What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-11-14 compared with 2021-11-19 · 182 added, 274 removed, 1107 unchanged (29% of the section changed)

3 unchanged sentences

Management’s Report on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Financial Statements of Franklin Resources, Inc.

and its consolidated subsidiaries:

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

Consolidated Statements of Income for the fiscal years ended September 30, 2022 , 2021 and 2 020

Consolidated Statements of Comprehensive Income for the fiscal years ended September 30, 2022 , 2021 and 202 0

14 unchanged sentences

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 April 1, 2022, Franklin Resources, Inc.

completed the acquisition of Lexington Partners L.P.

(“Lexington”).

Consistent with guidance issued by the SEC that an assessment of a recently acquired business may be omitted from management’s report on internal control over financial reporting for one year following the acquisition, management excluded an assessment of the effectiveness of the Company’s internal control over financial reporting related to Lexington.

Lexington represents approximately 2% of the Company’s consolidated total operating revenues and approximately 1% of the Company’s consolidated total assets, excluding associated goodwill and intangible assets, as of and for the fiscal year ended September 30, 2022.

The recognition of goodwill and intangible assets, however, is covered by our internal controls over business combinations, which were included in management's assessment of the effectiveness of the Company's internal control over financial reporting as of September 30, 2022.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2022, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013).

23 unchanged sentences

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 Lexington Partners L.P.

from its assessment of internal control over financial reporting as of September 30, 2022 because Lexington Partners L.P.

was acquired by the Company in a purchase business combination during 2022.

We have also excluded Lexington Partners L.P.

from our audit of internal control over financial reporting.

Lexington Partners L.P.

is a subsidiary whose total assets and total operating revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 1% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended September 30, 2022.

Definition and Limitations of Internal Control over Financial Reporting

1 unchanged sentence

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;

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.

39 unchanged sentences

Interest expense ( 98.2 ) ( 85.4 ) ( 33.4 )

Investment and other income of consolidated investment products, net 421.1 70.2 78.8

Investment and other income (losses) of consolidated investment products, net ( 17.7 ) 421.1 70.2

Expenses of consolidated investment products ( 19.7 ) ( 31.2 ) ( 29.4 )

48 unchanged sentences

Accounts payable and accrued expenses 466.2 479.3

Commissions 259.8 268.0

Income taxes 523.1 693.6

35 unchanged sentences

Balance at October 1, 2019 499.3 $ 49.9 $ — $ 10,288.2 $ ( 431.6 ) $ 9,906.5 $ 635.0 $ 10,541.5

Adoption of new accounting guidance

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 )

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)

5 unchanged sentences

Stock-based compensation

16.3 16.3 16.3

Net subscriptions and other 164.4 164.4

Net consolidation of investment product 24.3 24.3

Acquisition 194.8 194.8

Net deconsolidation of investment product ( 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) 798.9 798.9 ( 60.4 ) 738.5

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

9 unchanged sentences

Net deconsolidation of investment products ( 552.4 ) ( 552.4 )

Acquisitions 39.1 39.1

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

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

Adoption of new accounting guidance

( 3.3 ) ( 3.3 ) ( 3.3 )

Net income 1,291.9 1,291.9 88.2 1,380.1

Other comprehensive income 30.0 30.0 30.0

Other comprehensive loss ( 243.4 ) ( 243.4 ) ( 243.4 )

Dividends declared on common stock ($ 1.16 per share)

8 unchanged sentences

Net deconsolidation of investment products ( 25.7 ) ( 25.7 )

Acquisition 149.9 149.9

Adjustment to fair value of redeemable noncontrolling interests ( 263.1 ) ( 263.1 ) ( 263.1 )

12 unchanged sentences

Impairments of intangible assets and goodwill — — 55.4

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

Net losses (gains) on investments 75.4 ( 75.5 ) 15.5

Losses (income) from investments in equity method investees ( 36.2 ) ( 154.3 ) 98.1

