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Item 1. Financial Statements

2023-05-01 compared with 2023-01-30 · 178 added, 83 removed, 480 unchanged (35% of the section changed)

3 unchanged sentences

Three Months Ended

March 31, Six Months Ended

(in millions, except per share data) 2023 2022 2023 2022

17 unchanged sentences

Interest expense ( 33.5 ) ( 22.9 ) ( 64.4 ) ( 42.2 )

Investment and other income (losses) of consolidated investment products, net ( 13.6 ) 104.7

Investment and other income of consolidated investment products, net 87.2 3.0 73.6 107.7

Expenses of consolidated investment products ( 3.4 ) ( 4.6 ) ( 14.9 ) ( 8.8 )

15 unchanged sentences

(in millions) Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Net Income $ 338.1 $ 359.1 $ 506.9 $ 903.9

1 unchanged sentence

Currency translation adjustments, net of tax 15.9 ( 16.3 ) 143.2 ( 23.2 )

Net unrealized losses on defined benefit plans, net of tax ( 2.6 ) ( 5.1 )

Net unrealized gains (losses) on defined benefit plans, net of tax 1.8 5.3 ( 0.8 ) 0.2

Net unrealized gains on investments, net of tax 0.2 — 0.2 —

Total other comprehensive income (loss) 17.9 ( 11.0 ) 142.6 ( 23.0 )

8 unchanged sentences

CONSOLIDATED BALANCE SHEETS

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

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

2023 September 30,

1 unchanged sentence

Receivables 1,300.8 1,264.8

Investments (including $ 969.6 and $ 613.5 at fair value at December 31, 2022 and September 30, 2022)

Investments (including $ 987.1 and $ 613.5 at fair value at March 31, 2023 and September 30, 2022)

2,378.0 1,651.3

24 unchanged sentences

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

500,265,643 and 499,575,175 shares issued and outstanding at December 31, 2022 and September 30, 2022

500,912,066 and 499,575,175 shares issued and outstanding at March 31, 2023 and September 30, 2022

Retained earnings 12,260.1 12,045.6

16 unchanged sentences

(in millions)

for the three months ended

December 31, 2022 Shares Amount

for the six months ended

March 31, 2023 Shares Amount

Balance at October 1, 2022 499.6 $ 50.0 $ — $ 12,045.6 $ ( 621.0 ) $ 11,474.6 $ 824.3 $ 12,298.9

12 unchanged sentences

Balance at December 31, 2022 500.3 $ 50.0 $ — $ 12,112.6 $ ( 496.3 ) $ 11,666.3 $ 889.2 $ 12,555.5

Net income 194.2 194.2 60.7 254.9

Other comprehensive income 17.9 17.9 17.9

Dividends declared on common stock ($ 0.30 per share)

( 153.8 ) ( 153.8 ) ( 153.8 )

Repurchase of common stock ( 0.1 ) — ( 66.0 ) 62.4 ( 3.6 ) ( 3.6 )

Issuance of common stock 0.7 0.1 25.2 25.3 25.3

Stock-based compensation 40.8 40.8 40.8

Net distributions and other ( 14.9 ) ( 14.9 )

Net deconsolidation of investment products ( 324.2 ) ( 324.2 )

Adjustment to fair value of redeemable noncontrolling interests 44.7 44.7 44.7

Balance at March 31, 2023 500.9 $ 50.1 $ — $ 12,260.1 $ ( 478.4 ) $ 11,831.8 $ 610.8 $ 12,442.6

See Notes to Consolidated Financial Statements.

Franklin Resources, Inc.

