What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2024-11-12 compared with 2023-11-14 · 148 added, 180 removed, 572 unchanged (36% of the section changed)

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In order to pay taxes due in connection with the vesting of employee and executive officer stock and stock unit awards, we may repurchase shares under our program using a net stock issuance method.

In April 2018, we announced that our Board of Directors authorized the repurchase of up to 80.0 million additional shares of our common stock under the stock repurchase program.

In December 2023, our Board of Directors authorized the repurchase of up to an additional 27.2 million shares of our common stock in either open market or private transactions, for a total of up to 40.0 million shares available for repurchase under the stock repurchase program.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.

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Securities and Exchange Commission (the “SEC”), each of which describe our risks, uncertainties and other important factors in more detail.

Words such as “we,” “us,” “our” and similar terms refer to the Company.

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

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We may perform services directly or through third parties.

We offer our services and products under our various distinct brand names, including, but not limited to, Alcentra ® , Benefit Street Partners ® , Brandywine Global Investment Management ® , Clarion Partners ® , ClearBridge Investments ® , Fiduciary Trust International™, Franklin ® , Franklin Bissett ® , Franklin Mutual Series ® , K2 ® , Legg Mason ® , Lexington Partners ® , Martin Currie ® , O’Shaughnessy ® Asset Management, Royce ® Investment Partners, Templeton ® and Western Asset Management Company ® .

We offer a broad product mix of fixed income, equity, alternative, multi-asset and cash management asset classes and solutions that meet a wide variety of specific investment goals and needs for individual and institutional investors.

We also provide sub-advisory services to certain investment products sponsored by other companies which may be sold to investors under the brand names of those other companies or on a co-branded basis.

We offer our services and products under our various distinct brand names, including, but not limited to, Franklin ® , Templeton ® , Legg Mason ® , Alcentra ® , Benefit Street Partners ® , Brandywine Global Investment Management ® , Canvas ® , Clarion Partners ® , ClearBridge Investments ® , Fiduciary Trust International™, Franklin Mutual Series ® , K2 ® , Lexington Partners ® , Martin Currie ® , O’Shaughnessy ® , Putnam ® , Royce ® and Western Asset Management Company ® .

We offer a broad product mix of equity, fixed income, alternative, multi-asset and cash management asset classes and solutions that meet a wide variety of specific investment goals and needs for individual and institutional investors.

We also provide sub-advisory services to certain investment products sponsored by other companies

which may be sold to investors under the brand names of those other companies or on a co-branded basis.

The level of our revenues depends largely on the level and relative mix of assets under management (“AUM”).

As noted in the “Risk Factors” section set forth above in Item 1A of Part I of this Annual Report, the amount and mix of our AUM are subject to significant fluctuations that can negatively impact our revenues and income.

As noted in the “Risk Factors” section set forth above in Item 1A of Part I of this Annual Report, the amount and mix of our AUM are subject to significant fluctuations, including as a result of reputational harm, that can negatively impact our revenues and income.

The level of our revenues also depends on the fees charged for our services, which are based on contracts with our funds and customers, fund sales, and the number of shareholder transactions and accounts.

These arrangements could change in the future.

During the fiscal year ended September 30, 2023 (“fiscal year 2023”), global equity markets provided positive returns driven by moderating inflation, easing of monetary policy and resilient economic activity amid continued concerns about the risk of recession.

During the fiscal year ended September 30, 2024 (“fiscal year 2024”), global equity markets provided positive returns reflecting, among other things, easing of monetary policy and resilient economic activity.

The S&P 500 Index and MSCI World Index increased 36.4% and 33.0% for the fiscal year.

The global bond markets remained positive as the Bloomberg Barclays Global Aggregate Index increased 2.2% for the fiscal year, reflecting moderating inflation and easing of monetary policy.

Our total AUM was $1,374.2 billion at September 30, 2023, which was 6% higher than at September 30, 2022 driven by the positive impact of $58.9 billion of net market change, distributions and other, $34.9 billion from an acquisition, and $4.3 billion of cash management net inflows, partially offset by $21.3 billion of long-term net outflows.

Simple monthly average AUM (“average AUM”) decreased 5% during fiscal year 2023.

On November 1, 2022, we acquired BNY Alcentra Group Holdings, Inc.

(together with its subsidiaries, “Alcentra”), one of the largest European credit and private debt managers, with global expertise in senior secured loans, high yield bonds, private credit, structured credit, special situations and multi-strategy credit strategies.

Total purchase price included cash consideration of $594.1 million, which includes $188.3 million for certain securities held in Alcentra’s collateralized loan obligations;

deferred consideration of $62.0 million which was paid on 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 had an acquisition-date fair value of $24.6 million.

The global bond markets were also positive as the Bloomberg Barclays Global Aggregate Index increased 12.0% for the fiscal year.

Our total AUM was $1,678.6 billion at September 30, 2024, which was 22% higher than at September 30, 2023 driven by the positive impact of $186.0 billion of net market change, distributions and other, $148.3 billion from the acquisition of Putnam Investments (“Putnam”), and $2.7 billion of cash management net inflows, partially offset by $32.6 billion of long-term net outflows.

Simple monthly average AUM (“average AUM”) increased 12% during fiscal year 2024.

On January 1, 2024, we acquired Putnam, a global asset management firm, from Great-West Lifeco Inc.

(“Great-West”).

The business and regulatory environments in which we operate globally remain complex, uncertain and subject to change.

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The success of these and other strategies may be influenced by the factors discussed in the “Risk Factors” section.

The following discussion and analysis includes a comparison of our financial results for fiscal year 2024 to fiscal year 2023.

For discussion and analysis of the financial results for fiscal year 2023 compared to fiscal year 2022, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, which was filed with the SEC on November 14, 2023.

