What changed in this filing

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Item 1. Financial Statements

2022-02-01 compared with 2021-08-03 · 156 added, 403 removed, 474 unchanged (54% of the section changed)

3 unchanged sentences

Three Months Ended

June 30, Nine Months Ended

(in millions, except per share data) 2021 2020

15 unchanged sentences

Other Income (Expenses)

Investment and other income (losses), net 52.9 49.6 197.2 ( 63.5 )

Investment and other income, net 57.0 77.2

Interest expense ( 19.3 ) ( 29.7 )

Investment and other income (losses) of consolidated investment products, net 61.0 0.3 263.3 ( 25.4 )

Investment and other income of consolidated investment products, net 104.7 91.1

Expenses of consolidated investment products ( 4.2 ) ( 10.4 )

Other income (expenses), net 77.3 37.3 362.7 ( 127.0 )

Other income, net 138.2 128.2

Income before taxes 695.9 537.3

1 unchanged sentence

Net income 544.8 394.8

net income (loss) attributable to

net income attributable to

Redeemable noncontrolling interests 7.5 18.7

9 unchanged sentences

(in millions) Three Months Ended

June 30, Nine Months Ended

2021 2020 2021 2020

Net Income $ 544.8 $ 394.8

1 unchanged sentence

Currency translation adjustments, net of tax ( 6.9 ) 93.5

Net unrealized gains (losses) on defined benefit plans, net of tax ( 0.2 ) — 0.2 ( 0.2 )

Net unrealized gains (losses) on investments, net of tax — ( 0.1 ) — 0.1

Net unrealized losses on defined benefit plans, net of tax ( 5.1 ) ( 0.6 )

Total other comprehensive income (loss) ( 12.0 ) 92.9

Total comprehensive income 532.8 487.7

comprehensive income (loss) attributable to

comprehensive income attributable to

Redeemable noncontrolling interests 7.5 18.7

5 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data) June 30,

(in millions, except share and per share data) December 31,

2021 September 30,

1 unchanged sentence

Receivables 1,434.7 1,428.2

Investments (including $ 635.1 and $ 504.8 at fair value at June 30, 2021 and September 30, 2020)

Investments (including $ 731.9 and $ 588.3 at fair value at December 31, 2021 and September 30, 2021)

1,663.2 1,510.3

16 unchanged sentences

Debt 4,178.6 3,671.0

Deferred taxes 321.2 305.3

Deferred tax liabilities 218.5 311.7

Operating lease liabilities 491.3 518.4

6 unchanged sentences

Common stock, $ 0.10 par value, 1,000,000,000 shares authorized;

502,870,612 and 495,116,677 shares issued and outstanding at June 30, 2021 and September 30, 2020

502,519,277 and 501,807,677 shares issued and outstanding at December 31, 2021 and September 30, 2021

Retained earnings 11,892.2 11,550.8

16 unchanged sentences

(in millions)

for the nine months ended

June 30, 2021 Shares Amount

for the three months ended

December 31, 2021 Shares Amount

Balance at October 1, 2021 501.8 $ 50.2 $ — $ 11,550.8 $ ( 377.6 ) $ 11,223.4 $ 587.2 $ 11,810.6

Adoption of new accounting guidance ( 3.3 ) ( 3.3 ) ( 3.3 )

Net income 453.2 453.2 84.1 537.3

Other comprehensive income 92.9 92.9 92.9

Other comprehensive loss ( 12.0 ) ( 12.0 ) ( 12.0 )

Dividends declared on common stock ($ 0.29 per share)

5 unchanged sentences

Stock-based compensation

Net subscriptions and other 93.3 93.3

Balance at December 31, 2020 505.5 $ 50.5 $ — $ 10,665.1 $ ( 314.7 ) $ 10,400.9 $ 878.7 $ 11,279.6

Net income 381.8 381.8 91.6 473.4

Other comprehensive loss ( 33.8 ) ( 33.8 ) ( 33.8 )

Dividends declared on common stock ($ 0.28 per share)

11.2 11.2 11.2

Repurchase of common stock ( 1.7 ) ( 0.2 ) ( 56.2 ) 10.6 ( 45.8 ) ( 45.8 )

Issuance of common stock 0.5 0.1 14.1 14.2 14.2

Stock-based compensation 42.1 42.1 42.1

Net subscriptions and other 16.5 16.5

Deconsolidation of investment products ( 31.6 ) ( 31.6 )

Adjustment to fair value of redeemable noncontrolling interests ( 52.3 ) ( 52.3 ) ( 52.3 )

Balance at March 31, 2021 504.3 $ 50.4 $ — $ 10,861.5 $ ( 348.5 ) $ 10,563.4 $ 955.2 $ 11,518.6

Net income (loss) 438.4 438.4 ( 0.5 ) 437.9

Other comprehensive income 22.4 22.4 22.4

Dividends declared on common stock ($ 0.28 per share)

( 143.3 ) ( 143.3 ) ( 143.3 )

Repurchase of common stock ( 1.4 ) ( 0.1 ) ( 40.7 ) ( 5.6 ) ( 46.4 ) ( 46.4 )

Issuance of common stock — — 0.2 0.2 0.2

Stock-based compensation 40.5 40.5 40.5

Net subscriptions and other 87.9 87.9

Net deconsolidation of investment products ( 487.0 ) ( 487.0 )

Balance at June 30, 2021 502.9 $ 50.3 $ — $ 11,151.0 $ ( 326.1 ) $ 10,875.2 $ 555.6 $ 11,430.8

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

Net distributions and other ( 27.8 ) ( 27.8 )

Balance at December 31, 2021 502.5 $ 50.3 $ — $ 11,892.2 $ ( 389.6 ) $ 11,552.9 $ 643.5 $ 12,196.4

Franklin Resources, Inc.