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

Net losses (gains) on investments of consolidated investment products 95.1 ( 316.4 ) 36.8

Net purchase of investments by consolidated investment products ( 355.9 ) ( 781.0 ) ( 682.8 )

3 unchanged sentences

Decrease (increase) in receivables and other assets ( 86.7 ) ( 182.5 ) 134.7

Decrease in investments, net 12.8 537.3 142.4

Decrease (increase) in investments, net ( 3.7 ) 12.8 537.3

Increase (decrease) in accrued compensation and benefits 281.7 114.8 ( 10.5 )

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

Decrease in income taxes payable ( 180.1 ) ( 12.5 ) ( 123.0 )

Increase (decrease) in accounts payable, accrued expenses and other liabilities 64.8 ( 97.3 ) ( 131.2 )

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

Increase (decrease) in accounts payable and accrued expenses of consolidated investment products ( 4.8 ) 62.3 70.6

Net cash provided by operating activities 1,956.7 1,245.4 1,083.3

12 unchanged sentences

Payments of contingent consideration asset 19.9 20.3 —

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

Net consolidation (deconsolidation) of investment products 38.8 ( 383.7 ) 587.2

Net cash used in investing activities ( 3,329.2 ) ( 2,615.9 ) ( 4,061.9 )

17 unchanged sentences

Payments on loan

— ( 0.4 ) ( 1.5 )

Proceeds from debt of consolidated investment products

26 unchanged sentences

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.

The Company’s related services include fund administration, sales and distribution, and shareholder servicing.

Basis of Presentation.

3 unchanged sentences

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, 2022 (“fiscal year 2022”).

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,

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.

The consolidated financial statements include the accounts of Franklin and its subsidiaries and CIPs in which it has a controlling financial interest.

The consolidated financial statements include the accounts of Franklin and its subsidiaries and consolidated investment products (“CIPs”) in which it has a controlling financial interest.

The Company has a controlling financial interest when it owns a majority of the voting interest in a voting interest entity (“VOE”) or is the primary beneficiary of a variable interest entity (“VIE”).

19 unchanged sentences

The fair value of trade names is determined using the relief from royalty method based on net present value of estimated future cash flows, which include significant assumptions about royalty rate, revenue growth rate, discount rate and effective tax rate.

The management contract intangible assets are amortized over their estimated useful lives, which range from three to 15 years, using the straight-line method, unless the asset is determined to have an indefinite useful life.

The management contract

intangible assets are amortized over their estimated useful lives, which range from three to 16 years, using the straight-line method, unless the asset is determined to have an indefinite useful life.

Indefinite-lived intangible assets represent contracts to manage investment assets for which there is no foreseeable limit on the contract period.

Trade names intangible assets are amortized over their estimated useful lives which range from five to twenty years using the straight-line method.

Amortization and impairment are recognized in general, administrative and other expense.

Goodwill and indefinite-lived intangible assets are tested for impairment annually as of August 1 and when an event occurs or circumstances change that more likely than not reduce the fair value of the related reporting unit or indefinite-lived intangible asset below its carrying value.

The Company has one reporting unit, investment management and related services, consistent with its single operating segment, to which all goodwill has been assigned.

Amortization and impairment are recognized in general, administrative and other expense.

Goodwill and indefinite-lived intangible assets may first be assessed for qualitative factors to determine whether it is necessary to perform a quantitative impairment test.

36 unchanged sentences

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.

Changes in the fair value of equity securities other than fund products 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 either a market-based or income-based approach using significant unobservable inputs.

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

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.

36 unchanged sentences

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

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

Debt consists of senior 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.

28 unchanged sentences

Revenue is recorded gross of payments made to third-party service providers in the Company’s role as principal as it controls the delegated services provided to customers.

Costs of obtaining a contract with a customer include internal and external sales commissions paid upon inception of a contract.

The cost to obtain a contract is capitalized if it is incremental and would not have been incurred if the contract had not been obtained.