RESULTS OF OPERATIONS

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as of September 30, 2024 2023 2022

Fixed Income $ 483.1 $ 490.9 $ 650.3 (2 %) (25 %)

Equity $ 632.1 $ 430.4 $ 392.3 47 % 10 %

Fixed Income 556.4 483.1 490.9 15 % (2 %)

Alternative 249.9 254.9 225.1 (2 %) 13 %

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for the fiscal years ended September 30, 2024 2023 2022

$ 544.0 $ 436.1 $ 491.3 25 % (11 %)

Fixed Income 542.3 499.7 586.5 9 % (15 %)

Equity 436.1 491.3 502.9 (11 %) (2 %)

Alternative 254.9 251.9 185.1 1 % 36 %

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for the fiscal years ended September 30, 2024 2023 2022

35 % 31 % 33 %

Fixed Income 35 % 36 % 40 %

Equity 31 % 33 % 33 %

Alternative 16 % 18 % 13 %

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Total net flows (29.9) (17.0) (28.6) 76 % (41 %)

Acquisitions 34.9 64.9 3.5 (46 %) NM

Net market change, distributions and other 58.9 (269.0) 148.0 NM NM

Acquisitions 148.3 34.9 64.9 325 % (46 %)

Net market change, distributions and other 186.0 58.9 (269.0) 216 % NM

Ending AUM $ 1,678.6 $ 1,374.2 $ 1,297.4 22 % 6 %

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for the fiscal year ended

September 30, 2023 Fixed

Income Equity Alternative Multi-Asset Cash

September 30, 2024 Equity Fixed

Income Alternative Multi-Asset Cash

Management Total

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(6.0) (38.8) 4.2 8.0 2.7 (29.9)

Acquisitions — — 34.9 — — 34.9

81.3 59.3 0.7 5.8 1.2 148.3

Net market change, distributions and other

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AUM at September 30, 2024 $ 632.1 $ 556.4 $ 249.9 $ 176.2 $ 64.0 $ 1,678.6

AUM increased $76.8 billion or 6% during fiscal year 2023 due to the positive impact of $58.9 billion of net market change, distributions and other, $34.9 billion from an acquisition, and $4.3 billion of cash management net inflows, partially offset by $21.3 billion of long-term net outflows.

AUM increased $304.4 billion or 22% during fiscal year 2024 due to the positive impact of $186.0 billion of net market change, distributions and other, $148.3 billion from the acquisition of Putnam, and $2.7 billion of cash management net inflows, partially offset by $32.6 billion of long-term net outflows, inclusive of $48.6 billion of long-term net outflows at Western Asset Management (“WAM”), and $20.7 billion of long-term reinvested distributions.

Net market change, distributions and other primarily consists of $224.2 billion of market appreciation, and a $7.2 billion increase from foreign exchange revaluation, partially offset by $45.4 billion of long-term distributions.

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dollar denominated was primarily due to a weaker U.S.

dollar compared to the Euro, British Pound and Brazilian Real.

Long-term inflows decreased 20% to $254.9 billion, as compared to the prior year, driven by lower inflows in equity and fixed income open-end funds, fixed income institutional separate accounts, and equity retail separately managed accounts.

Long-term inflows for fiscal years 2023 and 2022 include reinvested distributions of $20.6 billion and $32.0 billion.

Long-term outflows decreased 21% to $276.2 billion due to lower outflows in fixed income and equity open-end funds, fixed income institutional separate accounts, multi-asset sub-advised mutual funds, and equity retail separately managed accounts.

dollar compared to the Euro, Australian dollar and British Pound.

Long-term inflows increased 25% to $319.0 billion, as compared to the prior year, driven by higher inflows across multiple equity and fixed income vehicles, most significantly in open-end and sub-advised mutual funds.

Long-term outflows increased 27% to $351.6 billion, driven by higher outflows across multiple fixed income vehicles, primarily at WAM, and from equity open-end and sub-advised mutual funds.

(in billions)

for the fiscal year ended

September 30, 2022 Fixed

Income Equity Alternative Multi-Asset Cash

September 30, 2023 Equity Fixed

Income Alternative Multi-Asset Cash

Management Total

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AUM at September 30, 2023 $ 430.4 $ 483.1 $ 254.9 $ 145.0 $ 60.8 $ 1,374.2

AUM decreased $232.7 billion or 15% during fiscal year 2022 due to the negative impact of $269.0 billion of net market change, distributions and other, $27.8 billion of long-term net outflows and $0.8 billion of cash management net outflows, partially offset by acquisitions of $64.9 billion.

Net market change, distributions and other primarily consists of $199.2 billion of market depreciation, $48.7 billion of long-term distributions and a $21.1 billion decrease from foreign exchange revaluation.

The market depreciation occurred in all asset classes with the exception of the alternative asset class.

Net market change, distributions and other primarily consists of $94.4 billion of market appreciation, and a $4.6 billion increase from foreign exchange revaluation, partially offset by $40.1 billion of long-term distributions.

The market appreciation occurred in all asset classes with the exception of the alternative asset class, most significantly in the equity asset class and reflected positive returns in the global equity markets.

Foreign exchange revaluation from AUM in products that are not U.S.

dollar denominated was primarily due to a stronger U.S.

dollar compared to the Japanese Yen, Euro, British Pound and Australian dollar.

Long-term inflows decreased 12% to $320.4 billion, as compared to the prior year, driven by lower inflows in fixed income institutional separate accounts, open-end funds, and retail separately managed accounts, as well as equity open-end

funds, partially offset by higher alternative inflows for private funds.

Long-term outflows decreased 11% to $348.2 billion due to lower outflows in fixed income institutional separate accounts, equity and multi-asset open-end funds, and equity sub-advised mutual funds, partially offset by higher equity outflows in retail separately managed accounts and multi-asset sub-advised mutual funds.

(in billions)

for the fiscal year ended

September 30, 2021 Fixed

Income Equity Alternative Multi-Asset Cash

Management Total

AUM at October 1, 2020 $ 656.9 $ 438.1 $ 122.1 $ 129.4 $ 72.4 $ 1,418.9

Long-term inflows 176.5 132.1 19.8 36.3 — 364.7

Long-term outflows

(188.2) (154.2) (11.8) (35.7) — (389.9)

Long-term net flows (11.7) (22.1) 8.0 0.6 — (25.2)

Cash management net flows

— — — — (15.1) (15.1)

Total net flows

(11.7) (22.1) 8.0 0.6 (15.1) (40.3)

3.5 — — — — 3.5

Net market change, distributions and other

1.6 107.6 15.1 22.4 1.3 148.0

AUM at September 30, 2021 $ 650.3 $ 523.6 $ 145.2 $ 152.4 $ 58.6 $ 1,530.1

dollar denominated was primarily due to a weaker U.S.

dollar compared to the Euro, British Pound and Brazilian Real.

AUM by sales region was as follows:

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Europe, Middle East and Africa 1

209.1 165.1 134.4 27 % 23 %

Asia-Pacific 178.0 117.6 110.6 51 % 6 %

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Total $ 1,678.6 $ 1,374.2 $ 1,297.4 22 % 6 %

__________________

1 Effective October 1, 2023, India region is included in Europe, Middle East and Africa.

The region in which investment products are sold may differ from the geographic area in which we provide investment management and related services to the products.