6 unchanged sentences

(in millions)

for the nine months ended

June 30, 2020 Shares Amount

for the three months ended

December 31, 2020 Shares Amount

Balance at October 1, 2020 495.1 $ 49.5 $ — $ 10,472.6 $ ( 407.6 ) $ 10,114.5 $ 754.6 $ 10,869.1

Net income (loss) 350.5 350.5 ( 11.4 ) 339.1

Other comprehensive income 55.4 55.4 55.4

Dividends declared on common stock ($ 0.27 per share)

Adoption of new accounting guidance

( 3.3 ) ( 3.3 ) ( 3.3 )

Repurchase of common stock ( 4.6 ) ( 0.4 ) ( 27.8 ) ( 95.4 ) ( 123.6 ) ( 123.6 )

Issuance of common stock 2.9 0.3 28.7 29.0 29.0

Stock-based compensation ( 0.9 ) ( 0.9 ) ( 0.9 )

Net subscriptions and other 35.6 35.6

Deconsolidation of investment product ( 0.7 ) ( 0.7 )

Acquisition 19.0 19.0

Balance at December 31, 2019 497.6 $ 49.8 $ — $ 10,408.0 $ ( 376.2 ) $ 10,081.6 $ 677.5 $ 10,759.1

Net income 345.3 345.3 30.8 376.1

Other comprehensive loss ( 99.9 ) ( 99.9 ) ( 99.9 )

Dividends declared on common stock ($ 0.27 per share)

( 134.6 ) ( 134.6 ) ( 134.6 )

Repurchase of common stock ( 2.9 ) ( 0.4 ) ( 41.7 ) ( 22.5 ) ( 64.6 ) ( 64.6 )

Issuance of common stock 0.6 0.1 15.9 16.0 16.0

Stock-based compensation 25.8 25.8 25.8

Net subscriptions and other 96.3 96.3

Deconsolidation of investment product ( 0.6 ) ( 0.6 )

Balance at March 31, 2020 495.3 $ 49.5 $ — $ 10,330.0 $ ( 476.1 ) $ 9,903.4 $ 781.4 $ 10,684.8

Net income (loss) 290.4 290.4 ( 68.0 ) 222.4

Other comprehensive income 92.9 92.9 92.9

5 unchanged sentences

Net subscriptions and other 93.3 93.3

Balance at June 30, 2020 495.4 $ 49.5 $ — $ 10,514.8 $ ( 450.1 ) $ 10,114.2 $ 789.7 $ 10,903.9

Balance at December 31, 2020 505.5 $ 50.5 $ — $ 10,665.1 $ ( 314.7 ) $ 10,400.9 $ 878.7 $ 11,279.6

See Notes to Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Three Months Ended

(in millions) 2021 2020

5 unchanged sentences

Amortization of intangible assets 58.3 58.2

Losses (income) from investments in equity method investees ( 123.8 ) 110.3

Net (gains) losses on investments of consolidated investment products ( 176.1 ) 103.0

Net gains on investments ( 25.8 ) ( 47.8 )

Income from investments in equity method investees ( 24.7 ) ( 38.5 )

Net gains on investments of consolidated investment products ( 88.0 ) ( 55.2 )

Net purchase of investments by consolidated investment products ( 67.9 ) ( 106.2 )

2 unchanged sentences

Changes in operating assets and liabilities:

Decrease (increase) in receivables and other assets ( 115.2 ) 0.4

Decrease in investments, net 1.0 323.5

Increase in receivables and other assets ( 140.6 ) ( 14.4 )

Increase in investments, net ( 44.6 ) —

Decrease in accrued compensation and benefits ( 273.1 ) ( 104.2 )

Increase (decrease) in commissions payable ( 22.7 ) 11.4

Decrease in income taxes payable ( 50.4 ) ( 73.7 )

Decrease in accounts payable, accrued expenses and other liabilities ( 1.7 ) ( 44.6 )

Increase in accounts payable and accrued expenses of consolidated investment products 15.5 100.8

Increase in income taxes payable 174.5 135.3

Increase in accounts payable, accrued expenses and other liabilities 16.4 12.3

Decrease in accounts payable and accrued expenses of consolidated investment products ( 13.9 ) ( 13.2 )

Net cash provided by operating activities 166.4 291.2

3 unchanged sentences

Liquidation of investments by consolidated collateralized loan obligations 435.2 187.9

Decrease (increase) in loans receivable, net 42.7 ( 57.4 )

Decrease in loans receivable, net — 28.2

Additions of property and equipment, net ( 16.7 ) ( 13.6 )

8 unchanged sentences

[Table continued from previous page]

Nine Months Ended

Three Months Ended

(in millions) 2021 2020

Issuance of common stock $ 11.0 $ 12.1

Dividends paid on common stock $ ( 143.1 ) $ ( 134.8 )

2 unchanged sentences

Payment of debt issuance costs — ( 6.7 )

Payment on debt ( 250.0 ) —

Proceeds from loan — 0.2

Payments on loan — ( 0.4 )

Proceeds from debt of consolidated investment products 1,727.6 543.1

Payment on debt of consolidated investment products ( 488.7 ) ( 194.1 )

Payments on contingent consideration liability — ( 0.1 )

Payments on debt of consolidated investment products ( 1,228.1 ) ( 207.4 )

Payments on contingent consideration liabilities ( 4.0 ) —

Noncontrolling interests 136.6 63.4

1 unchanged sentence

Effect of exchange rate changes on cash and cash equivalents ( 8.0 ) 27.7

Increase in cash and cash equivalents 371.3 823.6

Increase (decrease) in cash and cash equivalents ( 102.9 ) 468.1

Cash and cash equivalents, beginning of period 4,647.2 3,989.8

7 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

December 31, 2021

Note 1 – Basis of Presentation

8 unchanged sentences

however, due to the inherent uncertainties in making estimates, actual amounts may differ from these estimates.