Capitalized contract costs are amortized based on average investor tenure, which range from five to 10 years.

Stock-Based Compensation.

3 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.

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 .

19 unchanged sentences

Transactions denominated in a foreign currency are revalued at the current exchange rate at the transaction date and any related gains and losses are recognized in earnings.

Note 2 – New Accounting Guidance

Recently Adopted Accounting Guidance

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 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.

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.

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 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

Cash and cash equivalents $ 681.1 $ — $ 681.1

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

Note 2 – Acquisitions

Lexington Partners L.P.

On April 1, 2022, the Company acquired all of the outstanding ownership interests in Lexington Partners L.P.

(“Lexington”), a leading global manager of secondary private equity and co-investment funds, for cash consideration of $ 984.7 million paid at the time of close and deferred consideration of $ 750.0 million that has an acquisition-date fair value of $ 706.4 million.

The consideration paid at close was funded from existing cash and the deferred consideration is included in other liabilities in the consolidated balance sheets.

In connection with the acquisition, the Company granted a 25 % profits interest in Lexington and performance-based cash retention awards to certain employees that vest over approximately five years.

The acquisition bolsters the Company’s alternative asset capabilities, complementing its existing strengths in real estate, private credit, and hedge fund strategies.

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

(in millions) Initial Estimated Fair Value Adjustments Revised Estimated Fair Value

as of April 1, 2022

Goodwill $ 1,105.3 $ ( 9.3 ) $ 1,096.0

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 )

Compensation and benefits ( 579.9 ) — ( 579.9 )

Deferred tax liabilities ( 315.4 ) 0.9 ( 314.5 )

Other liabilities ( 926.4 ) ( 6.1 ) ( 932.5 )

Redeemable noncontrolling interests ( 186.4 ) — ( 186.4 )

Definite-lived intangible assets 552.0 — 552.0

Investments 163.0 163.0

Operating lease right-of-use assets 84.4 84.4

Other assets and liabilities, net 28.1 9.3 37.4

Operating lease liabilities ( 91.8 ) ( 91.8 )

Nonredeemable noncontrolling interests ( 149.9 ) — ( 149.9 )

Total Identifiable Net Assets $ 1,691.1 $ — $ 1,691.1

______________

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.

The intangible assets relate to acquired investment management contracts and trade names.

Indefinite-lived intangible assets represent contracts for which there is no foreseeable limit on the contract period.

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 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 $ 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.

The pro forma adjustments include acquisition-related costs, adjustments to intangible amortization expense, and interest expense related to debt assumed.

These pro forma results are not indicative of future results of operations that would have been achieved nor are they indicative of future results of operations of the combined entity.

(in millions)

The goodwill is primarily attributable to expected growth opportunities from the combined operations and is expected to be deductible for tax purposes.

The definite-lived intangible assets relate to acquired investment management contracts and trade names, which are amortized over their estimated useful lives ranging from 6.0 years to 20.0 years.

Amortization expense related to the definite-lived intangible assets was $ 42.6 million for the fiscal year ended September 30, 2022.

Costs incurred in connection with the acquisition were $ 16.3 million for the fiscal year ended September 30, 2022.

Lexington contributed $ 184.5 million of revenue and did not have a material impact to net income attributable to Franklin Resources, Inc.

for the fiscal year ended September 30, 2022.

Revenues $ 7,862.0 $ 8,436.0

Net Income Attributable to Franklin Resources, Inc.

Consequently, the Company has not presented pro forma combined results of operations for this acquisition.

O’Shaughnessy Asset Management, LLC

On December 31, 2021, the Company acquired all of the outstanding ownership interests in O’Shaughnessy Asset Management, LLC (“OSAM”), a leading quantitative asset management firm, for cash consideration paid of approximately $ 300.0 million, excluding future payments to be made subject to the attainment of certain performance measures.

The acquisition resulted in $ 262.3 million of goodwill attributable to expected growth opportunities and synergies from the combined operations and is deductible for tax purposes.