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as of September 30, 2024 1-Year 3-Year 5-Year 10-Year 1-Year 3-Year 5-Year 10-Year

Fixed Income 46 % 39 % 37 % 67 % 80 % 47 % 46 % 90 %

Equity 57 % 56 % 43 % 59 % 51 % 40 % 41 % 45 %

Fixed Income 77 % 61 % 58 % 64 % 80 % 48 % 72 % 90 %

55 % 64 % 43 % 53 % 56 % 47 % 55 % 64 %

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Total mutual fund AUM measured for the 1-, 3-, 5- and 10-year periods represents 38%, 38%, 37% and 35% of our total AUM as of September 30, 2024.

Excludes funds scheduled to be closed.

2 Strategy composite performance measures the percent of composite AUM beating its benchmark.

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are generally higher than for U.S.

Investment management fees decreased $163.9 million in fiscal year 2023 primarily due to a 5% decrease in average AUM, partially offset by higher performance fees.

The decrease in average AUM occurred primarily in the fixed income and equity asset classes, partially offset by an increase in the alternative asset class that includes the acquisitions of Lexington Partners L.P.

(“Lexington”) on April 1, 2022 and Alcentra on November 1, 2022.

Investment management fees increased $75.2 million in fiscal year 2022 primarily due to higher performance fees, partially offset by a 2% decrease in average AUM.

The decrease in average AUM occurred primarily in the fixed income and equity asset classes, partially offset by an increase in the alternative asset class that includes the acquisition of Lexington.

Investment management fees increased $369.3 million in fiscal year 2024 primarily due to a 12% increase in average AUM, partially offset by a decrease in performance fees, certain transaction-related fees received in the prior year, and lower catch-up fees recognized at the closing of fundraising rounds in a secondary private equity fund, which ended in January 2024.

The increases in average AUM primarily occurred in the equity, fixed income and multi-asset asset classes, driven by net market appreciation and the acquisition of Putnam.

Our effective investment management fee rate excluding performance fees (investment management fees excluding performance fees divided by average AUM) was 41.1 and 42.1 basis points for fiscal years 2024 and 2023.

The rate increase in fiscal year 2023 was primarily due to a shift in AUM from lower-fee fixed income products to higher-fee alternative products, including those from the acquisitions of Lexington and Alcentra, and an increase in certain transaction-related fees received in the current year.

The rate decrease in fiscal year 2022 was primarily due to a shift in assets from higher-fee products to lower-fee products in the fixed income and equity asset classes.

Performance-based investment management fees were $550.1 million, $498.2 million and $258.6 million for fiscal years 2023, 2022 and 2021.

The increase in fiscal year 2023 was primarily due to a $166.0 million increase in performance fees earned by Lexington, which were passed through as compensation expense per the terms of the acquisition agreement, partially offset by lower performance fees earned by our other alternative specialist investment managers, while the increase in fiscal year 2022 was primarily due to strong performance by our alternative specialist investment managers.

The rate decrease was primarily due to increased AUM in lower fee products, including those from the acquisition of Putnam, certain transaction-related fees received in the prior year, and lower catch-up fees recognized at the closing of fundraising rounds in a secondary private equity fund, which ended in January 2024.

Performance fees were $390.7 million and $550.1 million for fiscal years 2024 and 2023.

The decrease was primarily due to lower performance fees earned by certain of our alternative specialist investment managers, and a decrease of $72.2 million in performance fees earned by Lexington Partners L.P.

(“Lexington”), which were passed through as compensation expense per the terms of the acquisition agreement.

Our product offerings and global operations are diverse.

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mutual funds, with the exception of certain money market funds and certain other funds specifically designed for purchase through separately managed account programs, have adopted distribution plans under Rule 12b-1 (the “Rule 12b-1 Plans”) promulgated under the Investment Company Act of 1940.

The Rule 12b-1 Plans

permit the funds to pay us for marketing, marketing support, advertising, printing and sales promotion services relating to the distribution of their shares, subject to the Rule 12b-1 Plans’ limitations on amounts based on daily average AUM.

The Rule 12b-1 Plans permit the funds to pay us for marketing, marketing support, advertising, printing and sales promotion services relating to the distribution of their shares, subject to the Rule 12b-1 Plans’ limitations on amounts based on daily average AUM.

We earn distribution fees from our non-U.S.

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Sales and Distribution Fees $ 1,381.0 $ 1,203.7 $ 1,415.0 15 % (15 %)

Asset-based distribution fees decreased $152.2 million and $152.1 million in fiscal years 2023 and 2022 primarily due to decreases of 11% and 12% in the related average AUM and, in fiscal year 2023, a higher mix of lower-fee assets.

Sales-based fees decreased $59.1 million and $68.4 million in fiscal years 2023 and 2022 primarily due to a 20% decrease in commissionable sales in both years.

Asset-based distribution fees increased $137.1 million in fiscal year 2024 primarily due to revenue earned from Putnam products subsequent to the acquisition and an increase of 4% in the related average AUM, excluding the impact of Putnam.

Sales-based fees increased $40.2 million in fiscal year 2024 primarily due to an increase of 12% in commissionable sales and sales-based revenue earned from Putnam products subsequent to the acquisition.

Shareholder Servicing Fees

Substantially all shareholder servicing fees are earned from our sponsored funds for providing transfer agency services, which include providing shareholder statements, transaction processing, customer service and tax reporting.

These fees are primarily determined based on a percentage of AUM and either the number of transactions in shareholder accounts or the number of shareholder accounts, while fees from certain funds are based only on AUM.

Shareholder servicing fees are earned from our sponsored funds for providing transfer agency services, which include providing shareholder statements, transaction processing, client service and tax reporting.

Shareholder servicing fees are primarily determined based on a contractual margin, or a percentage of AUM and either the number of transactions in shareholder accounts or the number of shareholder accounts.

Shareholder servicing fees also include fund reimbursements of expenses incurred while providing transfer agency services.

Effective October 1, 2023, fees charged to certain of our U.S.

sponsored funds are determined based on a contractual margin.

Shareholder servicing fees decreased $40.3 million in fiscal year 2023, primarily due to a reduction in fee rates charged for transfer agency services in the U.S., partially related to the outsourcing of our transfer agency services, lower levels of related AUM and fewer transactions.

Shareholder servicing fees decreased $18.2 million in fiscal year 2022 primarily due lower levels of related AUM and fewer transactions.

Other revenue decreased $10.4 million in fiscal year 2023 and increased $13.3 million in fiscal year 2022 driven by the volume of real estate transaction fees earned by certain of our alternative asset managers in each year.

Shareholder servicing fees increased $76.6 million in fiscal year 2024, primarily due to fees earned by Putnam subsequent to the acquisition, partially offset by the impact of a change in fee structure for certain U.S.

sponsored funds.