These financial statements should be read together with the Company’s audited financial statements included in its Form 10-K for the fiscal year ended September 30, 2020 (“fiscal year 2020”).

Certain comparative amounts for the prior fiscal year period have been reclassified to conform to the financial statement presentation as of and for the period ended June 30, 2021.

These financial statements should be read together with the Company’s audited financial statements included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2021 (“fiscal year 2021”).

Certain comparative amounts for the prior fiscal year period have been reclassified to conform to the financial statement presentation as of and for the period ended December 31, 2021.

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.

1 unchanged sentence

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.

1 unchanged sentence

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 statement of cash flows for the nine months ended June 30, 2020 is as follows:

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

The impact of the error on the consolidated statement of cash flows for the three months ended December 31, 2020 is as follows:

(in millions) As Reported Adjustments As Revised

Net cash provided by operating activities $ 290.0 $ 1.2 $ 291.2

Net cash provided by (used in) investing activities 269.1 ( 733.3 ) ( 464.2 )

Net cash provided by (used in) financing activities 96.4 482.6 579.0

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 (“CIPs”) in other income, net.

Amounts for the comparative prior fiscal year period 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 CIPs 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:

Three Months Ended

June 30, 2020 Nine Months Ended

June 30, 2020

(in millions) As Reported Adjustments As Amended As Reported Adjustments As Amended

Operating revenues

Other $ 32.2 $ ( 27.0 ) $ 5.2 $ 97.3 $ ( 77.6 ) $ 19.7

Operating Expenses

General, administrative, and other 1

$ 85.7 $ ( 5.8 ) $ 79.9 $ 271.8 $ ( 20.4 ) $ 251.4

Other Income (Expenses)

Investment and other income (losses), net $ 22.9 $ 26.7 $ 49.6 $ ( 166.5 ) 103.0 $ ( 63.5 )

Interest expense ( 6.8 ) 1.6 ( 5.2 ) ( 17.7 ) 2.7 ( 15.0 )

Investment and other income (losses) of consolidated investment products, net — 0.3 0.3 — ( 25.4 ) ( 25.4 )

Expenses of consolidated investment products — ( 7.4 ) ( 7.4 ) — ( 23.1 ) ( 23.1 )

Other income (expenses), net $ 16.1 $ 21.2 $ 37.3 $ ( 184.2 ) $ 57.2 $ ( 127.0 )

__________________

1 General, administrative and other includes amortization of intangible assets.

Note 2 – New Accounting Guidance

On October 1, 2020, the Company adopted new guidance issued by the Financial Accounting Standards Board 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 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

On July 31, 2020, the Company acquired all outstanding shares of Legg Mason, Inc.

(“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.

There were no changes to the purchase price allocation during the three and nine months ended June 30, 2021;

however, 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.

Transaction costs incurred in connection with the acquisition were 6.7 million for the nine months ended June 30, 2021.

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

The Company also incurred 13.0 million of acquisition-related compensation and benefits expense during the nine months ended June 30, 2021, primarily for employee severance and retention incentives.

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

in the consolidated statements of income were 1,500.8 million and 291.4 million for the six months ended March 31, 2021.

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 in periods subsequent to March 31, 2021.

See Note 3 – Acquisitions in the Company’s Form 10-K for fiscal year 2020 for additional information regarding the acquisition of Legg Mason.

Net cash used in investing activities ( 521.8 ) ( 289.8 ) ( 811.6 )

Net cash provided by financing activities 666.1 294.7 960.8

Note 2 – Earnings per Share

1 unchanged sentence

(in millions, except per share data) Three Months Ended

June 30, Nine Months Ended

2021 2020 2021 2020

Net income attributable to Franklin Resources, Inc.

1 unchanged sentence

allocation of earnings to participating nonvested stock and stock unit awards

19.4 4.2 50.6 9.7

Net Income Available to Common Stockholders $ 433.9 $ 330.7

1 unchanged sentence

Dilutive effect of nonparticipating nonvested stock unit awards

0.7 0.3 0.6 0.5

Weighted-Average Shares Outstanding – Diluted 490.6 491.7

2 unchanged sentences

Diluted 0.88 0.67

Nonparticipating nonvested stock unit awards excluded from the calculation of diluted earnings per share because their effect would have been antidilutive were insignificant for the three and nine months ended June 30, 2021, and 0.5 million for the three and nine months ended June 30, 2020.

Nonparticipating nonvested stock unit awards excluded from the calculation of diluted earnings per share because their effect would have been antidilutive were insignificant and 0.4 million for the three months ended December 31, 2021 and 2020.

Note 3 – Revenues

3 unchanged sentences

Luxembourg Total

for the three months ended June 30, 2021

Investment management fees

$ 1,213.0 $ 269.9 $ 73.1 $ 85.7 $ 55.6 $ 1,697.3

Sales and distribution fees

293.7 100.5 14.0 8.4 0.3 416.9

Shareholder servicing fees

38.3 10.1 0.1 2.0 — 50.5

7.8 0.3 — 0.1 — 8.2

$ 1,552.8 $ 380.8 $ 87.2 $ 96.2 $ 55.9 $ 2,172.9

(in millions) United States Luxembourg Americas

States Asia-Pacific Europe,

Luxembourg Total

for the nine months ended June 30, 2021

Investment management fees

$ 3,416.1 $ 803.2 $ 212.7 $ 248.0 $ 156.1 $ 4,836.1

Sales and distribution fees

852.4 295.2 38.9 37.4 3.5 1,227.4

Shareholder servicing fees

119.9 26.0 0.2 5.9 3.6 155.6

17.9 0.8 — 1.6 5.1 25.4

$ 4,406.3 $ 1,125.2 $ 251.8 $ 292.9 $ 168.3 $ 6,244.5

(in millions) United States Luxembourg Americas

States Asia-Pacific Europe,

Luxembourg Total

for the three months ended June 30, 2020

for the three months ended December 31, 2021

Investment management fees

9 unchanged sentences

Luxembourg Total

for the nine months ended June 30, 2020

for the three months ended December 31, 2020

Investment management fees

7 unchanged sentences

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 78 % and 80 % of the Company’s total operating revenues for the three and nine months ended June 30, 2021 and 91 % for the three and nine months ended June 30, 2020.

