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Item 1. Financial Statements

2024-01-29 compared with 2023-07-28 · 108 added, 259 removed, 430 unchanged (46% of the section changed)

3 unchanged sentences

Three Months Ended

June 30, Nine Months Ended

(in millions, except per share data) 2023 2022

17 unchanged sentences

Interest expense ( 18.8 ) ( 30.9 )

Investment and other income (losses) of consolidated investment products, net 1.7 ( 74.4 ) 75.3 33.3

Investment and other losses of consolidated investment products, net ( 23.8 ) ( 13.6 )

Expenses of consolidated investment products ( 5.9 ) ( 11.5 )

Other income (expenses), net 17.2 ( 91.6 ) 228.2 49.8

Other income, net 124.7 35.1

Income before taxes 331.2 229.1

13 unchanged sentences

(in millions) Three Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

Net Income $ 256.3 $ 168.8

Other Comprehensive Income (Loss)

Other Comprehensive Income

Currency translation adjustments, net of tax 59.1 127.3

Net unrealized losses on defined benefit plans, net of tax ( 0.1 ) ( 2.6 )

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

Total other comprehensive income (loss) 15.9 ( 103.0 ) 158.5 ( 126.0 )

Total other comprehensive income 59.0 124.7

Total comprehensive income 315.3 293.5

7 unchanged sentences

CONSOLIDATED BALANCE SHEETS

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

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

2023 September 30,

1 unchanged sentence

Receivables 1,469.6 1,348.4

Investments (including $ 867.3 and $ 613.5 at fair value at June 30, 2023 and September 30, 2022)

Investments (including $ 894.2 and $ 872.8 at fair value at December 31, 2023 and September 30, 2023)

2,317.3 2,222.0

24 unchanged sentences

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

499,012,841 and 499,575,175 shares issued and outstanding at June 30, 2023 and September 30, 2022

494,734,214 and 495,937,891 shares issued and outstanding at December 31, 2023 and September 30, 2023

Retained earnings 12,402.4 12,376.6

16 unchanged sentences

(in millions)

for the nine months ended

June 30, 2023 Shares Amount

for the three months ended

December 31, 2023 Shares Amount

Balance at October 1, 2023 495.9 $ 49.6 $ — $ 12,376.6 $ ( 509.3 ) $ 11,916.9 $ 630.9 $ 12,547.8

Net income 165.6 165.6 4.7 170.3

Net income (loss) 251.3 251.3 ( 4.5 ) 246.8

Other comprehensive income 59.0 59.0 59.0

8 unchanged sentences

Net subscriptions and other 9.6 9.6

Net deconsolidation of investment products ( 35.7 ) ( 35.7 )

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 ( 65.9 ) ( 65.9 ) ( 65.9 )

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

Net income (loss) 227.5 227.5 ( 6.3 ) 221.2

Other comprehensive income 15.9 15.9 15.9

Dividends declared on common stock ($ 0.30 per share)

( 152.9 ) ( 152.9 ) ( 152.9 )

Repurchase of common stock ( 2.0 ) ( 0.2 ) ( 15.9 ) ( 34.8 ) ( 50.9 ) ( 50.9 )

Issuance of common stock 0.1 — 3.6 3.6 3.6

Stock-based compensation 12.3 12.3 12.3

Net distributions and other ( 12.7 ) ( 12.7 )

Net deconsolidation of investment products ( 0.7 ) ( 0.7 )

Adjustment to fair value of redeemable noncontrolling interests 60.8 60.8 60.8

Balance at June 30, 2023 499.0 $ 49.9 $ — $ 12,360.7 $ ( 462.5 ) $ 11,948.1 $ 591.1 $ 12,539.2

See Notes to Consolidated Financial Statements.

Balance at December 31, 2023 494.7 $ 49.5 $ — $ 12,402.4 $ ( 450.3 ) $ 12,001.6 $ 636.0 $ 12,637.6

Franklin Resources, Inc.