OPERATING EXPENSES

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Amortization of intangible assets 338.2 341.1 282.0 (1 %) 21 %

Impairment of intangible assets

389.2 — — 100 % 0 %

General, administrative and other 703.3 565.0 564.9 24 % 0 %

Total Operating Expenses $ 8,070.4 $ 6,747.1 $ 6,501.4 20 % 4 %

The Putnam acquisition had a significant impact on operating expenses for the fiscal year ended September 30, 2024;

however, due to the ongoing integration of the combined businesses, it is not practicable to separately quantify the impact of the legacy Putnam business.

Compensation and Benefits

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Acquisition-related retention 1

263.6 164.9 167.2 60 % (1 %)

Acquisition-related performance fee pass through 1

97.5 169.7 4.2 (43 %) NM

127.8 (8.5) 49.8 NM NM

169.7 127.8 (8.5) 33 % NM

Compensation and Benefits Expenses $ 3,831.1 $ 3,494.0 $ 3,089.8 10 % 13 %

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and special termination benefits.

Salaries, wages and benefits increased $73.1 million in fiscal year 2023 primarily due to the recent acquisitions and annual salary increases, partially offset by the impact of headcount reductions.

Salaries, wages and benefits decreased $2.2 million in fiscal year 2022 primarily due to a $16.8 million decrease in termination benefits and the impact of headcount reductions which were substantially offset by increases due to annual salary adjustments and the acquisitions of Lexington and OSAM.

Incentive compensation increased $31.6 million in fiscal year 2023, primarily due to an increase in expense for deferred compensation awards, due, in part, to an increase in annual acceleration for retirement-eligible employees, and recent acquisitions.

These increases were partially offset by lower incentive compensation at specialist investment managers and lower bonus expense based on our annual performance.

Incentive compensation increased $196.6 million in fiscal year 2022, primarily due to higher performance fees and the acquisition of Lexington.

Acquisition-related retention expenses decreased $2.3 million in fiscal year 2023, primarily due to lower compensation associated with performance-based awards, partially offset by an increase due to the acquisition of Alcentra.

Acquisition-related retention expenses increased $3.5 million in fiscal year 2022, primarily due to the acquisition of Lexington.

Acquisition-related performance fee pass through expenses increased $165.5 million in fiscal year 2023, due to higher performance fees earned by Lexington, and decreased $21.1 million in fiscal year 2022, due to lower pass through performance fees at Clarion Partners.

Other compensation and benefits were $127.8 million, $(8.5) million, and $49.8 million for fiscal years 2023, 2022,

Fiscal year 2023 included the impact of $20.3 million of market gains on investments related to our deferred compensation plans, while fiscal year 2022 included losses of $36.7 million and fiscal year 2021 included $22.7 million of such gains.

Special termination benefits increased $55.0 million in fiscal year 2023 primarily due to workforce optimization initiatives and the acquisition of Alcentra and decreased $18.9 million in fiscal year 2022 primarily due to workforce optimization initiatives related to the acquisition of Legg Mason.

Compensation related to minority interests increased $24.3 million in fiscal year 2023 and $20.0 million in fiscal year 2022.

Salaries, wages and benefits increased $187.1 million in fiscal year 2024 primarily due to higher headcount as a result of the acquisition of Putnam and annual salary increases, partially offset by the impact of other headcount reductions.

Incentive compensation increased $81.6 million in fiscal year 2024, primarily due to the acquisition of Putnam and an increase in expense for deferred compensation awards, partially offset by lower incentive compensation at certain specialist investment managers.

Acquisition-related retention expenses increased $98.7 million in fiscal year 2024, primarily due to higher costs associated with recent acquisitions.

Acquisition-related performance fee pass through expenses decreased $72.2 million in fiscal year 2024, due to lower pass through performance fees earned by Lexington.

Other compensation and benefits increased $41.9 million in fiscal year 2024, primarily due to higher net market gains on investments related to our deferred compensation plans and an increase in special termination benefits.

Special termination benefits increased $12.6 million primarily due to the acquisition of Putnam, partially offset by costs associated with workforce optimization initiatives in the prior year.

We expect to incur acquisition-related retention expenses of approximately $190 million during the fiscal year ending September 30, 2025 (“fiscal year 2025”), and decreasing over the following two fiscal years by approximately $20 million and $80 million.

At September 30, 2023, our global workforce had decreased to approximately 9,200 employees from approximately 9,800 at September 30, 2022.

At September 30, 2024, our global workforce had increased to approximately 10,200 employees from approximately 9,200 at September 30, 2023, primarily due to the acquisition of Putnam.

We continue to place a high emphasis on our pay for performance philosophy.

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Marketing support expenses are based on AUM, sales or a combination thereof.

Also included is the amortization of deferred sales commissions related to upfront commissions on shares sold without a front-end sales charge.

Also included is the amortization of deferred sales commissions related to upfront commissions on shares sold without a front-

end sales charge.

The deferred sales commissions are amortized over the periods in which commissions are generally recovered from related revenues.

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Sales, Distribution and Marketing $ 1,863.1 $ 1,613.1 $ 1,845.6 15 % (13 %)

Asset-based expenses decreased $164.5 million and $182.1 million in fiscal years 2023 and 2022 primarily due to decreases of 10% and 11% in the related average AUM and in fiscal year 2023, a higher mix of lower-fee assets.

Sales-based expenses decreased $53.2 million and $64.7 million in fiscal years 2023 and 2022 primarily due to a 20% decrease in commissionable sales in both years.

Asset-based expenses increased $201.5 million in fiscal year 2024 primarily due to expenses related to Putnam products subsequent to the acquisition, an increase of 4% in the related average AUM, excluding the impact of Putnam, and higher marketing support fees.

Distribution expenses are generally not directly correlated with distribution fee revenues due to certain fee structures that do not provide full recovery of distribution costs.

Sales-based expenses increased $36.5 million in fiscal year 2024 primarily due to an increase of 12% in commissionable sales and sales-based expenses related to Putnam products subsequent to the acquisition.

Information Systems and Technology

Information systems and technology expenses increased $4.8 million in fiscal year 2023 primarily due to higher software costs partially offset by lower technology depreciation.

Information systems and technology expenses increased $14.1 million in fiscal year 2022 primarily due to higher costs incurred for technology consulting, software and external data services partially offset by lower technology depreciation.

Occupancy expenses increased $10.0 million in fiscal year 2023 primarily due to higher utility costs, reflecting a full year of return to office, and higher leasehold and equipment depreciation.