Revenues earned from sponsored funds were 81 % and 80 % of the Company’s total operating revenues for the three months ended December 31, 2021 and 2020.

Note 4 – Investments

The disclosures below include details of the Company’s investments, excluding those of CIPs.

The disclosures below include details of the Company’s investments, excluding those of consolidated investment products (“CIPs”).

See Note 6 – Consolidated Investment Products for information related to the investments held by these entities.

Investments consisted of the following:

(in millions) June 30,

(in millions) December 31,

2021 September 30,

13 unchanged sentences

Expedient Total

as of June 30, 2021

as of December 31, 2021

Investments, at fair value

15 unchanged sentences

Contingent consideration liabilities $ — $ — $ 42.4 $ — $ 42.4

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 and private real estate infrastructure funds.

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 $ 55.1 million with an expected weighted-average life of 4.1 years at June 30, 2021, and $ 51.2 million with an expected weighted-average life of 1.9 years at September 30, 2020.

The liquidation period for an investment in a private debt fund of $ 44.4 million and $ 40.2 million at June 30, 2021 and September 30, 2020 is unknown.

The Company’s unfunded commitments to the funds totaled $ 9.5 million at June 30, 2021 and September 30, 2020.

The redeemable global equity funds investment of $ 12.7 million and $ 25.3 million at June 30, 2021 and September 30, 2020 can be redeemed monthly and redeemable private real estate infrastructure fund investment of $ 11.8 million at June 30, 2021 can be redeemed quarterly.

These investments were as follows:

(in millions) December 31,

2021 September 30,

Nonredeemable investments 1

Investments with unknown liquidation periods $ 46.4 $ 46.6

Investments with known liquidation periods 32.3 53.9

Redeemable investments 2

Unfunded commitments 51.7 51.8

_______________

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 at both December 31, 2021 and September 30, 2021.

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 Liabilities

for the three months ended June 30,

Balance at beginning of period $ 19.5 $ 29.1 $ ( 25.3 ) $ 27.7 $ ( 7.6 )

Acquisitions — — — — ( 16.7 )

Total realized and unrealized gains (losses)

Included in investment and other income (losses), net 0.2 — — 0.8 —

Included in general, administrative and other expense — — — — ( 0.2 )

Purchases 5.3 — — 2.3 —

Sales ( 0.3 ) — — ( 10.5 ) —

Settlements — ( 5.0 ) — ( 2.3 ) 0.1

Balance at End of Period $ 24.7 $ 24.1 $ ( 25.3 ) $ 18.0 $ ( 24.4 )

Change in unrealized gains (losses) included in net income relating to assets and liabilities held at end of period $ 0.2 $ — $ — $ 0.1 $ ( 0.2 )

(in millions) Investments Contingent Consideration Asset Contingent Consideration Liabilities Investments Contingent Consideration Liabilities

for the nine months ended June 30,

(in millions) Investments Contingent Consideration Asset Contingent Consideration Liabilities Investments Contingent Consideration Asset Contingent Consideration Liabilities

for the three months ended December 31,

Balance at beginning of period $ 24.6 $ 19.4 $ ( 42.4 ) $ 17.4 $ 39.7 $ ( 25.3 )

1 unchanged sentence

Total realized and unrealized gains (losses)

Included in investment and other income (losses), net — — — 0.1 —

Included in investment and other income, net 0.2 — — ( 0.1 ) — —

Included in general, administrative and other expense — — 1.1 — — —

2 unchanged sentences

Settlements ( 3.2 ) ( 3.9 ) 9.0 ( 0.5 ) ( 2.8 ) —

Consolidation of investment product

— — — ( 10.0 ) —

Transfers out of Level 3

( 1.9 ) — — ( 0.2 ) — —

Foreign exchange revaluation — — 0.1 — — ( 0.2 )

Balance at End of Period $ 18.2 $ 15.5 $ ( 56.7 ) $ 17.8 $ 36.9 $ ( 25.5 )

Change in unrealized losses included in net income relating to assets and liabilities held at end of period $ — $ — $ — $ ( 0.9 ) $ ( 0.2 )

Change in unrealized gains (losses) included in net income relating to assets and liabilities held at end of period $ ( 0.2 ) $ — $ 1.3 $ ( 0.1 ) $ — $ —

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

(in millions) Fair Value

Level June 30, 2021 September 30, 2020

Level December 31, 2021 September 30, 2021

Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value

4 unchanged sentences

Equity securities 3 158.2 158.2 94.5 99.1

Loans receivable 3 — — 42.4 42.4

Financial Liability

Debt 2 $ 3,393.7 $ 3,395.1 $ 3,399.4 $ 3,434.1

Note 8 – Debt

The disclosures below include details of the Company’s debt, excluding that of CIPs.

See Note 9 – Consolidated Investment Products for information related to the debt of these entities.

Debt consisted of the following:

June 30, 2021 September 30, 2020

(in millions) Carrying

Value Effective Interest Rate Carrying

Value Effective Interest Rate

Notes issued by Franklin Resources, Inc.

$ 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 %

$ 750 million 1.600 % senior notes due October 2030

748.4 1.72 % — N/A

Total notes issued by Franklin Resources, Inc.