6 unchanged sentences

(in millions)

for the nine months ended

June 30, 2022 Shares Amount

for the three months ended

December 31, 2022 Shares Amount

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

Net income 165.6 165.6 4.7 170.3

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

Dividends declared on common stock ($ 0.29 per share)

( 148.9 ) ( 148.9 ) ( 148.9 )

Repurchase of common stock ( 0.7 ) — ( 58.8 ) 37.1 ( 21.7 ) ( 21.7 )

Issuance of common stock 1.4 0.1 47.6 47.7 47.7

Stock-based compensation 11.2 11.2 11.2

Net distributions and other ( 27.8 ) ( 27.8 )

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

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

Net income (loss) 256.4 256.4 ( 32.3 ) 224.1

Other comprehensive loss ( 103.0 ) ( 103.0 ) ( 103.0 )

Other comprehensive income 124.7 124.7 124.7

Dividends declared on common stock ($ 0.30 per share)

3 unchanged sentences

Stock-based compensation 35.6 35.6 35.6

Net distributions and other ( 24.8 ) ( 24.8 )

Net subscriptions and other 95.9 95.9

Net deconsolidation of investment products ( 35.7 ) ( 35.7 )

Acquisition 149.9 149.9

Balance at June 30, 2022 498.4 $ 49.8 $ — $ 11,997.5 $ ( 503.6 ) $ 11,543.7 $ 741.4 $ 12,285.1

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

See Notes to Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Three Months Ended

(in millions) 2023 2022

Net Income $ 256.3 $ 168.8

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

Adjustments to reconcile net income to net cash used in operating activities:

Stock-based compensation 66.8 69.5

2 unchanged sentences

Amortization of intangible assets 85.8 83.2

Net (gains) losses on investments ( 62.3 ) 32.9

Net gains on investments ( 60.1 ) ( 45.5 )

Income from investments in equity method investees ( 56.9 ) ( 33.2 )

4 unchanged sentences

Changes in operating assets and liabilities:

Increase in receivables and other assets ( 69.8 ) ( 97.3 )

Decrease (increase) in receivables and other assets ( 36.7 ) 14.6

Decrease (increase) in investments, net 0.2 ( 13.6 )

Increase (decrease) in accrued compensation and benefits ( 84.3 ) 45.1

Decrease in income taxes payable ( 58.9 ) ( 176.3 )

Decrease in accrued compensation and benefits ( 508.0 ) ( 481.6 )

Increase in income taxes payable 107.9 158.8

Increase (decrease) in accounts payable, accrued expenses and other liabilities ( 39.7 ) 59.8

Increase (decrease) in accounts payable and accrued expenses of consolidated investment products 1.3 ( 26.2 )

Net cash provided by operating activities 365.3 1,090.3

Increase in accounts payable and accrued expenses of consolidated investment products 1.0 17.0

Net cash used in operating activities ( 251.9 ) ( 256.3 )

Purchase of investments ( 267.4 ) ( 234.4 )

6 unchanged sentences

Payments of deferred consideration liability ( 60.8 ) —

Net (deconsolidation) consolidation of investment products ( 43.8 ) 211.0

Net deconsolidation of investment products ( 10.5 ) ( 13.8 )

Net cash used in investing activities ( 137.6 ) ( 1,042.6 )

4 unchanged sentences

[Table continued from previous page]

Nine Months Ended

Three Months Ended

(in millions) 2023 2022

Issuance of common stock $ 13.4 $ 13.6

Dividends paid on common stock $ ( 155.7 ) $ ( 148.4 )

5 unchanged sentences

Noncontrolling interests 37.7 271.3

Net cash provided by financing activities 2,425.0 1,489.2

Net cash (used in) provided by financing activities ( 159.0 ) 958.9

Effect of exchange rate changes on cash and cash equivalents 25.7 59.7

9 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

December 31, 2023

Note 1 – Basis of Presentation

8 unchanged sentences

These financial statements should be read together with the Company’s audited financial statements included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (“fiscal year 2023”).

Note 2 – Acquisition

BNY Alcentra Group Holdings, Inc.

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.

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 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

Cash and cash equivalents $ 93.6 $ — $ 93.6

Receivables 57.2 ( 8.8 ) 48.4

Investments 285.3 1.6 286.9

Goodwill 152.6 52.7 205.3

Indefinite-lived intangible assets 89.9 — 89.9

Definite-lived intangible assets 55.7 — 55.7

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.

