operating loss carry-forwards which expire between fiscal years 2021 and 2040 .

tax effected net operating loss carry-forwards which expires between fiscal years 2022 and 2041.

In addition, there were $ 206.1 million in tax effected state net operating loss carry-forwards that expire between fiscal years 2022 and 2042, with some having an indefinite carry-forward period.

The Company also has federal net operating losses of $ 9.3 million , the majority of which will carry-forward indefinitely and $ 103.0 million of foreign tax credit carry-forwards that expire between fiscal years 2021 and 2028 .

The Company recognizes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized based on timing of expiration, nature, projected sources of income and limitations on utilization under the statute.

The valuation allowance increased $ 293.7 million in fiscal year 2020 primarily related to carry-forward assets recognized in connection with the acquisition of Legg Mason, and decreased $ 0.6 million in fiscal year 2019 .

At September 30, 2020 , a valuation allowance of $ 320.6 million was recorded for the following items:

$ 202.2 million for federal, state, and foreign net operating loss carry-forwards, $ 45.0 million due to uncertainty of realizing the benefit of foreign tax credits, $ 38.4 million for other foreign deferred taxes including carried forward U.K.

interest deductions, and $ 35.0 million for capital losses.

The Company also has federal net operating losses of $ 9.9 million, majority of which will carry-forward indefinitely and $ 128.0 million of foreign tax credit carry-forwards that expire between fiscal years 2022 and 2029.

The valuation allowance decreased $ 1.3 million in fiscal year 2021 and increased $ 293.7 million in fiscal year 2020 primarily related to carry-forward assets recognized in connection with the acquisition of Legg Mason.

At September 30, 2021, the valuation allowance of $ 319.3 million was related to $ 195.1 million for federal, state, and foreign net operating loss carry-forwards, $ 73.1 million due to uncertainty of realizing the benefit of foreign tax credits, $ 37.8 million for capital losses, and $ 13.3 million for other foreign deferred taxes.

A reconciliation of the amount of tax expense at the federal statutory rate and taxes on income as reflected in the consolidated statements of income is as follows:

3 unchanged sentences

Transition tax on deemed repatriation of undistributed foreign earnings

Revaluation of net deferred tax liabilities

Other Tax Act impacts

— — — — 86.0 5.2 %

State taxes, net of federal tax effect

Capital loss on investments, net of valuation allowance

60.8 2.5 % 28.2 2.8 % 29.7 1.8 %

Tax reserve release on audit settlement, net of valuation allowance 1

( 126.8 ) ( 5.2 %) — — — —

Effect of net income (loss) attributable to noncontrolling interests ( 55.3 ) ( 2.3 %) 2.5 0.2 % ( 2.1 ) ( 0.1 %)

Effect of non-U.S.

Effect of net loss (income) attributable to noncontrolling interests

( 30.4 ) ( 1.2 %) 6.9 0.7 % ( 21.3 ) ( 1.3 %)

Capital loss on investments, net of valuation allowance 2

( 12.4 ) ( 0.5 %) ( 27.0 ) ( 2.7 %) — —

0.4 — 6.4 0.7 % 4.0 0.2 %

Tax Provision

Other Tax Act impacts consist primarily of foreign dividend distribution taxes and tax withholdings.

The Company recognized a tax benefit in fiscal year 2020 for capital losses that were realized from sales of investments subsequent to the change in corporate tax structure of a foreign holding company to a U.S.

The benefit reflects the Company’s ability to carryback losses for the last three tax years at historical Federal statutory tax rates.

The remaining capital losses can be carried forward, which the Company assessed for realizability.

$ 349.6 14.3 % $ 230.8 22.7 % $ 442.3 26.8 %

______________

1 The Company released a tax reserve in fiscal year 2021 following the close of an IRS audit of the transition tax for fiscal year 2018.

2 The Company recognized a tax benefit in fiscal years 2021 and 2020 for capital losses that were realized from sales of investments.

During fiscal year 2020, the sale of investments were subsequent to the change in corporate tax structure of a foreign holding company to a U.S.

These capital losses can be carried forward, for which the Company has assessed for realizability.

A reconciliation of the beginning and ending balances of gross unrecognized tax benefits is as follows:

9 unchanged sentences

Balance at End of Year $ 184.3 $ 342.9 $ 202.6

If recognized, $ 303.1 million for 2020 and the balance for 2019 and 2018 , net of any deferred tax benefits, would favorably affect the Company’s effective income tax rate in future periods.