Occupancy expenses remained relatively flat in fiscal year 2022.

We expect to incur additional expense of approximately $50 million in fiscal year 2024 primarily related to new leased office space located at One Madison Avenue.

This is part of an initiative to consolidate our existing office space in New York City.

Information systems and technology expenses increased $115.1 million in fiscal year 2024, primarily due to expenses incurred by Putnam subsequent to the acquisition, and higher costs for software and market data services.

Occupancy expenses increased $96.5 million in fiscal year 2024, driven by new leased office space located at One Madison Avenue and impairment of the right-of-use asset related to vacated office space, primarily associated with an initiative to consolidate our office space in New York City, and expenses incurred by Putnam subsequent to the acquisition.

Amortization of intangible assets

Amortization of intangible assets increased $59.1 million and $50.0 million in fiscal years 2023 and 2022, primarily due to intangible assets recognized as part of the acquisition of Lexington and, in fiscal year 2023, the acquisition of Alcentra.

Amortization of intangible assets decreased $2.9 million in fiscal year 2024, primarily due to the net effect of intangible assets which became fully amortized during the fiscal year, partially offset by the amortization of intangible assets recognized as part of the acquisitions of Putnam and Alcentra.

Impairment of intangible assets

In fiscal year 2024, we impaired our indefinite-lived intangible asset related to certain mutual fund contracts managed by WAM by $389.2 million.

See Critical Accounting Policies and Note 9 - Goodwill and Other Intangible Assets in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report for additional information.

General, Administrative and Other

General, administrative and other expenses primarily consist of professional fees, fund-related service fees payable to external parties, advertising and promotion, travel and entertainment, and other miscellaneous expenses.

General, administrative and other operating expenses remained relatively flat in fiscal year 2023 as an increase of $35.9 million in travel and entertainment expenses and conference costs, reflecting the resumption of activity post-pandemic, and the impact of net credits of $19.2 million recognized in the prior year to adjust the fair values of our contingent consideration asset and liabilities, were substantially offset by a $17.3 million decrease in third-party sub-advisory service fees, a $20.6 million decrease in acquisition-related costs, primarily due to costs associated with our global brand campaign in the prior year, and a $6.8 million decrease in other taxes at certain European subsidiaries.

General, administrative and other operating expenses increased $27.7 million in fiscal year 2022, primarily due to increases of $27.1 million in advertising and promotion expenses, due in part to our global brand campaign, $25.7 million in professional fees, largely related to acquisition costs, and $24.0 million in travel and entertainment expenses.

Fiscal year 2022 also included $20.3 million of non-recurring costs incurred in connection with the outsourcing of our transfer agent functions.

These increases were partially offset by $43.0 million of closed-end fund product launch costs incurred in the prior year.

Fiscal year 2022 also included net credits of $19.2 million to adjust the fair values of our contingent consideration asset and liabilities, as compared to $4.1 million of expense recognized in the prior year.

General, administrative and other expenses primarily consist of professional fees, fund-related service fees, advertising and promotion, travel and entertainment, and other miscellaneous expenses.

General, administrative and other operating expenses increased $138.3 million in fiscal year 2024, primarily due to the acquisition of Putnam, an increase of $45.9 million in legal and other professional fees, and an increase of $14.0 million in travel and entertainment expenses due to higher activity levels.

These increases were partially offset by a decrease of $14.4 million in fund-related expenses.

OTHER INCOME (EXPENSES)

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Investment and other income, net:

Dividend and interest income

$ 176.9 $ 159.9 $ 37.9 11 % 322 %

Gains (losses) on investments, net 57.6 39.5 (75.4) 46 % NM

Income from investments in equity method investees 137.5 45.4 36.2 203 % 25 %

Gains (losses) on derivatives, net (16.2) (15.1) 20.9 7 % NM

Rental income

43.7 46.3 37.9 (6 %) 22 %

Foreign currency exchange (losses) gains, net (19.9) (26.7) 40.6 (25 %) NM

15.9 13.0 (7.0) 22 % NM

Investment and other income, net 395.5 262.3 91.1 51 % 188 %

Interest expense (97.2) (123.7) (98.2) (21 %) 26 %

Investment and other income (losses) of consolidated investment products, net 115.8 (17.7) 421.1 NM NM

Investment and other income (losses) of consolidated investment products, net 149.9 115.8 (17.7) 29 % NM

Expenses of consolidated investment products (32.6) (18.7) (19.7) 74 % (5 %)

Other income (expenses), net $ 313.4 $ (44.5) $ 569.2 NM NM

Investment and other income, net consists primarily of gains (losses) on investments held by the Company, income (losses) from equity method investees, foreign currency exchange gains (losses), rental income from excess owned space leased to third parties, gains (losses) on derivatives, and dividend and interest income.

Investment and other income, net increased $248.9 million in fiscal year 2023 primarily due to an increase in dividend and interest income, gains on investments held by the Company as compared to losses in the prior year, and higher income from equity method investees, partially offset by net foreign currency exchange losses as compared to gains in the prior year.

Investment and other income, net decreased $173.6 million in fiscal year 2022 primarily due to the impact of market declines.

Dividend and interest income increased $122.0 million in fiscal year 2023, primarily due to higher yields, and increased $20.3 million in fiscal year 2022, primarily due to higher yields on money market funds.

Investments held by the Company generated net gains of $39.5 million, as compared to net losses of $75.4 million in the prior year, primarily from investments in nonconsolidated funds and separate accounts and assets invested for deferred compensation plans, partially offset by net losses from investments measured at cost adjusted for observable price changes.

Investments held by the Company generated net losses of $75.4 million in fiscal year 2022, as compared to net gains of $90.9 million in fiscal year 2021, primarily from investments in nonconsolidated funds and separate accounts and assets invested for deferred compensation plans.

The losses in fiscal year 2022 were partially offset in by net gains from investments measured at cost adjusted for observable price changes.

Income from equity method investees generated income of $123.1 million in fiscal year 2023 and income of $36.2 million in fiscal year 2022.

The current year income was largely related to various global alternative funds, and included $86.0 million which was fully offset in noncontrolling interest.

Income from equity method investees decreased $118.1 million in fiscal year 2022.

Fiscal year 2022 included a $52.6 million gain recognized on the sale of our investment in Embark, offset in part by losses from equity method investees, largely related to declines in market valuations of investments held by various global equity and alternative funds, while fiscal year 2021 included gains from equity method investees.

Net foreign currency exchange losses were $26.7 million in fiscal year 2023, as compared to net gains of $40.6 million fiscal year 2022 and net losses of $11.9 million in fiscal year 2021.