6 unchanged sentences

(in millions)

for the three months ended

December 31, 2021 Shares Amount

for the six months ended

March 31, 2022 Shares Amount

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

8 unchanged sentences

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

Net income 349.6 349.6 66.7 416.3

Other comprehensive loss ( 11.0 ) ( 11.0 ) ( 11.0 )

Dividends declared on common stock ($ 0.29 per share)

( 148.3 ) ( 148.3 ) ( 148.3 )

Repurchase of common stock ( 2.7 ) ( 0.4 ) ( 66.7 ) ( 13.7 ) ( 80.8 ) ( 80.8 )

Issuance of common stock 0.6 0.1 18.5 18.6 18.6

Stock-based compensation 48.2 48.2 48.2

Net distributions and other ( 21.7 ) ( 21.7 )

Net deconsolidation of investment products ( 39.6 ) ( 39.6 )

Adjustment to fair value of redeemable noncontrolling interests

( 188.5 ) ( 188.5 ) ( 188.5 )

Balance at March 31, 2022 500.4 $ 50.0 $ — $ 11,891.3 $ ( 400.6 ) $ 11,540.7 $ 648.9 $ 12,189.6

See Notes to Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(in millions) 2023 2022

12 unchanged sentences

Changes in operating assets and liabilities:

Decrease (increase) in receivables and other assets 14.6 ( 140.6 )

Increase in receivables and other assets ( 144.4 ) ( 121.6 )

Increase in investments, net ( 36.0 ) ( 21.3 )

Decrease in accrued compensation and benefits ( 336.1 ) ( 162.2 )

Increase in income taxes payable 158.8 174.5

Decrease in income taxes payable ( 28.5 ) ( 104.9 )

Increase (decrease) in accounts payable, accrued expenses and other liabilities 85.4 ( 90.0 )

8 unchanged sentences

Payments of contingent consideration asset 5.5 12.6

Net deconsolidation of investment products ( 13.8 ) ( 6.6 )

Net (deconsolidation) consolidation of investment products ( 85.4 ) 12.2

Net cash used in investing activities ( 2,195.0 ) ( 1,151.3 )

4 unchanged sentences

[Table continued from previous page]

Three Months Ended

Six Months Ended

(in millions) 2023 2022

Issuance of common stock $ 13.4 $ 13.6

Dividends paid on common stock ( 301.8 ) ( 290.5 )

7 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents 60.2 ( 27.6 )

Decrease in cash and cash equivalents ( 280.3 ) ( 102.9 )

Increase (decrease) in cash and cash equivalents ( 503.9 ) 367.5

Cash and cash equivalents, beginning of period 4,782.5 4,647.2

7 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

March 31, 2023

Note 1 – Basis of Presentation

11 unchanged sentences

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

(together with its subsidiaries “Alcentra”) from The Bank of New York Mellon Corporation, for cash consideration of $ 587.3 million, which includes $ 188.3 million for certain securities held in Alcentra’s collateralized loan obligations (“CLOs”);

(together with its subsidiaries “Alcentra”) from The Bank of New York Mellon Corporation.

Total purchase price consisted of cash consideration of $ 594.1 million, which includes $ 188.3 million for certain securities held in Alcentra’s collateralized loan obligations (“CLOs”);

deferred consideration of $ 62.0 million due November 1, 2023;

and contingent consideration to be paid upon the achievement of certain performance thresholds over the next four years of up to $ 350.0 million that has an acquisition-date fair value of $ 24.6 million.

The consideration paid at close was funded from existing cash.

The following table summarizes the estimated fair value amounts recognized for the assets acquired and liabilities assumed and resulting goodwill as of the acquisition date:

(in millions) Estimated Fair Value

The consideration paid was funded from existing cash.

During the quarter ended March 31, 2023, cash consideration increased by $ 6.8 million due to a net working capital adjustment and deferred consideration increased by $ 1.6 million.

The following table summarizes the initial and revised estimated fair value amounts recognized for the assets acquired and liabilities assumed and resulting goodwill as of the acquisition date:

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

as of November 1, 2022

6 unchanged sentences

Other assets 9.0 3.1 12.1

Deferred tax liabilities — ( 36.7 ) ( 36.7 )

Compensation and benefits and other liabilities ( 71.0 ) ( 3.5 ) ( 74.5 )

Total Identifiable Net Assets $ 672.3 $ 8.4 $ 680.7

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

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.

however, deferred tax assets and liabilities could materially change due to the use of preliminary valuation assumptions.