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 $ 3.5 million and $ 9.3 million for the three and nine months ended June 30, 2023.

These assets had a weighted-average remaining useful life of 4.8 years at June 30, 2023, with estimated remaining amortization expense as follows:

(in millions)

for the fiscal years ending September 30, Amount

2023 (remainder of year) $ 3.5

Thereafter 8.1

Costs incurred in connection with the acquisition were $ 14.1 million for the nine months ended June 30, 2023.

Alcentra contributed $ 116.7 million of operating revenue and did not have a material impact to net income attributable to Franklin Resources, Inc.

for the nine months ended June 30, 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 June 30, 2023, other liabilities includes repurchase agreements of $ 172.9 million with maturity values of € 132.3 million and $ 42.4 million in local currency.

The Company has pledged Alcentra investments with a carrying value of $ 179.3 million as collateral as of June 30, 2023.

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

Note 2 – New Accounting Guidance

Accounting Guidance Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued an amendment to the existing segment reporting guidance.

The amendment requires annual and interim disclosures of significant segment expenses that are regularly provided to the chief operating decision maker by reportable segment and clarifies that single reportable segment entities are required to apply all existing segment disclosures in the guidance.

The amendment is effective for the Company on October 1, 2024, and is retrospectively applicable to all prior periods presented in its consolidated financial statements.

The Company is currently evaluating the impact that the adoption will have on its consolidated financial statements.

In December 2023, the FASB issued an amendment to the existing income taxes guidance.

The amendment requires the disclosure of additional information with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes and requires greater detail about significant reconciling items in the reconciliation.

Additionally, the amendment requires disaggregated information pertaining to taxes paid, net of refunds received, for federal, state, and foreign income taxes.

The amendment allows for either a prospective or retrospective approach on adoption and is effective for the Company on October 1, 2025.

The Company is currently evaluating the impact that the adoption will have on its consolidated financial statements and has not yet determined its transition approach.

Note 3 – Earnings per Share

1 unchanged sentence

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

June 30, Nine 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

10.2 11.2 26.7 45.6

Net Income Available to Common Stockholders $ 241.6 $ 157.9

1 unchanged sentence

Dilutive effect of nonparticipating nonvested stock unit awards

0.7 0.4 0.7 0.6

Weighted-Average Shares Outstanding – Diluted 487.9 490.2

2 unchanged sentences

Diluted 0.50 0.32

Nonparticipating nonvested stock unit awards excluded from the calculation of diluted earnings per share because their effect would have been antidilutive were insignificant for the three and nine months ended June 30, 2023 and 2022.

Note 4 – Revenues

3 unchanged sentences

Luxembourg Total

for the three months ended June 30, 2023

Investment management fees

$ 1,232.3 $ 192.3 $ 64.3 $ 53.9 $ 70.6 $ 1,613.4

Sales and distribution fees

213.5 75.4 5.1 10.0 — 304.0

Shareholder servicing fees

30.3 8.0 0.5 — — 38.8

11.9 0.5 0.4 — — 12.8

$ 1,488.0 $ 276.2 $ 70.3 $ 63.9 $ 70.6 $ 1,969.0

(in millions) United States Luxembourg Asia-Pacific Americas

States Europe,

Luxembourg Total

for the nine months ended June 30, 2023

Investment management fees

$ 3,672.9 $ 570.7 $ 214.4 $ 162.0 $ 198.5 $ 4,818.5

Sales and distribution fees

634.1 217.4 15.1 30.7 — 897.3

Shareholder servicing fees

90.2 23.5 1.6 0.2 — 115.5

30.1 0.8 0.8 — 0.3 32.0

$ 4,427.3 $ 812.4 $ 231.9 $ 192.9 $ 198.8 $ 5,863.3

(in millions) United States Luxembourg Asia-Pacific Americas

States Europe,

Luxembourg Total

for the three months ended June 30, 2022

for the three months ended December 31, 2023

Investment management fees

9 unchanged sentences

Luxembourg Total

for the nine months ended June 30, 2022

for the three months ended December 31, 2022

Investment management fees

7 unchanged sentences

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

Revenues earned from sponsored funds were 83 % of the Company’s total operating revenues for the three and nine months ended June 30, 2023 and 83 % and 81 % for the three and nine months ended June 30, 2022.