The net losses in fiscal year 2023 compared to fiscal year 2022 were primarily due to the impact of the weakening of the U.S.

dollar against the Euro and British Pound on cash and cash equivalents denominated in U.S.

Other income (expenses), net $ 415.6 $ 235.7 $ (44.5) 76 % NM

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

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

Dividend and interest income increased $17.0 million in fiscal year 2024, primarily due to higher yields.

Investments held by the Company generated net gains of $57.6 million, as compared to net gains of $39.5 million in the prior year, primarily from assets invested for deferred compensation plans and investments in nonconsolidated funds and separate accounts, partially offset by net losses from investments measured at cost adjusted for observable price changes.

Equity method investees generated income of $137.5 million in fiscal year 2024 and $45.4 million in fiscal year 2023.

The current year income was largely related to various global alternative and equity funds, while the prior year income was largely related to various global alternative funds.

Net foreign currency exchange losses decreased $6.8 million in fiscal year 2024, primarily due to the U.S.

dollar weakening less in the current fiscal year against the Euro, which resulted in lower foreign exchange losses on cash and cash equivalents denominated in U.S.

dollars held by our European subsidiaries.

The net gains in fiscal year 2022 compared to fiscal year 2021 were primarily due to the impact of the strengthening of the U.S.

dollar against the Euro and British Pound.

Derivatives generated losses of $15.1 million in fiscal year 2023, gains of $20.9 million in fiscal 2022, and losses of $23.2 million in fiscal 2021.

Interest expense increased $25.5 million in fiscal year 2023 primarily due to a full year of accretion on Lexington deferred consideration, higher interest on debt and an increase in interest recognized on tax reserves.

Interest expense increased $12.8 million in fiscal year 2022 primarily due to accretion on Lexington deferred consideration.

Interest expense decreased $26.5 million in fiscal year 2024 primarily due to interest expense recognized in the prior year on our term loan that was terminated on July 25, 2023 and lower accretion on Lexington deferred purchase consideration.

Investment and other income (loss) of consolidated investment products, net consists of investment gains (losses) on investments held by consolidated investment products (“CIPs”) and dividend and interest income.

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Significant portions of the investment and other income of consolidated investment products, net and expenses of consolidated investment products are offset in noncontrolling interests in our consolidated statements of income.

Investments held by CIPs generated investment and other income of $115.8 million in fiscal year 2023, as compared to investment and other losses of $17.7 million in fiscal year 2022 and investment and other income of $421.1 million in fiscal year 2021, largely related to net investment gains (losses) on holdings of various equity, fixed income and alternative funds.

Expenses of consolidated investment products decreased $1.0 million in fiscal year 2023 and decreased $11.5 million in fiscal year 2022, due to activity of the funds.

Investments held by CIPs generated investment and other income of $149.9 million in fiscal year 2024, as compared to investment and other income of $115.8 million in fiscal year 2023, largely related to net investment gains (losses) on holdings of various equity, fixed income funds, and in the current year period, multi-asset funds.

Expenses of consolidated investment products increased $13.9 million in fiscal year 2024, due to activity of the funds.

Our investments in sponsored funds include initial cash investments made in the course of launching mutual fund and other investment product offerings, as well as investments for other business reasons.

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1 See Note 1 – Significant Accounting Policies and Note 6 – Investments in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report for information on investment accounting classifications.

2 Total cash and cash equivalents and investments includes $4,084.8 million held for operational activities, including investments in sponsored funds and other products, and $324.2 million necessary to comply with regulatory requirements.

3 Total cash and cash equivalents and investments includes $295.8 million attributable to employee-owned and other third-party investments made through partnerships which are offset in nonredeemable noncontrolling interests and approximately $380 million of investments that are subject to long-term repurchase agreements and other financing arrangements.

2 Total cash and cash equivalents and investments includes $4,261.5 million maintained for operational activities, including investments in sponsored funds and other products, and $453.3 million necessary to comply with regulatory requirements.

3 Total cash and cash equivalents and investments includes approximately $355 million attributable to employee-owned and other third-party investments made through partnerships which are offset in nonredeemable noncontrolling interests, approximately $289 million of investments that are subject to long-term repurchase agreements and other net financing arrangements, and approximately $441 million of cash and investments related to deferred compensation plans.

TAXES ON INCOME

Our effective income tax rate for fiscal year 2023 was 22.1% as compared to 22.9% in fiscal year 2022 and 14.3% in fiscal year 2021.

The rate decrease in fiscal year 2023 was primarily due to an increase in foreign earnings and activity of CIPs for which there is no related tax impact, partially offset by additional state tax expense.

The rate increase in fiscal year 2022 was primarily due to the release of a tax reserve in the prior year following the close of an IRS audit of the U.S.

taxation of deemed foreign dividends for fiscal year 2018, activity of CIPs for which there is no related tax impact, and a decrease in foreign earnings.

Our effective income tax rate for fiscal year 2024 was 26.2% as compared to 23.3% in fiscal year 2023.

The rate increase in fiscal year 2024 was primarily due to the net impact of valuation allowances for capital losses, an increase in foreign earnings, and benefits in the prior year related to the release of tax reserves, partially offset by activity of CIPs for which there is no related tax impact.

Our effective income tax rate reflects the relative contributions of earnings in the jurisdictions in which we operate, which have varying tax rates.

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338.2 341.1 282.0

Impairment of intangible assets

Special termination benefits

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338.2 341.1 282.0

Impairment of intangible assets

Special termination benefits

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(24.4) (25.4) (25.2)

Net compensation and benefits expense related to minority interests in certain subsidiaries not offset by net income (loss) attributable to redeemable noncontrolling interests 0.1 1.4 —

Net compensation and benefits expense related to minority interests in certain subsidiaries not offset by net income attributable to redeemable noncontrolling interests 3.5 0.1 1.4

Net income tax expense of adjustments (271.7) (154.8) (143.9)

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Financing cash flows 1,415.6 2,106.7 1,585.0

Net cash provided by operating activities decreased in fiscal year 2023 primarily due to higher net purchases of investments by CIPs and lower net income adjusted for non-cash items.

Net cash used in investing activities increased as compared to the prior year primarily due to net purchases of our investments as compared to net liquidations in the prior year, higher net purchases of investments by collateralized loan obligations (“CLOs”), payments of deferred consideration liability in the current year, and net deconsolidation of CIPs as compared to net consolidation in the prior year, partially offset by lower cash paid for acquisitions in the current year.

Net cash provided by financing activities increased as compared to the prior year primarily due to proceeds from repurchase agreements in the current year and higher net proceeds from debt of CIPs.