1,448.0 699.5

Notes issued by Legg Mason (a subsidiary of Franklin)

$ 250 million 3.950 % senior notes due July 2024

268.0 1.53 % 272.4 1.53 %

$ 450 million 4.750 % senior notes due March 2026

513.0 1.80 % 523.0 1.80 %

$ 550 million 5.625 % senior notes due January 2044

743.7 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

515.8 5.25 % 516.1 5.25 %

Total notes issued by Legg Mason 2,040.5 2,319.7

Debt issuance costs ( 7.9 ) ( 2.1 )

Total $ 3,480.6 $ 3,017.1

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.

The Company incurred $ 6.7 million in debt issuance costs and the notes were issued at a discount of $ 1.7 million.

The debt issuance costs and discount are being amortized over the term of the notes.

At June 30, 2021, Franklin’s outstanding senior unsecured unsubordinated notes had an aggregate principal amount due of $ 1,450.0 million.

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

At June 30, 2021, Legg Mason’s outstanding senior unsecured unsubordinated notes and junior unsecured subordinated notes had an aggregate principal amount due of $ 1,750.0 million.

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

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.

In addition, the indentures include requirements that must be met if the Company consolidates or merges with, or sells all or substantially all of its assets to, another entity.

The Company was in compliance with all debt covenants at June 30, 2021.

The junior notes due September 2056 may be redeemed in whole on or after September 15, 2021.

The Company currently expects to call these notes in September 2021, subject to approval by the Franklin Resources, Inc.

Board of Directors.

At June 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.

Note 6 – 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 voting interest entities and variable interest entities.

The Company had 57 CIPs, including eight CLOs, as of June 30, 2021 and 75 CIPs, including eight CLOs, as of September 30, 2020.

The Company had 63 CIPs, including 11 CLOs, as of December 31, 2021 and 60 CIPs, including 10 CLOs, as of September 30, 2021.

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

(in millions) June 30,

(in millions) December 31,

2021 September 30,

14 unchanged sentences

$ 6,904.2 $ 6,237.3

The CIPs did not have a significant impact on net income attributable to the Company during the three and nine months ended June 30, 2021 and 2020.

The CIPs did not have a significant impact on net income attributable to the Company during the three months ended December 31, 2021 and 2020.

The Company has no right to the CIPs’ assets, other than its direct equity investments in them and investment management and other fees earned from them.

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Expedient Total

as of June 30, 2021

as of December 31, 2021

Cash and cash equivalents of CLOs $ 249.9 $ — $ — $ — $ 249.9

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

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

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 $ 132.1 million with an expected weighted-average life of 0.8 years at June 30, 2021, and $ 261.1 million with an expected weighted-average life of 4.2 years at September 30, 2020.

The CIPs’ unfunded commitments to these funds totaled $ 0.5 million and $ 94.0 million, of which the Company was contractually obligated to fund $ 0.2 million and $ 11.4 million based on its ownership percentage in the CIPs, at June 30, 2021 and September 30, 2020.

The liquidation periods for investments in a redeemable hedge fund of $ 146.8 million and a nonredeemable U.S.

equity fund of $ 59.4 million at June 30, 2021 are unknown.

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

These investments were as follows:

(in millions) December 31,

2021 September 30,

Nonredeemable investments 1

Investments with known liquidation periods $ 53.8 $ 141.4

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 1.0 year at December 31, 2021 and 1.3 years at September 30, 2021.

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 based on its ownership percentage in the CIPs, at December 31, 2021 and September 30, 2021.

Changes in Level 3 assets were as follows:

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Securities Real Estate Loans Total

for the three months ended June 30, 2021

Balance at April 1, 2021 $ 271.2 $ 423.5 $ 22.4 $ 717.1

Realized and unrealized gains included in investment and other income (losses) of consolidated investment products, net 6.2 2.4 0.2 8.8

Purchases 14.0 44.2 — 58.2

Sales and settlements ( 2.4 ) — ( 1.2 ) ( 3.6 )

Deconsolidations — ( 448.8 ) — ( 448.8 )

Transfers into Level 3 0.9 — — 0.9

Transfers out of Level 3 ( 1.0 ) — — ( 1.0 )

Foreign exchange revaluation — 1.2 — 1.2

Balance at June 30, 2021 $ 288.9 $ 22.5 $ 21.4 $ 332.8

Change in unrealized gains (losses) included in net income relating to assets held at June 30, 2021 $ 6.2 $ ( 0.5 ) $ 0.2 $ 5.9

(in millions) Equity and Debt

Securities Real Estate Loans Total

for the nine months ended June 30, 2021

for the three months ended December 31, 2021

Balance at October 1, 2021 $ 453.3 $ 89.4 $ 20.5 $ 563.2

Realized and unrealized gains included in investment and other income (losses) of consolidated investment products, net 26.3 5.1 0.2 31.6

Realized and unrealized gains included in investment and other income of consolidated investment products, net 92.3 8.6 0.3 101.2

Purchases 18.2 0.9 14.0 33.1

Sales and settlements ( 23.9 ) — ( 0.6 ) ( 24.5 )

Deconsolidations ( 36.2 ) ( 448.8 ) — ( 485.0 )

Transfers into Level 3 0.1 — — 0.1

Transfers out of Level 3 ( 1.0 ) — — ( 1.0 )

Foreign exchange revaluation 0.7 10.5 — 11.2

Balance at June 30, 2021 $ 288.9 $ 22.5 $ 21.4 $ 332.8

Change in unrealized gains included in net income relating to assets held at June 30, 2021 $ 25.9 $ 2.2 $ 0.3 $ 28.4