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

Note 5 – Investments

2 unchanged sentences

Investments consisted of the following:

(in millions) June 30,

(in millions) December 31,

2023 September 30,

7 unchanged sentences

Total $ 2,317.3 $ 2,222.0

The Company has entered into repurchase agreements with a third-party financing company for certain investments held by the Company.

As of December 31, 2023, other liabilities includes repurchase agreements of $ 167.9 million with investments of $ 176.0 million in carrying value pledged as collateral.

The repurchase agreements have contractual maturity dates ranging between 2029 to 2035.

Note 6 – Fair Value Measurements

4 unchanged sentences

Expedient Total

as of June 30, 2023

as of December 31, 2023

Investments, at fair value

2 unchanged sentences

Other equity and debt investments 3.4 12.0 1.0 33.5 49.9

Contingent consideration asset — — 4.4 — 4.4

Total Assets Measured at Fair Value $ 555.1 $ 220.2 $ 15.9 $ 103.0 $ 894.2

9 unchanged sentences

Other equity and debt investments 3.4 11.3 3.3 32.7 50.7

Contingent consideration asset — — 9.8 — 9.8

Total Assets Measured at Fair Value $ 528.1 $ 223.2 $ 21.8 $ 99.7 $ 872.8

Securities sold short $ 158.3 $ — $ — $ — $ 158.3

Contingent consideration liabilities — — 55.0 — 55.0

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

Total Liabilities Measured at Fair Value $ 158.3 $ — $ 55.0 $ — $ 213.3

Investments for which fair value was estimated using reported NAV as a practical expedient primarily consist of nonredeemable private equity, debt and infrastructure funds, and redeemable alternative credit, global equity and private real estate funds.

These investments were as follows:

(in millions) June 30,

(in millions) December 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 3.2 years and 3.4 years at June 30, 2023 and September 30, 2022.

Investments with known liquidation periods have an expected weighted-average life of 3.1 years and 2.9 years at December 31, 2023 and September 30, 2023.

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

1 unchanged sentence

(in millions) Fair Value

Level June 30, 2023 September 30, 2022

Level December 31, 2023 September 30, 2023

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 69 CIPs, including 19 CLOs, as of June 30, 2023 and 59 CIPs, including 15 CLOs, as of September 30, 2022.

The Company had 69 CIPs, including 19 CLOs, as of December 31, 2023 and 70 CIPs, including 20 CLOs, as of September 30, 2023.

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

(in millions) June 30,

(in millions) December 31,

2023 September 30,

14 unchanged sentences

$ 10,209.3 $ 10,519.9

The CIPs did not have a significant impact on net income attributable to the Company during the three and nine months ended June 30, 2023 and 2022.

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

5 unchanged sentences

Expedient Total

as of June 30, 2023

as of December 31, 2023

Cash and cash equivalents of CLOs $ 296.2 $ — $ — $ — $ 296.2

10 unchanged sentences

Loans — 8,044.8 — — 8,044.8

Real estate — — 268.6 — 268.6

Total Assets Measured at Fair Value $ 563.2 $ 8,804.1 $ 584.9 $ 154.0 $ 10,106.2

2 unchanged sentences

These investments were as follows:

(in millions) June 30,

(in millions) December 31,

2023 September 30,

Nonredeemable investments 1

Investments with known liquidation periods $ — $ 19.5

Investments with unknown liquidation periods $ 21.9 $ 21.8

Redeemable investments 2

Unfunded commitments 3

_______________

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

As of June 30, 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 As of June 30, 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 Loans Total

for the three months ended June 30, 2023

Balance at April 1, 2023 $ 539.0 $ 3.1 $ 542.1

Gains (losses) included in investment and other income (losses) of consolidated investment products, net ( 31.6 ) 0.1 ( 31.5 )

Purchases 61.2 ( 0.2 ) 61.0

Sales and settlements ( 0.1 ) 0.2 0.1

Transfers into Level 3 — 0.5 0.5

Transfers out of Level 3 ( 0.3 ) — ( 0.3 )