Note 3 – Earnings per Share

14 unchanged sentences

Diluted 2.53 3.57 1.59

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.

Nonparticipating nonvested stock unit awards excluded from the calculation of diluted earnings per share because their effect would have been antidilutive were insignificant for fiscal year 2022 and 0.5 million for the fiscal year ended September 30, 2020 (“fiscal year 2020”).

No nonparticipating nonvested stock unit awards were excluded for the fiscal year ended September 30, 2021 (“fiscal year 2021”).

Note 4 – Revenues

1 unchanged sentence

(in millions) United

States Luxembourg Americas

Pacific Europe,

States Luxembourg Asia-Pacific Americas

States Europe,

Luxembourg Total

10 unchanged sentences

(in millions) United

States Luxembourg Americas

Pacific Europe,

States Luxembourg Asia-Pacific Americas

States Europe,

Luxembourg Total

10 unchanged sentences

(in millions) United

States Luxembourg Americas

Pacific Europe,

States Luxembourg Asia-Pacific Americas

States Europe,

Luxembourg Total

25 unchanged sentences

Total $ 1,651.3 $ 1,510.3

The Company recognized other-than-temporary impairments of $ 29.9 million during fiscal year 2022, and insignificant amounts during fiscal years 2021 and 2020.

Note 6 – Fair Value Measurements

40 unchanged sentences

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

Changes in the Level 3 contingent consideration liabilities were as follows:

(in millions)

for the fiscal years ended September 30, 2022 2021

2 unchanged sentences

( 24.5 ) ( 13.0 )

Total realized and unrealized gains (losses)

Included in investment and other income (losses), net 0.3 — — — — —

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 ) — — — — —

Total realized and unrealized gains (losses) included in general, administrative and other expense 9.4 ( 4.1 )

Balance at End of Year $ ( 31.6 ) $ ( 42.4 )

Change in unrealized gains (losses) included in net income relating to assets and liabilities held at end of year $ 0.3 $ — $ ( 4.1 ) $ ( 1.4 ) $ — $ —

Change in unrealized gains included in net income relating to assets and liabilities held at end of year $ 6.7 $ ( 4.1 )

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

10 unchanged sentences

Equity securities 3 256.9 256.9 94.5 99.1

Loans receivable 3 — — 42.4 42.4

Financial Liability

12 unchanged sentences

Depreciation and amortization expense related to property and equipment was $ 108.1 million, $ 124.4 million and $ 95.2 million in fiscal years 2022, 2021 and 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.

The Company recognized no impairment of property and equipment in fiscal years 2022, 2021 and 2020.

Note 8 – Goodwill and Other Intangible Assets

11 unchanged sentences

Acquisitions 1,367.6 —

Impairment — ( 23.7 )

Purchase price allocation adjustment ( 9.3 ) ( 52.4 )

1 unchanged sentence

Balance at End of Year $ 5,778.6 $ 4,457.7

______________

1 Refer to Note 3 - Acquisitions

During fiscal years 2022 and 2021, 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.).

The Company recognized impairments of indefinite-lived intangible assets of $ 3.2 million during fiscal year 2022 due to declines in market prices of crypto assets.

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 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.

Definite-lived intangible assets were as follows:

9 unchanged sentences

Total $ 2,082.9 $ ( 575.2 ) $ 1,507.7 $ 1,477.1 $ ( 294.7 ) $ 1,182.4

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.

No impairment of definite-lived intangible assets was recognized during fiscal years 2022 and 2021.

Definite-lived intangible assets had a weighted-average remaining useful life of 6.5 years at September 30, 2022, with estimated remaining amortization expense as follows:

11 unchanged sentences

as of September 30,

Notes issued by Franklin Resources, Inc.

Debt of Franklin Resources, Inc.