(in millions) Equity and Debt

Securities Real Estate Loans Total

for the three months ended June 30, 2020

Balance at April 1, 2020 $ 287.0 $ 288.0 $ 11.0 $ 586.0

Realized and unrealized losses included in investment and other income (losses) of consolidated investment products, net ( 9.4 ) ( 0.4 ) ( 0.4 ) ( 10.2 )

Purchases 63.1 12.1 — 75.2

Sales and settlements ( 1.2 ) — ( 1.7 ) ( 2.9 )

Transfers out of Level 3 ( 0.1 ) — — ( 0.1 )

Foreign exchange revaluation ( 1.8 ) 4.6 — 2.8

Balance at June 30, 2020 $ 337.6 $ 304.3 $ 8.9 $ 650.8

Change in unrealized losses included in net income relating to assets held at June 30, 2020 $ ( 8.6 ) $ ( 0.5 ) $ ( 0.4 ) $ ( 9.5 )

Balance at December 31, 2021 $ 539.0 $ 98.9 $ 34.2 $ 672.1

Change in unrealized gains included in net income relating to assets held at December 31, 2021 $ 92.5 $ 8.6 $ 0.3 $ 101.4

(in millions) Equity and Debt

Securities Real Estate Loans Total

for the nine months ended June 30, 2020

for the three months ended December 31, 2020

Balance at October 1, 2020 $ 322.3 $ 339.2 $ 24.9 $ 686.4

Realized and unrealized losses included in investment and other income (losses) of consolidated investment products, net ( 37.3 ) ( 1.3 ) ( 1.8 ) ( 40.4 )

Realized and unrealized gains included in investment and other income of consolidated investment products, net 19.1 1.5 — 20.6

Purchases 12.6 51.1 — 63.7

Sales and settlements ( 1.0 ) — ( 1.4 ) ( 2.4 )

Deconsolidation ( 40.7 ) — — ( 40.7 )

Transfers into Level 3 2.2 — — 2.2

Transfers out of Level 3 ( 1.1 ) — — ( 1.1 )

Foreign exchange revaluation 3.0 16.0 — 19.0

Balance at June 30, 2020 $ 337.6 $ 304.3 $ 8.9 $ 650.8

Change in unrealized losses included in net income relating to assets held at June 30, 2020 $ ( 36.5 ) $ ( 1.3 ) $ ( 1.8 ) $ ( 39.6 )

Balance at December 31, 2020 $ 356.0 $ 407.8 $ 23.5 $ 787.3

Change in unrealized gains included in net income relating to assets held at December 31, 2020 $ 18.3 $ 1.5 $ 0.1 $ 19.9

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

(in millions)

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

as of December 31, 2021 Fair Value Valuation Technique Significant Unobservable Inputs Range (Weighted Average 1 )

Equity and debt securities $ 404.0 Market pricing Private sale pricing $ 0.39 –$ 100.00 ($ 21.11 ) per share

71.7 Discounted cash flow Discount rate 3.4 %– 6.3 % ( 4.3 %)

Risk premium 14.5 %

85.2 Market comparable companies Enterprise value/

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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 27.9

49.8 Discounted cash flow Discount rate 3.1 %– 6.3 % ( 4.2 %)

Real estate 98.9 Discounted cash flow Discount rate 5.5 %– 6.3 % ( 5.9 %)

2 unchanged sentences

as of September 30, 2021 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 %

Risk premium 9.7 %– 19.3 % ( 16.7 %)

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/

1 unchanged sentence

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

Risk premium 55.0 %

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

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

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 %)

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

__________________

1 Based on the relative fair value of the instruments.

If the relevant significant inputs used in the market-based valuations, other than the discount for lack of marketability and risk premium, were independently higher (lower) as of June 30, 2021, the resulting fair value of the assets would be higher (lower).

If the relevant significant inputs used in the discounted cash flow or yield capitalization valuations, as well as the discount for lack of marketability and risk premium in the market-based valuations, were independently higher (lower) as of June 30, 2021, the resulting fair value of the assets would be lower (higher).

If the relevant significant inputs used in the market-based valuations, other than discount for lack of marketability, were independently higher (lower) as of December 31, 2021, the resulting fair value of the assets would be higher (lower).

If the relevant significant inputs used in the discounted cash flow valuations, as well as the discount for lack of marketability used in the market-based valuations, were independently higher (lower) as of December 31, 2021, the resulting fair value of the assets would be lower (higher).

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

(in millions) Fair Value

Level June 30, 2021 September 30, 2020

Level December 31, 2021 September 30, 2021

Value Estimated

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Debt of CIPs consisted of the following:

June 30, 2021 September 30, 2020

December 31, 2021 September 30, 2021

(in millions) Amount Weighted-

4 unchanged sentences

$ 4,178.6 $ 3,671.0

The debt of CLOs had fixed and floating interest rates based on LIBOR ranging from 1.00 % to 8.28 % at June 30, 2021, and from 1.43 % to 8.34 % at September 30, 2020.

The other debt had fixed and floating interest rates primarily based on LIBOR, EURIBOR and U.S.

Treasury rates ranging from 2.42 % to 4.24 % at June 30, 2021, and from 1.00 % to 5.81 % at September 30, 2020.

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

The debt of CLOs had fixed and floating interest rates ranging from 0.87 % to 7.30 % at December 31, 2021, and from 1.00 % to 8.22 % at September 30, 2021.

The other debt had floating interest rates ranging from 1.63 % to 2.42 % at both December 31, 2021 and September 30, 2021.

The floating rates were primarily based on LIBOR.

The contractual maturities for the debt of CIPs at December 31, 2021 were as follows:

(in millions)

5 unchanged sentences

The unpaid principal balance and fair value of the investments of CLOs were as follows:

(in millions) June 30,

(in millions) December 31,

2021 September 30,

2 unchanged sentences

Fair Value $ 4,462.8 $ 3,972.0

Investments 90 days or more past due were $ 6.5 million and $ 3.9 million at June 30, 2021 and September 30, 2020.