Net cash provided by operating activities increased in fiscal year 2022 primarily due to lower net purchases of

investments by CIPs, higher net income adjusted for non-cash items and timing differences in the cash settlement of operating assets and liabilities.

Net cash used in investing activities increased as compared to the prior year primarily due to cash paid for acquisitions in the current year, partially offset by net liquidations of our investments as compared to net purchases in the prior year.

Net cash provided by financing activities decreased as compared to the prior year primarily due to proceeds from issuance of debt in the prior year, partially offset by higher net proceeds from debt of CIPs.

Net cash provided by operating activities decreased in fiscal year 2024 primarily due to lower net income adjusted for non-cash items, partially offset by lower net purchases of investments by CIPs.

Net cash used in investing activities decreased as compared to the prior year primarily due to lower cash paid for acquisitions in the current year, lower net purchases of investments by collateralized loan obligations (“CLOs”) and net liquidations of our investments as compared to net purchases in the prior year, partially offset by higher payments of deferred consideration liabilities in the current year.

Net cash provided by financing activities decreased as compared to the prior year primarily due to net payments on repurchase agreements in the current year as compared to net proceeds in the prior year and lower net subscriptions in CIPs by noncontrolling interest.

The assets and liabilities of CIPs attributable to third-party investors do not impact our liquidity and capital resources.

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The notes have fixed interest rates from 4.750% to 5.625% with interest paid semi-annually and have an aggregate carrying value, inclusive of unamortized premium, of $1,193.4 million.

On July 15, 2024, we repaid all of the outstanding $250.0 million 3.950% senior notes due July 2024 issued by Legg Mason at the principal amount plus accrued and unpaid interest of $4.9 million.

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

The indentures governing the senior notes

contain limitations on our ability and the ability of our subsidiaries to pledge voting stock or profit participating equity interests in our subsidiaries to secure other debt without similarly securing the notes equally and ratably.

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

In addition, the indentures include requirements that must be met if we consolidate or merge with, or sell all of our assets to, another entity.

On July 25, 2023, we terminated our undrawn 364-day $500.0 million revolving credit facility and our 3-year term loan with an aggregate commitment of $300.0 million.

The term loan was repaid with existing cash.

Concurrently, the Company entered into a $800.0 million 5-year revolving credit facility which remains undrawn as of the time of this filing.

This facility contains a financial performance covenant requiring that the Company maintain a consolidated net leverage ratio, measured as of the last day of each fiscal quarter, of no greater than 3.25 to 1.00.

We maintain an $800.0 million 5-year revolving credit facility that contains a financial performance covenant requiring that the Company maintain a consolidated net leverage ratio, measured as of the last day of each fiscal quarter, of no greater than 3.25 to 1.00.

This facility remains undrawn as of the time of this filing.

We were in compliance with all debt covenants at September 30, 2024.

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Uses of Capital

We expect that our main uses of cash will be to invest in and grow our business including through acquisitions, pay stockholder dividends, invest in our products, pay income taxes and operating expenses of the business, enhance technology infrastructure and business processes, repurchase shares of our common stock, and repay and service debt.

We expect that our main uses of cash will be to invest in and grow our business including through acquisitions, pay stockholder dividends, invest in our products, pay income taxes and expenses of the business, enhance technology infrastructure and business processes, repurchase shares of our common stock, and repay and service debt.

While we expect to continue to repurchase shares to offset dilution from stock-based compensation, and expect to continue to repurchase shares opportunistically from time to time, we will likely spend more of our post-dividend free cash flow investing in our business, including seed capital and acquiring resources to help grow our investment teams and operations.

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Our stock repurchase program is effected through open-market purchases and private transactions in accordance with applicable laws and regulations, and is not subject to an expiration date.

The size and timing of these purchases will depend on business conditions, price, market and other factors.

The size and timing of these purchases will depend on business conditions, price, market and other factors, including the terms of any 10b5-1 stock purchase plan that may be in effect at any given time.

During fiscal years 2024 and 2023, we repurchased 12.0 million and 9.6 million shares of our common stock at a cost of $274.4 million and $256.3 million.

At September 30, 2023, 14.7 million shares remained available for repurchase under the authorization of 80.0 million shares approved by our Board of Directors in April 2018.

At September 30, 2024, 29.9 million shares remained available for repurchase under the authorization approved by our Board of Directors.

While we have no legal or contractual obligation to do so, we routinely make cash investments in the course of launching sponsored funds.

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These unfunded commitments are not recorded in the consolidated balance sheet.

We entered into a lease agreement for office space in New York City located at One Madison Avenue with occupancy expected to begin in early fiscal year 2024 with an aggregate expected commitment of $766.7 million over sixteen years.

In the first quarter of fiscal year 2024, we expect to recognize operating lease liabilities of approximately $400 million.

This is part of an initiative to consolidate our existing office space in New York City.

On May 31, 2023, we entered into a definitive agreement to acquire Putnam Investments from Great-West Lifeco, Inc.

(“Great-West”) for approximately 33.3 million shares of our common stock that we will issue to Great-West at closing and $100.0 million paid in cash 180 days after closing.

We plan to pay the cash portion with existing cash.

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

from The Bank of New York Mellon Corporation.

Total purchase consideration consisted of cash consideration of approximately $594.1 million, which includes $188.3 million for certain securities held in Alcentra’s CLOs;

deferred consideration of $62.0 million which was paid on November 1, 2023;

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

We paid the purchase price from our existing cash.

On December 15, 2022, we entered into repurchase agreements with a third-party financing company for certain securities held in Alcentra’s CLOs.

Under the terms of the repurchase agreements, we received cash proceeds of approximately $175.0 million with pledged collateral consisting of Alcentra investments with a carrying value of $171.3 million at September 30, 2023.

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

On April 1, 2022, we acquired all of the outstanding ownership interests in Lexington for cash consideration of approximately $1.0 billion and additional payments of $750.0 million to be paid in cash over the next three years.

The first additional payment of $250.0 million was made during the quarter ended June 30, 2023 from our existing cash.

On January 1, 2024, we acquired Putnam from Great-West for 31.6 million shares of our common stock, cash consideration paid at closing of $221.7 million for investments and other purchase-related amounts, and deferred cash consideration of $100.0 million paid on July 1, 2024.

The cash consideration paid at closing and the deferred consideration payment was funded from existing cash.

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.

On November 1, 2023, we paid $60.8 million in deferred cash consideration related to our acquisition of Alcentra from existing cash.

On April 1, 2024, we paid $400.0 million in deferred cash consideration related to our acquisition of Lexington from existing cash.