$ 300 million 2.800 % senior notes due September 2022

$ 299.9 2.93 % $ 299.8 2.93 %

$ — N/A $ 299.9 2.93 %

$ 400 million 2.850 % senior notes due March 2025

1 unchanged sentence

$ 850 million 1.600 % senior notes due October 2030

846.3 1.74 % — N/A

846.7 1.74 % 846.3 1.74 %

$ 350 million 2.950 % senior notes due August 2051

347.9 3.00 % 347.8 3.00 %

$ 300 million term loan due September 2025

300.0 3.50 % — N/A

Total notes issued by Franklin Resources, Inc.

Total debt of Franklin Resources, Inc.

1,894.4 1,893.7

Notes issued by Legg Mason (a subsidiary of Franklin)

Debt of Legg Mason (a subsidiary of Franklin)

$ 250 million 3.950 % senior notes due July 2024

4 unchanged sentences

736.3 3.38 % 742.2 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

Total debt of Legg Mason 1,493.1 1,518.3

Debt issuance costs ( 11.1 ) ( 12.6 )

Total $ 3,376.4 $ 3,399.4

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.

On September 15, 2022, the Company repaid all of the outstanding $ 300.0 million 2.800 % senior notes due in September 2022 issued by Franklin Resources, Inc.

at the principal amount plus accrued and unpaid interest of $ 4.2 million.

On September 8, 2022, the Company entered into a term loan credit agreement with several financial institutions to establish a 3-year term loan with an aggregate commitment of $ 300.0 million.

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 an aggregate commitment of $ 500.0 million.

On September 8, 2022, the Company amended and restated the credit facility to, among other things, extend its maturity to September 7, 2023.

As of September 30, 2022, there were no amounts outstanding.

At September 30, 2022, 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.

At September 30, 2022, Franklin’s outstanding senior unsecured unsubordinated notes had an aggregate principal amount due of $ 1,600.0 million.

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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.

Effective August 2, 2021, Franklin 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.

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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 September 30, 2021.

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.

The 364-day revolving credit facility and term loan credit agreement contain a financial performance covenant requiring that the Company maintains a consolidated net leverage ratio, measured as of the last day of each fiscal quarter, of no greater than 3.00 to 1.00.

The Company was in compliance with all covenants at September 30, 2022.

Note 10 – 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.

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 Company had 59 CIPs, including 15 CLOs, as of September 30, 2022 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:

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Accounts payable and accrued expenses $ 646.9 $ 558.0

$ 558.0 $ 611.2

Debt 5,457.7 3,671.0

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Franklin Resources, Inc.’s interests 960.8 1,000.7

1,000.7 754.4

Nonredeemable noncontrolling interests 497.1 371.3

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Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity $ 8,679.7 $ 6,237.3

$ 6,237.3 $ 5,155.3

The CIPs did not have a significant impact on net income attributable to the Company in fiscal years 2022, 2021 and 2020.

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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 redeemable global hedge fund, nonredeemable private equity funds and redeemable U.S.

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

equity fund and nonredeemable private equity funds.

These investments were as follows:

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Investments with known liquidation periods $ 19.5 $ 141.4

Investments with unknown liquidation periods 12.0 —

Redeemable investments 2

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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.

Investments with known liquidation have an expected weighted-average life of 0.3 years and 1.3 years at September 30, 2022 and 2021.

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

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Balance at beginning of year $ 453.3 $ 89.4 $ 20.5 $ 563.2

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

Realized and unrealized gains included in investment and other income (losses) of consolidated investment products, net 106.0 29.2 0.1 135.3

Purchases 177.5 150.0 14.0 341.5

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

Deconsolidations ( 36.2 ) ( 448.8 ) — ( 485.0 )

Sales ( 119.7 ) — ( 1.3 ) ( 121.0 )

Consolidations (deconsolidations) ( 52.1 ) — 200.4 148.3

Transfers into Level 3 0.1 — 5.7 5.8

Transfers out of Level 3 ( 9.3 ) — — ( 9.3 )

Foreign exchange revaluation 0.7 10.5 — 11.2

Balance at End of Year

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

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 )