The goodwill is primarily attributable to expected growth opportunities from the combined operations and is not 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 3.0 years to 10.0 years.

Amortization expense related to the definite-lived intangible assets was $ 2.3 million for the period ended December 31, 2022.

These assets had a weighted-average remaining useful life of 5.1 years at December 31, 2022, with estimated remaining amortization expense as follows:

Amortization expense related to the definite-lived intangible assets was $ 3.5 million and $ 5.8 million for the three and six months ended March 31, 2023.

These assets had a weighted-average remaining useful life of 4.9 years at March 31, 2023, with estimated remaining amortization expense as follows:

(in millions)

2 unchanged sentences

Thereafter 8.1

Costs incurred in connection with the acquisition were $ 14.1 million for the three months ended December 31, 2022.

Costs incurred in connection with the acquisition were $ 14.1 million for the six months ended March 31, 2023.

Alcentra contributed $ 71.4 million of revenue and did not have a material impact to net income attributable to Franklin Resources, Inc.

for the period ended December 31, 2022.

for the six months ended March 31, 2023.

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

In connection with the acquisition, the Company on December 15, 2022 entered into repurchase agreements with a third-party financing company for certain securities held by the Company in Alcentra’s CLOs.

As of December 31, 2022, other liabilities includes repurchase agreements of €125.2 million (equivalent to $ 134.0 million at December 31, 2022) and $ 40.8 million with maturity values of € 132.3 million and $ 42.4 million.

The Company has pledged Alcentra investments with a carrying value of $ 198.9 million as collateral as of December 31, 2022.

As of March 31, 2023, other liabilities includes repurchase agreements of €125.5 million (equivalent to $ 136.1 million at March 31, 2023) and $ 40.8 million with maturity values of € 132.3 million and $ 42.4 million, respectively.

The Company has pledged Alcentra investments with a carrying value of $ 201.4 million as collateral as of March 31, 2023.

The repurchase agreements have contractual maturity dates ranging between 2029 to 2034.

2 unchanged sentences

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

March 31, Six Months Ended

2023 2022 2023 2022

Net income attributable to Franklin Resources, Inc.

1 unchanged sentence

allocation of earnings to participating nonvested stock and stock unit awards

9.0 15.1 16.7 34.3

Net Income Available to Common Stockholders $ 185.2 $ 334.5 $ 343.1 $ 768.5

1 unchanged sentence

Dilutive effect of nonparticipating nonvested stock unit awards

0.7 0.5 0.7 0.6

Weighted-Average Shares Outstanding – Diluted 491.4 490.5 490.8 490.5

2 unchanged sentences

Diluted 0.38 0.68 0.70 1.57

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 months ended December 31, 2022 and 2021.

Note 4 – Revenues

3 unchanged sentences

Luxembourg Total

for the three months ended December 31, 2022

for the three months ended March 31, 2023

Investment management fees

9 unchanged sentences

Luxembourg Total

for the three months ended December 31, 2021

for the six months ended March 31, 2023

Investment management fees

6 unchanged sentences

$ 2,939.3 $ 536.2 $ 161.6 $ 129.0 $ 128.2 $ 3,894.3

(in millions) United States Luxembourg Asia-Pacific Americas

States Europe,

Luxembourg Total

for the three months ended March 31, 2022

Investment management fees

$ 1,202.1 $ 237.2 $ 89.5 $ 64.6 $ 55.8 $ 1,649.2

Sales and distribution fees

261.6 89.3 6.6 12.7 — 370.2

Shareholder servicing fees

42.1 9.3 0.3 — 0.5 52.2

9.1 0.2 0.1 — — 9.4

$ 1,514.9 $ 336.0 $ 96.5 $ 77.3 $ 56.3 $ 2,081.0

(in millions) United States Luxembourg Asia-Pacific Americas

States Europe,

Luxembourg Total

for the six months ended March 31, 2022

Investment management fees

$ 2,486.1 $ 495.6 $ 171.3 $ 134.9 $ 121.8 $ 3,409.7

Sales and distribution fees

540.0 188.1 14.2 26.1 — 768.4

Shareholder servicing fees

78.9 19.4 0.7 0.1 0.8 99.9

26.2 0.5 0.3 — — 27.0

$ 3,131.2 $ 703.6 $ 186.5 $ 161.1 $ 122.6 $ 4,305.0

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 83 % and 81 % of the Company’s total operating revenues for the three months ended December 31, 2022 and 2021.