Balance at June 30, 2023 $ 568.2 $ 3.7 $ 571.9

Change in unrealized gains (losses) included in net income relating to assets held at June 30, 2023 $ ( 32.0 ) $ 0.1 $ ( 31.9 )

(in millions) Equity and Debt

Securities Real Estate Loans Total

for the nine months ended June 30, 2023

for the three months ended December 31, 2023

Balance at October 1, 2023 $ 584.9 $ — $ 584.9

Gains (losses) included in investment and other income (losses) of consolidated investment products, net ( 56.3 ) ( 9.0 ) 0.2 ( 65.1 )

Purchases 83.7 86.1 58.4 228.2

Sales and settlements ( 25.1 ) — — ( 25.1 )

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

Transfers into Level 3 — — 3.6 3.6

Transfers out of Level 3 ( 0.3 ) — ( 5.3 ) ( 5.6 )

Balance at June 30, 2023 $ 568.2 $ — $ 3.7 $ 571.9

Change in unrealized gains (losses) included in net income relating to assets held at June 30, 2023 $ ( 55.0 ) $ — $ 0.1 $ ( 54.9 )

(in millions) Equity and Debt

Securities Real Estate Loans Total

for the three months ended June 30, 2022

Balance at April 1, 2022 $ 595.4 $ 175.4 $ 33.6 $ 804.4

Gains (losses) included in investment and other income (losses) of consolidated investment products, net ( 31.7 ) 4.1 0.2 ( 27.4 )

Losses included in investment and other losses of consolidated investment products, net ( 38.1 ) — ( 38.1 )

Purchases 3.8 — 3.8

Sales and settlements ( 13.1 ) — ( 0.1 ) ( 13.2 )

Net deconsolidations — — ( 1.7 ) ( 1.7 )

( 0.2 ) — ( 0.2 )

Transfers into Level 3 1.1 0.6 1.7

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

Balance at June 30, 2022 $ 557.0 $ 240.5 $ 37.6 $ 835.1

Change in unrealized gains (losses) included in net income relating to assets held at June 30, 2022 $ ( 32.2 ) $ 4.1 $ 0.2 $ ( 27.9 )

Balance at December 31, 2023 $ 551.5 $ 0.6 $ 552.1

Change in unrealized losses included in net income relating to assets held at December 31, 2023 $ ( 37.8 ) $ — $ ( 37.8 )

(in millions) Equity and Debt

Securities Real Estate Loans Total

for the nine months ended June 30, 2022

for the three months ended December 31, 2022

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

Gains included in investment and other income (losses) of consolidated investment products, net 138.6 18.4 0.2 157.2

Gains (losses) included in investment and other losses of consolidated investment products, net ( 6.3 ) 3.7 0.1 ( 2.5 )

Purchases 9.0 85.7 27.5 122.2

Sales and settlements ( 118.9 ) — ( 1.1 ) ( 120.0 )

Net deconsolidations ( 55.0 ) — ( 1.7 ) ( 56.7 )

Transfers into Level 3 0.1 — 5.7 5.8

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

Balance at June 30, 2022 $ 557.0 $ 240.5 $ 37.6 $ 835.1

Change in unrealized gains included in net income relating to assets held at June 30, 2022 $ 126.6 $ 18.4 $ — $ 145.0

( 5.6 ) — ( 0.2 ) ( 5.8 )

Net (deconsolidations) and consolidations 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

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

(in millions)

as of June 30, 2023 Fair Value Valuation Technique Significant Unobservable Inputs Range (Weighted Average 1 )

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

Equity and debt securities $ 290.4 Market pricing Private sale pricing $ 0.37 –$ 1,000.00 ($ 27.23 ) per share

Discount for lack of marketability 17.2 %

261.1 Market comparable companies Enterprise value/ Revenue multiple 1.2 – 31.2 ( 15.5 )

Discount for lack of marketability 8.3 %– 12.0 % ( 9.9 %)

(in millions)

2 unchanged sentences

Discount for lack of marketability 21.9 %

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 %)

238.9 Market comparable companies Enterprise value/ Revenue multiple 11.4 – 13.5 ( 12.1 )

Discount for lack of marketability 11.2 %– 13.6 % ( 12.2 %)

__________________

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 liquidity, were independently higher (lower) as of June 30, 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 June 30, 2023, the resulting fair value of the assets would be lower (higher).