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

Purchases 105.7 161.7 — 267.4

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

Sales ( 62.8 ) — ( 4.7 ) ( 67.5 )

Deconsolidations ( 36.2 ) ( 448.8 ) — ( 485.0 )

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$ 453.3 $ 89.4 $ 20.5 $ 563.2

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

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

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

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Equity and debt securities $ 555.8 Market pricing Private sale pricing $ 0.01 –$ 558.45 ($ 33.31 ) per share

102.3 Market comparable companies Enterprise value/

EBITDA multiple 6.0 – 20.6 ( 13.7 )

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

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

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

Discount for lack of liquidity 23.5 %– 25.1 % ( 24.9 %)

Real estate 268.6 Discounted cash flow Discount rate 4.5 %– 6.3 % ( 5.1 %)

Exit capitalization rate 5.5 %– 6.8 % ( 6.0 %)

Loans 147.2 Market pricing Price $ 0.97 –$ 0.98 ($ 0.98 )

60.4 Discounted cash flow Discount rate 9.9 %

31.9 Yield capitalization Credit spread 6.3 %

Loan-to-value ratio 79.1 %– 88.1 % ( 83.1 %)

(in millions)

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/

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

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

Risk premium 55.0 %

Enterprise value/

Revenue multiple 0.6 – 7.2 ( 5.1 )

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

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

Control Premium 20.0 %

Price-to-earnings ratio 28.8

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), 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 September 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 September 30, 2022, 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 used in the market-based valuations, were independently higher (lower) as of September 30, 2022, 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:

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Fair Value $ 5,762.3 $ 3,972.0

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.

Investments 90 days or more past due were immaterial at September 30, 2022.

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

During fiscal years 2022 and 2021, the Company recognized $ 22.6 million of net gains and $ 15.4 million of net gains related to its own economic interests in the CLOs.

The aggregate principal amount due of the debt of CLOs was $ 5,781.3 million and $ 3,629.9 million at September 30, 2022 and 2021.

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(in millions)

for the fiscal years ended September 30,

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

for the fiscal years ended September 30, 2022, 2021 and 2020

CIPs Minority Interests Total

Balance at October 1, 2019 $ 746.7 $ — $ 746.7

Acquisition 22.1 164.3 186.4

Business divestiture — ( 21.3 ) ( 21.3 )

Net income 63.8 30.3 94.1 45.0 3.6 48.6 6.2

Net income (loss) 45.0 3.6 48.6

Net subscriptions (distributions) and other 247.1 ( 2.0 ) 245.1

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

Net consolidations (deconsolidations) ( 663.6 ) — ( 663.6 )

Balance at September 30, 2020 $ 397.3 $ 144.6 $ 541.9

Net income (loss) 63.8 30.3 94.1

Net subscriptions (distributions) and other 531.4 ( 23.6 ) 507.8

Net consolidations (deconsolidations) ( 370.0 ) — ( 370.0 )

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

______________

1 Represents redeemable noncontrolling interests of CIPs.

Balance at September 30, 2021 $ 622.5 $ 310.5 $ 933.0

Net income (loss) ( 106.1 ) 59.2 ( 46.9 )

Net subscriptions (distributions) and other 244.5 ( 49.2 ) 195.3

Net consolidations (deconsolidations) 181.3 — 181.3

Adjustment to fair value — 263.1 263.1

Balance at September 30, 2022 $ 942.2 $ 583.6 $ 1,525.8

Note 12 – Nonconsolidated Variable Interest Entities

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Receivables 165.4 172.1

Loans receivable — 42.4

Total $ 883.4 $ 811.3

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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 and which are in the process of winding up.

See Note 16 – Commitments and Contingencies for further information.

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.

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

Note 13 – Taxes on Income

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Total $ 1,729.4 $ 2,444.2 $ 1,017.9

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

The impact of the reduced rates on income tax expense was $ 3.2 million or $ 0.01 per diluted share for fiscal year 2021, $ 2.7 million or $ 0.01 per diluted share for fiscal year 2020, and $ 4.1 million or $ 0.01 per diluted share for fiscal year 2019.