The Company accrues interest and penalties related to unrecognized tax benefits in general, administrative and other expenses.

If recognized, $ 173.4 million for 2021, $ 303.1 million for 2020 and $ 202.6 million for 2019, net of any deferred tax benefits, would favorably affect the Company’s effective income tax rate in future periods.

The Company accrues interest and penalties related to unrecognized tax benefits in interest expense and general, administrative and other expenses.

Accrued interest on uncertain tax positions at September 30, 2021 and 2020 was $ 25.7 million and $ 21.7 million, and is not presented in the unrecognized tax benefits table above.

Accrued penalties at September 30, 2020 was $ 2.9 million and insignificant in 2019 .

Accrued penalties at September 30, 2021 and 2020 was $ 3.9 million and $ 2.9 million.

The Company files a consolidated U.S.

6 unchanged sentences

Brazil 2008 to 2021, Canada 2011 to 2021;

Hong Kong 2014 to 2020 ;

Australia 2017 to 2021, Hong Kong 2015 to 2021;

Singapore 2016 to 2021;

3 unchanged sentences

the City of New York 2012 to 2021;

and the States of California, and Minnesota 2016 to 2020 ;

and the States of Florida, Maryland, Massachusetts, New York, and Pennsylvania 2017 to 2020 .

The Company has ongoing examinations in various stages of completion in the State of Illinois, City of New York, and in Canada, France, Germany and India.

the States of California, Maryland, Massachusetts, Minnesota, New York, and Pennsylvania 2017 to 2021.

The Company has ongoing litigations and examinations in various stages, in the State of Wisconsin, and in Brazil, Canada, France, Germany, and India.

Examination outcomes and the timing of settlements are subject to significant uncertainty.

8 unchanged sentences

taxing authorities.

The Tax Cuts and Jobs Act which was enacted into law in the U.S.

The payment for the Company’s remaining federal portion of the transition tax liability were as follows:

(in millions) Amount

for the fiscal years ending September 30,

Total $ 672.2

Note 15 – Leases

Lessee Arrangements

The leases had a weighted-average remaining lease term of 6.5 years as of September 30, 2020 , and generally include one or more options to renew.

The Company’s leases generally include one or more options to renew.

Lease expense was as follows:

(in millions)

for the fiscal year ended September 30, 2020

for the fiscal years ended September 30, 2021 2020

Operating lease cost 1

Finance lease cost

$ 141.4 $ 72.5

Variable lease cost 21.2 6.0

Finance lease cost 0.4 0.5

sublease income ( 24.6 ) ( 4.2 )

1 unchanged sentence

__________________

Substantially all is included in occupancy expense.

1 Substantially all operating lease cost is included in occupancy expense.

Supplemental cash flow information related to leases was as follows:

(in millions)

for the fiscal year ended September 30, 2020

for the fiscal years ended September 30, 2021 2020

Operating cash flows from operating leases included in the measurement of operating lease liabilities $ 133.7 $ 65.1

ROU assets obtained in exchange for new/modified operating lease liabilities 18.7 13.7

The weighted-average discount rate for the operating lease liabilities as of September 30, 2020 was 3.5 % .

The maturities of the liabilities were as follows:

The weighted-average remaining lease term and weighted-average discount rate for operating lease liabilities were as follows:

(in millions)

as of September 30, 2021 2020

Weighted-average remaining lease term

6.1 years 6.5 years

Weighted-average discount rate

The maturities of the liabilities were as follows:

(in millions) Amount

for the fiscal years ending September 30,

Thereafter 121.9

Total lease payments 553.4

interest ( 35.0 )

Operating lease liabilities $ 518.4

As of September 30, 2019 , future minimum lease payments under long-term non-cancelable operating leases were as follows:

(in millions)

for the fiscal years ending September 30,

Total Minimum Lease Payments

Lessor Arrangements

1 unchanged sentence

The Company subleases excess leased office spaces to various firms, primarily in the U.S., and generally include options to renew or terminate within a specified period.

The maturities of lease payments due to the Company and weighted-average remaining lease term as of September 30, 2020 were as follows:

(in millions)

The maturities of lease payments due to the Company as of September 30, 2021 were as follows:

(in millions) Subleases Leases

for the fiscal years ending September 30,

Weighted-average remaining lease term

2022 $ 23.2 $ 31.0

2023 21.5 32.4

2024 9.2 32.9

2025 0.3 32.5

2026 0.1 32.1

Thereafter 0.1 41.9

Total $ 54.4 $ 202.8

Note 16 – Commitments and Contingencies

1 unchanged sentence

India Credit Fund Closure Matters .