The Company recognized $ 1.1 million and $ 8.5 million of net gains during the three and nine months ended June 30, 2021 related to its own economic interests in the CLOs.The aggregate principal amount due of the debt of CLOs was $ 3,165.4 million and $ 2,821.6 million at June 30, 2021 and September 30, 2020.

There were no investments 90 days or more past due at December 31, 2021 and September 30, 2021.

The Company recognized $ 5.3 million and $ 0.9 million of net gains during the three months ended December 31, 2021 and 2020, related to its own economic interests in the CLOs.

The aggregate principal amount due of the debt of CLOs was $ 4,136.9 million and $ 3,629.9 million at December 31, 2021 and September 30, 2021.

Note 7 – Redeemable Noncontrolling Interests

1 unchanged sentence

(in millions) 2021 2020

CIPs Minority Interests Total 2020¹

for the three months ended June 30,

Balance at beginning of period $ 609.9 $ 205.8 $ 815.7 $ 209.1

Net income 23.5 10.2 33.7 31.3

Net subscriptions (distributions) and other 190.1 ( 18.1 ) 172.0 52.6

Net consolidations 31.3 — 31.3 420.8

Balance at End of Period $ 854.8 $ 197.9 $ 1,052.7 $ 713.8

(in millions) 2021

CIPs Minority Interests Total 2020¹

for the nine months ended June 30,

CIPs Minority Interests Total CIPs Minority Interests Total

for the three months ended December 31,

Balance at beginning of period $ 622.5 $ 310.5 $ 933.0 $ 397.3 $ 144.6 $ 541.9

Net income 42.9 21.5 64.4 11.8

Net income (loss) ( 4.8 ) 12.3 7.5 13.0 5.7 18.7

Net subscriptions (distributions) and other 166.3 ( 1.9 ) 164.4 ( 29.9 ) — ( 29.9 )

Net consolidations (deconsolidations) ( 121.5 ) — ( 121.5 ) 84.9 — 84.9

Adjustment to fair value — 52.3 52.3 —

Balance at End of Period $ 662.5 $ 320.9 $ 983.4 $ 465.3 $ 150.3 $ 615.6

______________

1 Represents redeemable noncontrolling interests of CIPs .

Note 8 – Nonconsolidated Variable Interest Entities

Variable interest entities (“VIEs”) for which the Company is not the primary beneficiary consist of sponsored funds and other investment products in which the Company has an equity ownership interest.

The Company’s maximum exposure to loss from these VIEs consists of equity investments, investment management and other fee receivables, and loans and related interest receivable as follows:

(in millions) June 30,

The Company’s maximum exposure to loss from these VIEs consists of equity investments, investment management and other fee receivables as follows:

(in millions) December 31,

2021 September 30,

1 unchanged sentence

Receivables 153.5 172.1

Loans receivable — 42.4

Total $ 875.4 $ 811.3

1 unchanged sentence

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.

The Company did not provide financial or other support to its sponsored funds during the nine months ended June 30, 2021.

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.

The Company did not provide financial or other support to its sponsored funds during the three months ended December 31, 2021.

During the fiscal year ended September 30, 2020, the Company authorized loans to certain sponsored funds in India that experienced increased liquidity risks and redemptions.

See Note 9 – Commitments and Contingencies for further information.

The loans were fully repaid during the second quarter of the fiscal year ending September 30, 2021.

The loans were fully repaid by March 31, 2021.

Note 9 – Commitments and Contingencies

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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 unitholder approval is required to implement the decision.

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.

3 unchanged sentences

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

The Supreme Court is expected to set a further hearing for October 2021 in connection with the remaining issues on appeal.

Further hearings are expected to occur 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 July 2021, approximately $ 2.8 billion has been distributed to Fund unitholders.

As of December 2021, approximately $ 3.5 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.

Following respondents’ responses to the show cause notices, 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.

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);

4 unchanged sentences

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

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 has also responded 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 has been 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.

4 unchanged sentences

Management is of the opinion that the ultimate resolution of such claims will not materially affect the Company’s business, financial position, results of operations or liquidity.

In management’s opinion, an adequate accrual has been made as of June 30, 2021 to provide for any probable losses that may arise from such matters for which the Company could reasonably estimate an amount.

In management’s opinion, an adequate accrual has been made as of December 31, 2021 to provide for any probable losses that may arise from such matters for which the Company could reasonably estimate an amount.

Indemnifications and Guarantees

4 unchanged sentences

Future payments for claims against the Company under these indemnities or guarantees could negatively impact the Company’s financial condition.

In management’s opinion, no material loss was deemed probable or reasonably possible pursuant to such indemnification agreements and/or guarantees as of June 30, 2021.

In management’s opinion, no material loss was deemed probable or reasonably possible pursuant to such indemnification agreements and/or guarantees as of December 31, 2021.

Other Commitments and Contingencies

At June 30, 2021, there were no material changes in the other commitments and contingencies as reported in the Company’s Form 10-K for fiscal year 2020.

At December 31, 2021, there were no material changes in the other commitments and contingencies as reported in the Company’s Annual Report on Form 10-K for fiscal year 2021.

Note 10 – Stock-Based Compensation

4 unchanged sentences

Shares Weighted-

for the nine months ended June 30, 2021

for the three months ended December 31, 2021

Nonvested balance at October 1, 2021 14,176 3,658 17,834 $ 22.27

2 unchanged sentences

Forfeited/canceled ( 207 ) ( 156 ) ( 363 ) 24.35

Nonvested Balance at June 30, 2021 16,472 4,305 20,777 $ 22.61

Total unrecognized compensation expense related to nonvested stock and stock unit awards was $ 319.1 million at June 30, 2021.