If the relevant significant inputs used in the valuations, other than discount for lack of marketability, were independently higher (lower) as of December 31, 2023, the resulting fair value of the assets would be higher (lower).

If the relevant significant inputs used in the discount for lack of marketability were independently higher (lower) as of December 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 June 30, 2023 September 30, 2022

Level December 31, 2023 September 30, 2023

Value Estimated

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Debt of CIPs consisted of the following:

June 30, 2023 September 30, 2022

December 31, 2023 September 30, 2023

(in millions) Amount Weighted-

2 unchanged sentences

$ 7,839.6 7.41 % $ 8,210.0 7.12 %

21.7 6.00 % 49.7 5.19 %

— N/A 21.8 6.00 %

$ 7,839.6 $ 8,231.8

The debt of CIPs had fixed and floating interest rates ranging from 2.39 % to 15.08 % at June 30, 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 June 30, 2023 were as follows:

The debt of CIPs had fixed and floating interest rates ranging from 2.39 % to 15.77 % at December 31, 2023, and from 2.39 % to 15.49 % at September 30, 2023.

The floating rates were based on the Secured Overnight Financing Rate.

The contractual maturities for the debt of CIPs at December 31, 2023 were as follows:

(in millions)

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

(in millions) June 30,

(in millions) December 31,

2023 September 30,

2 unchanged sentences

Fair Value $ 7,901.5 $ 8,196.8

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

The Company recognized $ 6.5 million and $ 9.0 million of net gains during the three and nine months ended June 30, 2023 and $ 4.9 million and $ 17.8 million of net gains during the three and nine months ended June 30, 2022, related to its own economic interests in the CLOs.

The aggregate principal amount due of the debt of CLOs was $ 8,125.7 million and $ 5,781.3 million at June 30, 2023 and September 30, 2022.

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

The Company recognized $ 20.8 million of net gains and $ 2.3 million of net losses during the three months ended December 31, 2023 and 2022, related to its own economic interests in the CLOs.

The aggregate principal amount due of the debt of CLOs was $ 7,811.1 million and $ 8,281.5 million at December 31, 2023 and September 30, 2023.

Note 8 – Redeemable Noncontrolling Interests

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CIPs Minority Interests Total CIPs Minority Interests Total

for the three months ended June 30,

Balance at beginning of period $ 445.6 $ 514.9 $ 960.5 $ 625.3 $ 512.8 $ 1,138.1

Net income (loss) 10.5 16.3 26.8 ( 16.5 ) 16.0 ( 0.5 )

Net subscriptions (distributions) and other 30.2 ( 11.2 ) 19.0 5.4 ( 29.6 ) ( 24.2 )

Net consolidations 104.6 — 104.6 380.3 — 380.3

Adjustment to fair value — ( 60.8 ) ( 60.8 ) — — —

Balance at End of Period $ 590.9 $ 459.2 $ 1,050.1 $ 994.5 $ 499.2 $ 1,493.7

(in millions) 2023 2022

CIPs Minority Interests Total CIPs Minority Interests Total

for the nine months ended June 30,

for the three months ended December 31,

Balance at beginning of period $ 580.1 $ 446.0 $ 1,026.1 $ 942.2 $ 583.6 $ 1,525.8

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

(in millions) June 30,

(in millions) December 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 nine months ended June 30, 2023 or fiscal year 2022.

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

Note 10 – Commitments and Contingencies

1 unchanged sentence

India Credit Fund Closure Matters .

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

As of June 30, 2023, the amount reported as distributed to fund unitholders in the aggregate is INR 27,109.3 crore (approximately $ 3.3 billion).

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

Other Litigation Matters.

1 unchanged sentence

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

In management’s opinion, an adequate accrual has been made as of June 30, 2023 to provide for any probable losses that may arise from such matters for which the Company could reasonably estimate an amount.