Effective April 24, 2020, a subsidiary of Franklin, Franklin Templeton Trustee Services Private Limited (“FTTS”), announced its decision to wind-up six fixed income mutual fund schemes of the Franklin Templeton Mutual Fund in India (referred to herein as the “Funds” or the “India Fixed Income Funds”), which at the time had collective assets under management of approximately USD $ 3.4 billion .

FTTS took action to convene unitholder meetings for the Funds to approve the appointment of liquidators, and the asset management company to the Funds, Franklin Templeton Asset Management (India) Private Limited (“FTAMI”), ceased earning investment management fees on the Funds.

Certain Fund unitholders and others subsequently commenced multiple writ petition actions in India (some of which were promptly voluntarily dismissed), challenging the decision to wind up the Funds and alleging that the Company Respondents (as defined below) violated various regulations of the Securities and Exchange Board of India (“SEBI”), mismanaged the Funds, misrepresented or omitted certain information relating to the Funds, and/or engaged in other alleged misconduct.

The petitions were filed in May 2020 and June 2020 in the High Court of Gujarat, the High Court of Madras, and the High Court of Delhi, and named as respondents one or more of Franklin, its subsidiaries Templeton International, Inc., FTTS, FTAMI, and certain individual directors, officers, and employees of FTAMI (collectively, the “Company Respondents”), as well as SEBI and other governmental authorities.

The petitioners sought a wide range of relief, including, among other items, an order quashing the

wind-up notice and blocking the unitholder vote, initiating various investigations into the Company Respondents, and allowing the unitholder petitioners to redeem their investments with interest.

On June 3, 2020, the High Court of Gujarat granted an ex parte interim injunction order, staying the operation and implementation of the unitholder voting process.

On June 19, 2020, the petitions were transferred to the High Court of Karnataka for hearing and resolution.

In the course of the hearings, on September 24, 2020, the Company learned that a “first information report” or “FIR” had been registered by the Economic Offenses Wing of the Chennai police department against certain of the Company Respondents in connection with a complaint made by one of the petitioners.

In light of the registration of the FIR, which is the preliminary step in an investigation, the court disposed of the petition that had sought an order for such an investigation.

On October 24, 2020, the High Court of Karnataka issued its judgment, in which it upheld the decision taken by FTTS to wind up the Funds and held that there was “nothing wrong with the decision making process,” but determined that consent of the unitholders is required to implement the decision.

The court did not grant the other relief sought by the petitioners.

The court stayed the operation of its judgment for a period of six weeks, during which time the court held that there will not be any redemptions from the Funds.

The deadline for any party to file an appeal is 90 days from the date of the judgment.

Certain Company Respondents intend to appeal parts of the judgment.

Separately, on May 27, 2020, SEBI initiated a forensic audit/inspection of Franklin Templeton Mutual Fund, FTAMI, and FTTS and appointed an outside auditor to conduct the review.

The auditor submitted a confidential report to SEBI containing certain preliminary observations, to which SEBI sought responses from FTAMI and FTTS, and such responses were provided in September 2020.

The matter is currently under review by SEBI.

As part of the judgment issued by the High Court of Karnataka, the court directed SEBI to decide whether or not to take action within six weeks from the date it receives a final report by the forensic auditor.

The Company strongly believes that the decision by FTTS to wind up the India Fixed Income Funds was taken in the best interests of investors and fully pursuant to applicable SEBI regulations.

Nonetheless, to implement the decision, FTTS ultimately may be required, or may determine, to obtain unitholder consent.

If that effort is unsuccessful and/or if unitholder redemptions from the Funds are not suspended until the process for seeking such consent is complete, the Funds could experience significant redemption pressures.

In the event that the Funds are unable to meet investor redemption requests in an orderly fashion, including if redemptions require the Funds to undertake distressed sales of assets resulting in the reduction of the net asset values of the Funds, additional litigation and/or regulatory or governmental investigations and proceedings could be initiated.

In addition, if SEBI were to commence a regulatory proceeding in connection with the forensic audit, and ultimately conclude that the respondents violated applicable regulations, it is possible that certain Franklin subsidiaries and related individuals could be subject to the imposition of regulatory sanctions.

While the Company believes that it would have meritorious defenses to any such actions, such matters could involve the risk of significant financial penalties and other liabilities, reputational harm, and restrictions on the Company’s asset management activities in India, all of which could adversely impact the Company’s financial results.