Revenues earned from sponsored funds were 83 % of the Company’s total operating revenues for the three and six months ended March 31, 2023 and 79 % and 80 % for the three and six months ended March 31, 2022.

Note 5 – Investments

2 unchanged sentences

Investments consisted of the following:

(in millions) December 31,

(in millions) March 31,

2023 September 30,

13 unchanged sentences

Expedient Total

as of December 31, 2022

as of March 31, 2023

Investments, at fair value

4 unchanged sentences

Total Assets Measured at Fair Value $ 659.3 $ 206.3 $ 23.5 $ 102.4 $ 991.5

Securities sold short $ 211.2 $ — $ — $ — $ 211.2

Contingent consideration liabilities — — 51.7 — 51.7

Total Liabilities Measured at Fair Value $ 211.2 $ — $ 51.7 $ — $ 262.9

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

10 unchanged sentences

These investments were as follows:

(in millions) December 31,

(in millions) March 31,

2023 September 30,

6 unchanged sentences

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 3.5 years and 3.4 years at December 31, 2022 and September 30, 2022.

Investments with known liquidation periods have an expected weighted-average life of 3.3 years and 3.4 years at March 31, 2023 and September 30, 2022.

2 Investments are redeemable on a semi-monthly, monthly and quarterly basis.

1 unchanged sentence

(in millions) Fair Value

Level December 31, 2022 September 30, 2022

Level March 31, 2023 September 30, 2022

Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value

8 unchanged sentences

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 (“VIEs”).

The Company had 62 CIPs, including 16 CLOs, as of December 31, 2022 and 59 CIPs, including 15 CLOs, as of September 30, 2022.

The Company had 64 CIPs, including 18 CLOs, as of March 31, 2023 and 59 CIPs, including 15 CLOs, as of September 30, 2022.

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

(in millions) December 31,

(in millions) March 31,

2023 September 30,

14 unchanged sentences

$ 9,300.0 $ 8,679.7

The CIPs did not have a significant impact on net income attributable to the Company during the three months ended December 31, 2022 and 2021.

The CIPs did not have a significant impact on net income attributable to the Company during the three and six months ended March 31, 2023 and 2022.

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.

4 unchanged sentences

Expedient Total

as of December 31, 2022

as of March 31, 2023

Cash and cash equivalents of CLOs $ 507.6 $ — $ — $ — $ 507.6

2 unchanged sentences

Loans — 7,118.4 3.1 — 7,121.5

Real estate — — 358.0 — 358.0

Total Assets Measured at Fair Value $ 570.8 $ 7,699.2 $ 542.1 $ 146.4 $ 8,958.5

11 unchanged sentences

These investments were as follows:

(in millions) December 31,

(in millions) March 31,

2023 September 30,

6 unchanged sentences

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 0.3 years at December 31, 2022 and September 30, 2022.

As of March 31, 2023, there were no investments with known liquidation periods.

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

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 $ 0.1 million based on its ownership percentage in the CIPs, at December 31, 2022 and September 30, 2022.

3 As of March 31, 2023, there were no investments with unfunded commitments.

Of the total unfunded commitments, the Company was contractually obligated to fund $ 0.1 million based on its ownership percentage in the CIPs, at September 30, 2022.