Nonvested Balance at December 31, 2021 16,607 3,549 20,156 $ 24.53

Total unrecognized compensation expense related to nonvested stock and stock unit awards was $ 379.7 million at December 31, 2021.

This expense is expected to be recognized over a remaining weighted-average vesting period of 2.4 years.

Note 14 – Investment and Other Income (Losses), Net

Investment and other income (losses), net consisted of the following:

Note 11 – Investment and Other Income, Net

Investment and other income, net consisted of the following:

Three Months Ended

June 30, Nine Months Ended

(in millions) 2021 2020

Dividend income $ 1.9 $ 5.5 $ 5.7 $ 44.1

Interest income 1.5 2.3 6.7 11.4

Gains (losses) on investments, net 17.3 42.3 76.2 ( 29.3 )

Income (losses) from investments in equity method investees 39.4 10.0 123.8 ( 110.3 )

Gains (losses) on derivatives, net ( 9.1 ) ( 20.2 ) ( 25.2 ) 8.9

Dividend and interest income $ 6.1 $ 5.1

Gains on investments, net 25.8 48.7

Income from investments in equity method investees 24.7 38.5

Rental income 9.7 7.7

Foreign currency exchange losses, net ( 7.2 ) ( 0.6 ) ( 17.2 ) ( 11.5 )

Foreign currency exchange gains (losses), net 3.9 ( 16.5 )

Other, net ( 13.2 ) ( 6.3 )

Investment and other income (losses), net $ 52.9 $ 49.6 $ 197.2 $ ( 63.5 )

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 June 30, 2021 and 2020 were $( 0.2 ) million and $ 27.2 million for the three and nine months ended June 30, 2021, and $ 52.9 million and $( 12.5 ) million for the three and nine months ended June 30, 2020.

Investment and other income, net $ 57.0 $ 77.2

Net gains (losses) recognized on equity securities measured at fair value and trading debt securities that were held by the Company at December 31, 2021 and 2020 were $( 4.4 ) million for the three months ended December 31, 2021, and $ 30.4 million for the three months ended December 31, 2020.

Note 12 – Accumulated Other Comprehensive Income (Loss)

3 unchanged sentences

Defined Benefit

for the three months ended June 30, 2021

Balance at April 1, 2021 $ ( 340.9 ) $ ( 7.6 ) $ ( 348.5 )

Other comprehensive income (loss)

Other comprehensive income (loss) before reclassifications, net of tax 21.5 ( 0.2 ) 21.3

Reclassifications to net investment and other income (losses), net of tax 1.1 — 1.1

Total other comprehensive income (loss) 22.6 ( 0.2 ) 22.4

Balance at June 30, 2021 $ ( 318.3 ) $ ( 7.8 ) $ ( 326.1 )

(in millions) Currency

Adjustments Unrealized

Defined Benefit

for the nine months ended June 30, 2021

for the three months ended December 31, 2021

Balance at October 1, 2021 $ ( 370.5 ) $ ( 7.1 ) $ ( 377.6 )

Other comprehensive income

Other comprehensive income before reclassifications, net of tax 79.3 0.2 79.5

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

Total other comprehensive income 81.3 0.2 81.5

Balance at June 30, 2021 $ ( 318.3 ) $ ( 7.8 ) $ ( 326.1 )

(in millions) Currency

Adjustments Unrealized

Defined Benefit

Plans Unrealized

Investments Total

for the three months ended June 30, 2020

Balance at April 1, 2020 $ ( 469.9 ) $ ( 6.4 ) $ 0.2 $ ( 476.1 )

Other comprehensive income (loss)

Other comprehensive income (loss) before reclassifications, net of tax 26.1 — ( 0.5 ) 25.6

Reclassifications to net investment and other income (losses), net of tax — — 0.4 0.4

Total other comprehensive income (loss) 26.1 — ( 0.1 ) 26.0

Balance at June 30, 2020 $ ( 443.8 ) $ ( 6.4 ) $ 0.1 $ ( 450.1 )

Other comprehensive loss

Other comprehensive loss before reclassifications, net of tax ( 6.9 ) ( 4.6 ) ( 11.5 )

Reclassifications to compensation and benefits expense, net of tax — ( 0.5 ) ( 0.5 )

Total other comprehensive loss ( 6.9 ) ( 5.1 ) ( 12.0 )

Balance at December 31, 2021 $ ( 377.4 ) $ ( 12.2 ) $ ( 389.6 )

(in millions) Currency

1 unchanged sentence

Defined Benefit

Plans Unrealized

Investments Total

for the nine months ended June 30, 2020

for the three months ended December 31, 2020

Balance at October 1, 2020 $ ( 399.6 ) $ ( 8.0 ) $ ( 407.6 )

Other comprehensive income (loss)

Other comprehensive loss before reclassifications, net of tax ( 18.8 ) ( 0.2 ) ( 0.5 ) ( 19.5 )

Reclassifications to net investment and other income (losses), net of tax 0.4 — 0.6 1.0

Other comprehensive income (loss) before reclassifications, net of tax 93.4 ( 0.6 ) 92.8

Reclassifications to net investment and other income, net of tax 0.1 — 0.1

Total other comprehensive income (loss) 93.5 ( 0.6 ) 92.9

Balance at June 30, 2020 $ ( 443.8 ) $ ( 6.4 ) $ 0.1 $ ( 450.1 )

Balance at December 31, 2020 $ ( 306.1 ) $ ( 8.6 ) $ ( 314.7 )

Note 13 – Subsequent Event

On January 10, 2022, the Company entered into a bi-lateral credit agreement with Bank of America, N.A.

to establish a 364 day revolving credit facility with aggregate commitments of $ 500.0 million.

As of the time of this filing, there were no amounts outstanding.

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-Q

Item 1. Financial Statements