One tax incentive remained in effect at September 30, 2021 which will expire in December 2023.

The significant components of deferred tax assets and deferred tax liabilities were as follows:

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In addition, there were $ 172.1 million in tax effected state net operating loss carry-forwards that expire between fiscal years 2023 and 2042, with some having an indefinite carry-forward period.

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.

The Company also has federal net operating losses of $ 10.3 million, the majority of which will carry-forward indefinitely and $ 109.4 million of foreign tax credit carry-forwards that expire between fiscal years 2023 and 2029.

The valuation allowance decreased $ 61.0 million in fiscal year 2022, primarily related to State and non-US net operating loss utilization and US foreign tax credit utilization.

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

At September 30, 2022, the valuation allowance of $ 258.3 million was related to $ 147.9 million for federal, state, and foreign net operating loss carry-forwards, $ 63.6 million due to uncertainty of realizing the benefit of foreign tax credits, $ 37.8 million for capital losses, and $ 9.0 million for other foreign deferred taxes.

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Federal taxes at statutory rate $ 363.2 21.0 % $ 513.3 21.0 % $ 213.8 21.0 %

Transition tax on deemed repatriation of undistributed foreign earnings

— — — — 86.0 5.2 %

State taxes, net of federal tax effect

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

Foreign tax credit valuation allowance release 3

( 20.6 ) ( 1.2 ) % — — — —

8.9 0.5 % 0.4 — 6.4 0.7 %

Tax Provision

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

3 The Company released a valuation allowance on foreign tax credit in fiscal year 2022 due to additional foreign source income from foreign investments.

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

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Balance at End of Year $ 168.7 $ 184.3 $ 342.9

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.

If recognized, $ 161.9 million for 2022, $ 173.4 million for 2021 and $ 303.1 million for 2020 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, 2022 and 2021 was $ 24.8 million and $ 25.7 million, and is not presented in the unrecognized tax benefits table above.

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

Accrued penalties at September 30, 2022 and 2021 were $ 4.4 million and $ 3.9 million.

The Company files a consolidated U.S.

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India 2003 to 2022;

Brazil 2008 to 2021, Canada 2011 to 2021;

Brazil 2008 to 2022, Canada 2011 to 2014 and 2017 to 2022;

Australia 2018 to 2022, Hong Kong 2016 to 2022;

Singapore 2017 to 2022;

Luxembourg and the U.K.

Luxembourg 2018 to 2022;

2019 to 2022;

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the City of New York 2012 to 2022;

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.

the States of California, New Jersey, and New York 2018 to 2022;

and State of Maryland 2019 to 2022.

The Company has ongoing litigation and examinations in various stages, in the States of California and New York, and City of New York, and in Brazil, Canada, India, Japan and Malaysia.

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

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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.

At the time, the Funds had collective assets under management of INR 25,648.3 crore (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.

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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.

The additional issues on appeal remain pending.

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.

As of September 2022, an aggregate of INR 26,783.2 crore (approximately $ 3.3 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.

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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 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, which stay applications were granted in June and July 2021, subject to respondents’ deposit in escrow of a portion of the ordered penalties for an aggregate deposit made of INR 257.5 crore (approximately $ 34.7 million).

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

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In addition, certain Company entities guarantee certain financial and performance-related obligations of various Franklin subsidiaries.

The Company is also subject to certain legal requirements and agreements providing for indemnifications of directors, officers and personnel against liabilities and expenses they may incur under certain circumstances in connection with their service in those positions.

The terms of these indemnities and guarantees vary pursuant to applicable facts and circumstances, and from agreement to agreement.

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Note 16 – Stock-Based Compensation

The Company’s stock-based compensation plans consist of the Amended and Restated Annual Incentive Compensation Plan (the “AIP”), the 2002 Universal Stock Incentive Plan, as amended and restated (the “USIP”) and the amended and restated Franklin Resources, Inc.