We expect to make an additional deferred cash payment related to our acquisition of Lexington of $100.0 million during the third quarter of fiscal year 2025 from existing cash and sources of liquidity.

The funds that we manage have their own resources available for purposes of providing liquidity to meet shareholder redemptions, including securities that can be sold or provided to investors as in-kind redemptions, and lines of credit.

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We are the primary beneficiary of a VIE if we have the power to direct the activities that most significantly impact the VIE ’ s economic performance and the obligation to absorb losses of or right to receive benefits from the VIE that could potentially be significant to the VIE.

Investment management fees earned from VIEs are excluded from the primary

beneficiary determination if they are deemed to be at market and commensurate with service.

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

The key assumption used in the analysis includes the amount of AUM.

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Intangible assets acquired in business combinations consist primarily of investment management contracts and trade names.

The fair values of the acquired management contracts are based on the net present value of estimated future cash flows attributable to the contracts, which include significant assumptions about forecasts of the AUM growth rate, pre-tax profit margin, discount rate, average effective fee rate and effective tax rate.

The fair values of the acquired management contracts are based on the net present value of estimated future cash flows attributable to the contracts, which include significant assumptions about the AUM growth rate, pre-tax profit margin, discount rate, average effective fee rate and effective tax rate.

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.

Our estimates are based on assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, may differ from actual results.

Our management contract intangible assets are amortized over their estimated useful lives, which range from three to sixteen 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 are amortized over their estimated useful lives which range from five to twenty years using the straight-line method.

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We make significant estimates and assumptions when evaluating goodwill and other intangible assets for impairment.

We may first assess goodwill and indefinite-lived intangible assets for qualitative factors to determine whether it is necessary to perform a quantitative impairment test.

We may first assess goodwill and indefinite-lived intangible assets using qualitative factors to determine whether it is necessary to perform a quantitative impairment test.

The qualitative analysis considers entity-specific and macroeconomic factors and their potential impact on key assumptions used in the determination of the fair value of the reporting unit or indefinite-lived intangible asset.

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The most relevant of these assumptions to the determination of estimated fair value are the AUM growth rate, pre-tax profit margin and the discount rate.

We performed a qualitative annual impairment test for goodwill and all indefinite-lived intangible assets as of August 1, 2023 and concluded it is more likely than not that the fair values of the reporting unit and the indefinite-lived intangible assets exceed their carrying values.

We subsequently monitored market conditions and their potential impact on the assumptions used in the annual assessment to determine whether circumstances have changed that would more likely than not reduce the fair value of the reporting unit below its carrying value, or indicate that the other indefinite-lived intangible assets might be impaired.

We performed a qualitative annual impairment test for goodwill and all indefinite-lived intangible assets as of August 1, 2024 and concluded it was more likely than not that the fair values of the reporting unit and the indefinite-lived intangible assets exceed their carrying values.

We subsequently monitored market conditions and their potential impact on the assumptions used in the annual assessment to determine whether circumstances had changed that would more likely than not reduce the fair value of the reporting unit below its carrying value, or indicate that the other indefinite-lived intangible assets might be impaired.

We considered, among other things, changes in our AUM and weighted-average cost of capital by assessing whether these changes would impact the reasonableness of our impairment assessment as of August 1, 2024.

We also monitored fluctuations of our common stock per share price to evaluate our market capitalization relative to the reporting unit as a whole.

Subsequent to August 1, 2023, there were no impairments of goodwill or indefinite-lived intangible assets as no events occurred or circumstances changed that would indicate these assets might be impaired.

On August 21, 2024, the Company and WAM announced developments in ongoing investigations into certain past trading activity at WAM by the SEC and U.S.

Department of Justice, after which we experienced accelerated net outflows from certain WAM managed mutual funds.

Following these developments and as part of our ongoing year-end review of intangible assets, we determined it no longer was more likely than not that the fair value exceeded the carrying value of indefinite-lived intangible asset related to certain mutual fund contracts managed by WAM.

On September 30, 2024, we performed a quantitative impairment test for this intangible asset and recognized a $389.2 million impairment primarily due to decreased AUM resulting from current and projected net client outflows and lower discounted future cash flows generated from these management contracts.

The most relevant assumptions used in the test are the AUM growth rates and the discount rate.

The AUM growth rates used in the analysis ranged from (19%) to 4% over the forecast period and the discount rate used was 13.0%.

The impairment does not impact our liquidity or capital resources.

We performed a sensitivity analysis over the critical assumptions used in the impairment test.

An increase or decrease in the AUM growth rate of 100 basis points would result in a change in the impairment charge of approximately $(40) million or $50 million.

An increase or a decrease of 50 basis points in the discount rate would result in a change of approximately $40 million or $(30) million in the impairment amount.

Subsequent to August 1, 2024, there were no impairments of goodwill or indefinite-lived assets, other than the identified impairment above, as no events occurred or circumstances changed that would indicate these assets might be impaired.

We test definite-lived intangible assets for impairment quarterly.

Impairment is indicated when the carrying value of an asset is not recoverable and exceeds its fair value.

Recoverability is evaluated based on estimated undiscounted future cash flows using assumptions about the AUM growth rate, pre-tax profit margin, average effective fee rate and expected useful life as well as royalty rate for trade name intangible assets.

Recoverability is evaluated based on estimated undiscounted future cash flows using assumptions about the AUM growth rate, pre-tax profit margin, average effective fee rate, and expected useful life.

We also use a royalty rate for trade name intangible assets.

The most relevant of these assumptions to determine future cash flows is the AUM growth rate.

If the carrying value of an asset is not recoverable through undiscounted cash flows, impairment is recognized in the amount by which the carrying value exceeds the asset’s fair value, as determined by discounted cash flows or other methods as appropriate for the asset type.

Due to accelerated net outflows in certain WAM managed accounts, the Company revised the remaining useful life of the related definite-lived intangible asset, resulting in a cumulative weighted-average remaining useful life of 5.8 years for all definite-lived intangible assets as of September 30, 2024.

There were no impairments of definite-lived intangible assets during fiscal year 2024.

While we believe that the assumptions used to estimate fair value in our impairment tests are reasonable and appropriate, future changes in the assumptions could result in recognition of impairment.

While we believe that the assumptions used to estimate fair value in our impairment tests are reasonable and appropriate, future changes in the assumptions or occurrence of future events could result in recognition of additional impairment.

Such events may include, but are not limited to, the impact of the global economic environment on the Company’s AUM, other material negative changes in AUM and related fees, or a significant and sustained decline in our stock price.

Fair Value Measurements

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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 5. Market for Registrant’s Common Equity