Changes in Level 3 assets were as follows:

1 unchanged sentence

Securities Real Estate Loans Total

for the three months ended December 31, 2022

for the three months ended March 31, 2023

Balance at January 1, 2023 $ 555.8 $ 358.0 $ 64.7 $ 978.5

Losses included in investment and other income of consolidated investment products, net ( 18.4 ) ( 12.7 ) — ( 31.1 )

Purchases 13.5 0.4 31.1 45.0

Sales and settlements ( 19.4 ) — — ( 19.4 )

Net (deconsolidations) consolidations 7.5 ( 345.7 ) ( 90.5 ) ( 428.7 )

Transfers into Level 3 — — 3.1 3.1

Transfers out of Level 3 — — ( 5.3 ) ( 5.3 )

Balance at March 31, 2023 $ 539.0 $ — $ 3.1 $ 542.1

Change in unrealized losses included in net income relating to assets held at March 31, 2023 $ ( 25.0 ) $ — $ — $ ( 25.0 )

(in millions) Equity and Debt

Securities Real Estate Loans Total

for the six months ended March 31, 2023

Balance at October 1, 2022 $ 555.8 $ 268.6 $ 239.4 $ 1,063.8

Realized and unrealized gains (losses) included in investment and other income (losses) of consolidated investment products, net ( 6.3 ) 3.7 0.1 ( 2.5 )

Gains (losses) included in investment and other income of consolidated investment products, net ( 24.7 ) ( 9.0 ) 0.1 ( 33.6 )

Purchases 22.5 86.1 58.6 167.2

Sales and settlements ( 25.0 ) — ( 0.2 ) ( 25.2 )

Deconsolidations 2.9 — ( 202.1 ) ( 199.2 )

Balance at December 31, 2022 $ 555.8 $ 358.0 $ 64.7 $ 978.5

Change in unrealized gains included in net income relating to assets held at December 31, 2022 $ 2.0 $ 3.7 $ 0.1 $ 5.8

Net (deconsolidations) consolidations 10.4 ( 345.7 ) ( 292.6 ) ( 627.9 )

Transfers into Level 3 — — 3.1 3.1

Transfers out of Level 3 — — ( 5.3 ) ( 5.3 )

Balance at March 31, 2023 $ 539.0 $ — $ 3.1 $ 542.1

Change in unrealized losses included in net income relating to assets held at March 31, 2023 $ ( 22.3 ) $ — $ — $ ( 22.3 )

(in millions) Equity and Debt

Securities Real Estate Loans Total

for the three months ended December 31, 2021

for the three months ended March 31, 2022

Balance at January 1, 2022 $ 539.0 $ 98.9 $ 34.2 $ 672.1

Gains (losses) included in investment and other income of consolidated investment products, net 78.0 5.7 ( 0.3 ) 83.4

Purchases 115.3 70.8 0.1 186.2

Sales and settlements ( 81.9 ) — ( 0.4 ) ( 82.3 )

Net deconsolidations ( 55.0 ) — — ( 55.0 )

Balance at March 31, 2022 $ 595.4 $ 175.4 $ 33.6 $ 804.4

Change in unrealized gains (losses) included in net income relating to assets held at March 31, 2022 $ 73.6 $ 5.7 $ ( 0.3 ) $ 79.0

(in millions) Equity and Debt

Securities Real Estate Loans Total

for the six months ended March 31, 2022

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 92.3 8.6 0.3 101.2

Gains included in investment and other income of consolidated investment products, net 170.3 14.3 — 184.6

Purchases 133.5 71.7 14.1 219.3

Sales and settlements ( 105.8 ) — ( 1.0 ) ( 106.8 )

Net deconsolidations ( 55.0 ) — — ( 55.0 )

Transfers into Level 3 0.1 — — 0.1

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

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

Balance at March 31, 2022 $ 595.4 $ 175.4 $ 33.6 $ 804.4

Change in unrealized gains included in net income relating to assets held at March 31, 2022 $ 166.1 $ 14.3 $ — $ 180.4

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

(in millions)

as of December 31, 2022 Fair Value Valuation Technique Significant Unobservable Inputs Range (Weighted Average 1 )

as of March 31, 2023 Fair Value Valuation Technique Significant Unobservable Inputs Range (Weighted Average 1 )