The Company cannot at this time predict the eventual outcome of the matters described above or reasonably estimate the possible loss or range of loss that may arise from any negative outcome of such matters, including due to the current stage of these matters.

Effective April 24, 2020, Franklin Templeton Trustee Services Private Limited (“FTTS”), a subsidiary of Franklin, announced its decision to wind up six fixed income mutual fund schemes of the Franklin Templeton Mutual Fund in India (referred to herein as the “Funds”), closing the Funds to redemptions.

At the time, the Funds had collective assets under management of approximately $ 3.4 billion.

In connection with the wind-up decision, FTTS sought to convene unitholder meetings for the Funds to approve the appointment of a liquidator and the asset management company to the Funds, Franklin Templeton Asset Management (India) Private Limited (“FTAMI”), ceased earning investment management fees on the Funds.

In May and June 2020, certain Fund unitholders and others commenced multiple writ petition actions in different courts in India against a number of respondents, including Franklin, its subsidiaries FTTS, FTAMI, and Templeton International, Inc., as sponsor of the Franklin Templeton Mutual Fund, and related individuals (collectively, the “Company Respondents”), the Securities and Exchange Board of India (“SEBI”), and other governmental entities.

The petitioners challenged the decision to wind up the Funds and alleged that the Company Respondents violated various SEBI regulations, mismanaged the Funds, misrepresented or omitted certain information relating to the Funds, and/or engaged in other alleged misconduct.

The petitioners requested a wide range of relief, including, among other items, an order quashing the winding up notices and blocking the unitholder votes, initiating investigations into the Company Respondents, and allowing the unitholder petitioners to redeem their investments with interest.

One of the petitioners obtained an interim injunction order staying the operation and implementation of the unitholder voting process.

Following appeals to the Supreme Court of India, the petitions were transferred to the High Court of Karnataka for further consolidated proceedings.

In October 2020, the High Court of Karnataka issued its judgment, in which it upheld the decision taken by FTTS to wind up the Funds and held that there was “nothing wrong with the decision making process,” but determined that, under applicable regulations, unitholder approval is required to implement the decision.

Certain Company Respondents and other parties filed cross-appeals to the Supreme Court of India, and certain intervenors filed applications, challenging aspects of the High Court’s judgment.

In December 2020, with the approval of the Supreme Court, and without prejudice to its arguments on appeal that unitholder approval of the wind-up decision is not required, FTTS proceeded to obtain approval from the majority of the voting unitholders for winding up the six Funds.

In February 2021, the Supreme Court issued a decision confirming the results of the unitholder votes and appointed a third-party asset manager to serve as the liquidator and begin cash distributions to unitholders.

In July 2021, the Supreme Court issued a ruling interpreting applicable regulations to require unitholder consent to effect a trustee’s decision to wind up a fund, while finding that, upon the trustee’s publication of its decision to unitholders under applicable regulations, fund business activities, including redemptions, are suspended pending the results of the unitholder vote.

The Supreme Court further found that FTTS’ April 2020 publication to unitholders of its wind-up decision complied with applicable regulations, effectively freezing redemptions.

Further hearings are anticipated to be scheduled in connection with the remaining issues on appeal.

FTAMI continues to cooperate with the court-appointed liquidator in its work to liquidate the Funds’ remaining investments and distribute proceeds to unitholders.

As of September 2021, approximately $ 3.2 billion has been distributed to Fund unitholders.

Separately, following the completion of a forensic audit/inspection, in late November and early December 2020, SEBI initiated regulatory proceedings by issuing show cause notices against FTAMI, FTTS and certain FTAMI employees (including in their officer or director capacities), alleging certain deficiencies and areas of non-compliance in the management of the Funds.

In June 2021, SEBI issued orders against FTAMI, FTTS, and the FTAMI employee respondents, finding violations of certain regulatory provisions, including with respect to similarity in investment strategies among the Funds, calculation of duration and valuation of portfolio securities, deficiencies in documentation relating to investment diligence and investment terms, and portfolio risk management.

SEBI’s orders include, as applicable, aggregate monetary penalties of INR 20.0 crore (approximately $ 2.7 million);

disgorgement of investment management and advisory fees, together with interest through the date of SEBI’s order, totaling INR 512.5 crore (approximately $ 69.1 million), with continuing accrual of 12 % interest until paid;

and a prohibition on FTAMI from launching new fixed income funds in India for a two-year period.