1998 Employee Stock Investment Plan (the “ESIP”).

In connection with the acquisition of Legg Mason, the Company assumed the Legg Mason 2017 Equity Incentive Plan, which was amended and restated as the Amended and Restated Franklin Resources, Inc.

The Company’s stock-based compensation plans consist of the Amended and Restated Annual Incentive Compensation Plan (the “AIP”), the 2002 Universal Stock Incentive Plan, as amended and restated (the “USIP”), the amended and restated Franklin Resources, Inc.

1998 Employee Stock Investment Plan (the “ESIP”), and the Amended and Restated Franklin Resources, Inc.

2017 Equity Incentive Plan (the “EIP”).

The Compensation Committee of the Board of Directors determines the terms and conditions of awards under the AIP, the USIP, the ESIP and the EIP.

Stock-based compensation expenses were as follows:

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Forfeited/canceled ( 513 ) ( 214 ) ( 727 ) 27.70

Modified 199 ( 199 ) — n/a

Nonvested balance at September 30, 2022 13,492 3,401 16,893 $ 24.04

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The weighted-average grant-date fair values of stock awards and stock unit awards granted during fiscal years 2022, 2021 and 2020 were $ 34.20 , $ 21.08 and $ 23.05 per share.

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 total fair value of stock and stock unit awards vested during the same periods was $ 147.8 million, $ 121.2 million and $ 72.2 million.

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

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Participants may contribute up to 50 % of their eligible salary and up to 100 % of the cash portion of their year-end bonus, as defined by the plan and subject to Internal Revenue Code limitations, each year to the plan.

The Company increased its matching contribution rate from 75 % to 85 % for a period of three years beginning January 1, 2020.

The Company makes a matching contribution equal to 85 % of eligible compensation contributed by participants.

Certain of the Company ’ s non-U.S.

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for the fiscal years ended September 30, 2022 2021 2020

Dividend income $ 8.8 $ 48.9 $ 97.0

Interest income 8.8 14.3 31.0

Dividend and interest income $ 37.9 $ 17.6 $ 63.2

Gains (losses) on investments, net ( 75.4 ) 90.9 ( 16.8 )

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Rental income 37.9 28.8 30.0

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

Foreign currency exchange gains (losses), net 40.6 ( 11.9 ) ( 22.3 )

Other, net ( 7.0 ) 8.2 2.6

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Other comprehensive income (loss)

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

Reclassifications to net investment and other income (losses), net of tax 1.4 — 6.9 8.3

Total other comprehensive income (loss) ( 52.5 ) ( 2.0 ) 1.5 ( 53.0 )

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

Other comprehensive income (loss)

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

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

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.

Other comprehensive income (loss)

Other comprehensive income (loss) before reclassifications, net of tax ( 246.8 ) 2.3 0.4 ( 244.1 )

Reclassifications to compensation and benefits expense, net of tax — ( 1.5 ) — ( 1.5 )

Reclassifications to net investment and other income (losses), net of tax 2.2 — — 2.2

Total other comprehensive income (loss) ( 244.6 ) 0.8 0.4 ( 243.4 )

Balance at September 30, 2022 $ ( 615.1 ) $ ( 6.3 ) $ 0.4 $ ( 621.0 )

Note 21 – Subsequent Events

On November 1, 2022, the Company acquired all of the outstanding ownership interests in BNY Alcentra Group Holdings, Inc.

from The Bank of New York Mellon Corporation for cash consideration of approximately $ 587.3 million paid at closing, including $ 188.3 million related to investments, and up to $ 350.0 million in contingent consideration to be paid upon on the achievement of certain performance thresholds over the next four years.

On November 1, 2022, the Company announced a voluntary buyout for certain U.S.

employees who meet specific criteria related to age and years of service.

The impact of this voluntary termination plan is unknown, but is expected to result in increased compensation and benefits expense during the fiscal year ending September 30, 2023.

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

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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