Equity and debt securities $ 539.0 Market pricing Private sale pricing $ 0.01 –$ 1,000.00 ($ 45.98 ) per share

Discount for lack of liquidity 13.0 %– 25.1 % ( 23.2 %)

Real estate 358.0 Discounted cash flow Discount rate 5.5 %– 6.8 % ( 6.2 %)

Exit capitalization rate 4.5 %– 6.3 % ( 5.2 %)

Loans 64.7 Yield capitalization Credit Spread 6.0 %– 7.3 % ( 6.5 %)

Loan to value ratio 64.6 %– 77.2 % ( 70.2 %)

(in millions)

10 unchanged sentences

1 Based on the relative fair value of the instruments.

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, 2022, 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, 2022, 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 liquidity, were independently higher (lower) as of March 31, 2023, 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 liquidity used in the market-based valuations, were independently higher (lower) as of March 31, 2023, 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 December 31, 2022 September 30, 2022

Level March 31, 2023 September 30, 2022

Value Estimated

10 unchanged sentences

Debt of CIPs consisted of the following:

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

(in millions) Amount Weighted-

4 unchanged sentences

$ 7,153.1 $ 5,457.7

The debt of CIPs had fixed and floating interest rates ranging from 2.17 % to 13.73 % at December 31, 2022, and from 1.42 % to 8.51 % at September 30, 2022.

The floating rates were based on Bloomberg Short-Term Bank Yield Index.

The contractual maturities for the debt of CIPs at December 31, 2022 were as follows:

The debt of CIPs had fixed and floating interest rates ranging from 2.39 % to 13.73 % at March 31, 2023, and from 1.42 % to 8.51 % at September 30, 2022.

The floating rates were based on the London Interbank Offered Rate and Secured Overnight Financing Rate.

The contractual maturities for the debt of CIPs at March 31, 2023 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) December 31,

(in millions) March 31,

2023 September 30,

2 unchanged sentences

Fair Value $ 7,205.3 $ 5,762.3

Investments 90 days or more past due were immaterial at December 31, 2022 and September 30, 2022.

The Company recognized $ 2.3 million of net losses and $ 5.3 million of net gains during the three months ended December 31, 2022 and 2021, related to its own economic interests in the CLOs.

The aggregate principal amount due of the debt of CLOs was $ 6,466.2 million and $ 5,781.3 million at December 31, 2022 and September 30, 2022.

Investments 90 days or more past due were immaterial at March 31, 2023 and September 30, 2022.

The Company recognized $ 4.8 million and $ 2.5 million of net gains during the three and six months ended March 31, 2023 and $ 7.6 million and $ 12.9 million of net gains during the three and six months ended March 31, 2022, related to its own economic interests in the CLOs.

The aggregate principal amount due of the debt of CLOs was $ 7,401.4 million and $ 5,781.3 million at March 31, 2023 and September 30, 2022.

Note 8 – Redeemable Noncontrolling Interests

2 unchanged sentences

CIPs Minority Interests Total CIPs Minority Interests Total

for the three months ended December 31,

for the three months ended March 31,

Balance at beginning of period $ 1,379.7 $ 599.5 $ 1,979.2 $ 662.5 $ 320.9 $ 983.4

1 unchanged sentence

Net subscriptions (distributions) and other 289.6 ( 52.9 ) 236.7 148.3 ( 9.0 ) 139.3

Net consolidations (deconsolidations) 271.3 — 271.3 ( 121.5 ) — ( 121.5 )

Net deconsolidations ( 1,293.9 ) — ( 1,293.9 ) ( 115.9 ) — ( 115.9 )

Adjustment to fair value — ( 44.7 ) ( 44.7 ) — 188.5 188.5

Balance at End of Period $ 445.6 $ 514.9 $ 960.5 $ 625.3 $ 512.8 $ 1,138.1

(in millions) 2023 2022

CIPs Minority Interests Total CIPs Minority Interests Total

for the six months ended March 31,

Balance at beginning of period $ 942.2 $ 583.6 $ 1,525.8 $ 622.5 $ 310.5 $ 933.0

Net income (loss) 58.0 23.7 81.7 ( 74.4 ) 24.7 ( 49.7 )