The respondents filed appeals, as well as applications to stay enforcement of SEBI’s orders pending resolution of the appeals, with the Securities Appellate Tribunal (the “SAT”) in India.

In June 2021, the SAT granted the stay requested by FTAMI, subject to FTAMI’s deposit of INR 250.0 crore (approximately $ 33.7 million) into an escrow account, which has been deposited.

In July 2021, SEBI appealed the SAT’s stay order to the Supreme Court of India.

Based on FTAMI’s submission that it would not launch new fixed income schemes in India pending resolution of its appeal, the Supreme Court of India did not interfere with the SAT’s stay order with respect to the monetary amounts and disposed of SEBI’s appeal.

In July 2021, the SAT also granted the stay requests of FTTS and the FTAMI employee respondents, subject to the deposit of an aggregate of INR 7.5 crore (approximately $ 1.0 million) into an escrow account.

The SAT appeals remain pending.

The Company is also responding to related inquiries and investigations commenced by certain governmental agencies in India, including the previously-reported “first information report” (the preliminary step in an investigation) registered by the Economic Offences Wing of the Chennai police department against certain of the Company Respondents in connection with a complaint by two Fund unitholders, as well as a related investigation by India’s Enforcement Directorate commenced in or around April 2021.

The Company is cooperating in these matters.

The Company strongly believes that the decision taken by FTTS to wind up the Funds was in the best interests of unitholders.

The Company further believes that it has meritorious defenses to the outstanding claims in the pending proceedings and intends to continue vigorously defending against the claims.

The Company cannot at this time predict the eventual outcome of the matters described above or reasonably estimate the possible loss or range of loss that may arise from any final outcome of such matters, including due to the complexities and uncertainty involved in the appeals and the various questions of law and fact at issue.

Other Litigation Matters.

24 unchanged sentences

Employee stock investment plan 6.7 5.2 5.8

Phantom unit awards 30.4 2.7 1.7

Total $ 202.3 $ 125.0 $ 113.2

Stock and Stock Unit Awards

1 unchanged sentence

The USIP and EIP provide for the issuance of the Company’s common stock for various stock-related awards to officers, directors and employees.

There are 120.0 million shares authorized under the USIP and 23.0 million shares authorized under the EIP, of which 4.5 million shares and 18.3 million shares were available for grant at September 30, 2020 .

In February 2021, the Company’s stockholders approved an amendment and restatement of the USIP increasing the number of shares authorized by 20.0 million shares to a total of 140.0 million shares.

There are 23.0 million shares authorized under the EIP.

At September 30, 2021, 23.4 million shares and 14.4 million shares were available for grant under the USIP and EIP.

Stock awards entitle holders to the right to sell the underlying shares of the Company’s common stock once the awards vest.

2 unchanged sentences

Stock and stock unit award activity was as follows:

(shares in thousands)

Weighted-Average

(shares in thousands) Time-Based

Shares Performance-

Based Shares Total

Shares Weighted-Average

for the fiscal year ended September 30, 2021

Nonvested balance at September 30, 2020 12,141 4,808 16,949 $ 24.30

Granted 5,906 240 6,146 21.08

Vested ( 3,500 ) ( 619 ) ( 4,119 ) 26.56

Forfeited/canceled ( 570 ) ( 572 ) ( 1,142 ) 30.61

Modified 199 ( 199 ) — n/a

Nonvested balance at September 30, 2021 14,176 3,658 17,834 $ 22.27

2 unchanged sentences

The weighted-average grant-date fair values of stock awards and stock unit awards granted during fiscal years 2021, 2020 and 2019 were $ 21.08 , $ 23.05 and $ 30.75 per share.

The total fair value of stock and stock unit awards vested during the same periods was $ 72.2 million , $ 84.2 million and $ 91.5 million .

The total fair value of stock and stock unit awards vested during

the same periods was $ 121.2 million, $ 72.2 million and $ 84.2 million.

The Company generally does not repurchase shares upon vesting of stock and stock unit awards.

19 unchanged sentences

Europe, Middle East and Africa 132.1 133.0

Asia-Pacific 34.5 37.7

Americas excluding United States 6.8 8.7

Total $ 770.0 $ 813.8

Note 20 – Investment and Other Income (Losses), Net

6 unchanged sentences

Income (losses) from investments in equity method investees 154.3 ( 98.1 ) ( 10.4 )

Gains (losses) on derivatives, net ( 23.2 ) 3.0 —

Rental income 28.8 30.0 19.8

Foreign currency exchange (losses) gains, net ( 11.9 ) ( 22.3 ) 13.1

Other, net 8.2 2.6 0.6

Investment and Other Income (Losses), Net $ 264.7 $ ( 38.4 ) $ 141.4

Substantially all dividend income was generated by investments in nonconsolidated sponsored funds.