In management’s opinion, an adequate accrual has been made as of December 31, 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

4 unchanged sentences

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

In management’s opinion, no material loss was deemed probable or reasonably possible pursuant to such indemnification agreements and/or guarantees as of June 30, 2023.

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, 2023.

Other Commitments and Contingencies

At June 30, 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.

On November 1, 2023, the Company took possession of office space in New York City located at One Madison Avenue.

At the time of possession, the Company recognized an operating lease right-of-use asset and a corresponding operating lease liability of $ 396.6 million.

The lease agreement is over sixteen years with an aggregate expected commitment of $ 707.3 million and is part of a corporate initiative to consolidate existing office space in New York City.

At December 31, 2023, there were no other material changes in the other commitments and contingencies as reported in the Company’s Annual Report on Form 10-K for fiscal year 2023.

Note 11 – Stock-Based Compensation

4 unchanged sentences

Shares Weighted-

for the nine months ended June 30, 2023

for the three months ended December 31, 2023

Nonvested balance at October 1, 2023 12,782 3,099 15,881 $ 23.09

2 unchanged sentences

Forfeited/canceled ( 192 ) ( 148 ) ( 340 ) 21.25

Nonvested Balance at June 30, 2023 18,274 3,357 21,631 $ 23.51

Total unrecognized compensation expense related to nonvested stock and stock unit awards was $ 202.3 million at June 30, 2023.

Nonvested Balance at December 31, 2023 18,663 3,231 21,894 $ 23.29

Total unrecognized compensation expense related to nonvested stock and stock unit awards was $ 280.0 million at December 31, 2023.

This expense is expected to be recognized over a remaining weighted-average vesting period of 2.0 years.

Note 13 - Subsequent Event

On January 1, 2024, the Company acquired Putnam Investments (“Putnam”) from Great-West Lifeco Inc.

(“Great-West”) for 31.6 million shares of its common stock (excludes shares to be granted under deferred compensation program), cash consideration paid at close of approximately $ 220 million for investments and other purchase-related amounts, and deferred cash consideration of $ 100.0 million to be paid during the third quarter of fiscal year 2024.

In addition, the Company will pay up to $ 375.0 million between the third and seventh anniversaries of the closing date related to revenue growth targets from the strategic partnership with Great-West and its affiliates which will be recognized in operating income.

Note 12 – Investment and Other Income, Net

1 unchanged sentence

Three Months Ended

June 30, Nine Months Ended

(in millions) 2023 2022

Dividend and interest income $ 54.8 $ 36.5

Gains (losses) on investments, net 13.8 ( 35.6 ) 62.3 ( 32.9 )

Income (losses) from investments in equity method investees ( 7.7 ) ( 0.1 ) 111.1 51.6

Gains (losses) on derivatives, net ( 5.1 ) 17.5 ( 19.4 ) 15.2

Gains on investments, net 60.1 45.5

Income from investments in equity method investees 56.9 33.2

Rental income 10.8 10.6

Foreign currency exchange (losses) gains, net ( 6.6 ) 14.5 ( 40.2 ) 24.2

Foreign currency exchange losses, net ( 7.4 ) ( 27.1 )

Other, net ( 2.0 ) ( 7.6 )

Investment and other income, net $ 173.2 $ 91.1

Net gains (losses) recognized on equity securities measured at fair value and trading debt securities that were held by the Company were $ 17.0 million and $ 95.7 million for the three and nine months ended June 30, 2023 and $( 50.3 ) million and $( 79.1 ) million for the three and nine months ended June 30, 2022.

Note 13 - Subsequent Event

On July 25, 2023, the Company terminated its 364-day $ 500.0 million revolving credit facility and its 3-year $ 300.0 million term loan.

On the date of termination, the 364-day revolving credit facility had no amounts outstanding and all amounts outstanding under the term loan were repaid with existing cash.

Concurrent with the actions above, the Company entered into a 5-year $ 800.0 million revolving credit facility.

As of the time of this filing, there were no borrowings outstanding under the 5-year credit facility.

Net gains recognized on equity securities measured at fair value and trading debt securities that were held by the Company were $ 68.5 million for the three months ended December 31, 2023 and $ 68.3 million for the three months ended December 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