Net subscriptions (distributions) and other 468.0 ( 47.7 ) 420.3 314.6 ( 10.9 ) 303.7

Net deconsolidations ( 1,022.6 ) — ( 1,022.6 ) ( 237.4 ) — ( 237.4 )

Adjustment to fair value — ( 44.7 ) ( 44.7 ) — 188.5 188.5

Balance at End of Period $ 445.6 $ 514.9 $ 960.5 $ 625.3 $ 512.8 $ 1,138.1

Note 9 – Nonconsolidated Variable Interest Entities

1 unchanged sentence

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,

(in millions) March 31,

2023 September 30,

4 unchanged sentences

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 assessed as VIEs during the three months ended December 31, 2022 or fiscal year 2022.

The Company did not provide financial or other support to its sponsored funds assessed as VIEs during the six months ended March 31, 2023 or fiscal year 2022.

Note 10 – Commitments and Contingencies

1 unchanged sentence

India Credit Fund Closure Matters .

During the three months ended December 31, 2022, there were no significant changes from the disclosure in the Form 10‑K for the fiscal year ended September 30, 2022.

As of December 31, 2022, the amount reported as distributed to fund unitholders in the aggregate is INR 26,843.0 crore (approximately $ 3.2 billion).

During the six months ended March 31, 2023, there were no significant changes from the disclosure in the Form 10‑K for the fiscal year ended September 30, 2022.

As of March 31, 2023, the amount reported as distributed to fund unitholders in the aggregate is INR 26,931.3 crore (approximately $ 3.3 billion).

Other Litigation Matters.

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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 December 31, 2022 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 March 31, 2023 to provide for any probable losses that may arise from such matters for which the Company could reasonably estimate an amount.

Indemnifications and Guarantees

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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 December 31, 2022.

In management’s opinion, no material loss was deemed probable or reasonably possible pursuant to such indemnification agreements and/or guarantees as of March 31, 2023.

Other Commitments and Contingencies

At December 31, 2022, 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 2022.

At March 31, 2023, 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 2022.

Note 11 – Stock-Based Compensation

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Shares Weighted-

for the three months ended December 31, 2022

for the six months ended March 31, 2023

Nonvested balance at October 1, 2022 13,492 3,401 16,893 $ 24.04

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Forfeited/canceled ( 284 ) ( 90 ) ( 374 ) 25.66

Nonvested Balance at December 31, 2022 18,844 3,424 22,268 $ 23.54

Total unrecognized compensation expense related to nonvested stock and stock unit awards was $ 330.8 million at December 31, 2022.

Nonvested Balance at March 31, 2023 18,487 3,444 21,931 $ 23.53

Total unrecognized compensation expense related to nonvested stock and stock unit awards was $ 281.9 million at March 31, 2023.

This expense is expected to be recognized over a remaining weighted-average vesting period of 1.8 years.

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Three Months Ended

March 31, Six Months Ended

(in millions) 2023 2022 2023 2022

Dividend and interest income $ 32.3 $ 5.1 $ 68.8 $ 11.2

Gains on investments, net 45.5 25.8

Gains (losses) on investments, net 3.0 ( 23.1 ) 48.5 2.7

Income from investments in equity method investees 85.6 27.0 118.8 51.7

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Investment and other income, net $ 125.6 $ 27.7 $ 216.7 $ 84.7

Net losses recognized on equity securities measured at fair value and trading debt securities that were held by the Company were $ 68.3 million for the three months ended December 31, 2022, and $ 4.4 million for the three months ended December 31, 2021.

Net gains (losses) recognized on equity securities measured at fair value and trading debt securities that were held by the Company were $ 13.1 million and $ 78.2 million for the three and six months ended March 31, 2023 and $( 29.2 ) million and $( 34.5 ) million for the three and six months ended March 31, 2022.

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