Interest income was primarily generated by cash equivalents, debt securities of U.S.

states and political subdivisions.

Gains (losses) on investments, net consists primarily of realized and unrealized gains (losses) on equity securities measured at fair value and other-than-temporary impairment of investments.

Proceeds from the sale of available-for-sale securities were $ 1.6 million and $ 85.5 million in fiscal years 2020 and 2018 .

There were no sales of available-for-sale securities in fiscal year 2019 .

Net losses recognized on equity securities measured at fair value and trading debt securities that were held by the Company at September 30, 2020 and 2019 were $ 2.6 million and $ 0.1 million , and the net loss recognized on trading investment securities that were held by the Company at September 30, 2018 was $ 1.7 million .

Gains (losses) on investments, net consists primarily of realized and unrealized gains (losses) on equity securities measured at fair value.

Net gains (losses) recognized on equity securities measured at fair value and trading debt securities that were held by the Company at September 30, 2021, 2020 and 2019 were $ 46.5 million, $( 2.6 ) million, and $( 0.1 ) million.

Note 21 – Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component were as follows:

(in millions)

(in millions) Currency

Adjustments Unrealized

Defined Benefit

Plans Unrealized

Investments Total

as of and for the fiscal years ended

3 unchanged sentences

Other comprehensive income (loss)

Other comprehensive income (loss) before reclassifications, net of tax

Other comprehensive loss before reclassifications, net of tax ( 53.9 ) ( 2.4 ) ( 5.4 ) ( 61.7 )

Reclassifications to compensation and benefits expense, net of tax — 0.4 — 0.4

2 unchanged sentences

Balance at September 30, 2019 $ ( 425.4 ) $ ( 6.2 ) $ — $ ( 431.6 )

Adoption of new accounting guidance

Other comprehensive income (loss)

Other comprehensive loss before reclassifications, net of tax

Other comprehensive income (loss) before reclassifications, net of tax 23.8 ( 2.1 ) ( 1.3 ) 20.4

Reclassifications to compensation and benefits expense, net of tax — 0.3 — 0.3

2 unchanged sentences

Balance at September 30, 2020 $ ( 399.6 ) $ ( 8.0 ) $ — $ ( 407.6 )

Other comprehensive income (loss)

Other comprehensive income (loss) before reclassifications, net of tax

Other comprehensive income

Other comprehensive income before reclassifications, net of tax 27.1 1.6 — 28.7

Reclassifications to compensation and benefits expense, net of tax — ( 0.7 ) — ( 0.7 )

Reclassifications to net investment and other income (losses), net of tax 2.0 — — 2.0

Total other comprehensive income (loss)

Total other comprehensive income 29.1 0.9 — 30.0

Balance at September 30, 2021 $ ( 370.5 ) $ ( 7.1 ) $ — $ ( 377.6 )

Note 22 – Subsequent Event

On October 19, 2020, the Company completed its offering and sale of the 1.600 % Notes due 2030 with a principal amount of $ 750.0 million .

Interest on the notes will be payable semi-annually on April 30 and October 30 of each year, beginning on April 30, 2021.

The notes contain an optional redemption feature that allows the Company to redeem each series of notes prior to maturity in whole or in part at any time, at a make-whole redemption price.

Note 22 – Pending Acquisitions

In September 2021, the Company entered into an agreement to acquire all of the outstanding ownership interest in O’Shaughnessy Asset Management, a leading quantitative asset management firm, for cash consideration to be paid at closing of approximately $ 300.0 million, excluding future payments to be made upon the attainment of certain performance measures.

The acquisition is expected to be completed in the first quarter of the fiscal year ended September 30, 2022 (“fiscal year 2022”).

In November 2021, the Company entered into an agreement to acquire all of the outstanding ownership interest in Lexington Partners L.P., a leading global manager of secondary private equity and co-investment funds, for cash consideration to be paid at closing of approximately $ 1.0 billion and additional cash payments totaling $ 750.0 million to be paid over the next three years.

The acquisition is expected to be completed in the second quarter of fiscal year 2022.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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.

What changed 10-K

Item 8. Financial Statements and Supplementary Data