What changed in this filing

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Item 1. Financial Statements

2025-01-31 compared with 2024-07-26 · 102 added, 314 removed, 442 unchanged (48% of the section changed)

3 unchanged sentences

Three Months Ended

Nine Months Ended

(in millions, except per share data) 2024 2023

17 unchanged sentences

Interest expense ( 23.1 ) ( 18.8 )

Investment and other income of consolidated investment products, net 37.6 1.7 103.7 75.3

Investment and other income (losses) of consolidated investment products, net 114.1 ( 23.8 )

Expenses of consolidated investment products ( 7.3 ) ( 5.9 )

15 unchanged sentences

(in millions) Three Months Ended

June 30, Nine Months Ended

2024 2023 2024 2023

Net Income $ 232.1 $ 256.3

2 unchanged sentences

Net unrealized gains (losses) on defined benefit plans, net of tax 0.3 ( 0.1 )

Net unrealized gains (losses) on investments, net of tax ( 0.1 ) — — 0.2

Total other comprehensive income (loss) ( 104.8 ) 59.0

8 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,

2024 September 30,

1 unchanged sentence

Receivables 1,393.8 1,479.1

Investments (including $ 720.4 and $ 872.8 at fair value at June 30, 2024 and September 30, 2023)

Investments (including $ 806.9 and $ 838.0 at fair value at December 31, 2024 and September 30, 2024)

2,392.5 2,338.4

24 unchanged sentences

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

522,059,992 and 495,937,891 shares issued and outstanding at June 30, 2024 and September 30, 2023

523,967,899 and 523,596,548 shares issued and outstanding at December 31, 2024 and September 30, 2024

Capital in excess of par

1,014.9 947.6

Retained earnings 11,919.1 11,927.6

16 unchanged sentences

(in millions)

for the nine months ended

June 30, 2024 Shares Amount

for the three months ended

December 31, 2024 Shares Amount

Balance at October 1, 2024 523.6 $ 52.4 $ 947.6 $ 11,927.6 $ ( 419.5 ) $ 12,508.1 $ 734.9 $ 13,243.0

Net income (loss) 251.3 251.3 ( 4.5 ) 246.8

Other comprehensive income 59.0 59.0 59.0

Net income 163.6 163.6 18.9 182.5

Other comprehensive loss ( 104.8 ) ( 104.8 ) ( 104.8 )

Dividends declared on common stock ($ 0.32 per share)

7 unchanged sentences

Net subscriptions and other 13.1 13.1

Net consolidation of investment products 4.7 4.7

Adjustment to fair value of redeemable noncontrolling interests 1.5 1.5 1.5

Balance at December 31, 2024 524.0 $ 52.4 $ 1,014.9 $ 11,919.1 $ ( 524.3 ) $ 12,462.1 $ 771.6 $ 13,233.7

Net income 124.2 124.2 8.3 132.5

Other comprehensive loss ( 28.9 ) ( 28.9 ) ( 28.9 )

Dividends declared on common stock ($ 0.31 per share)

( 169.3 ) ( 169.3 ) ( 169.3 )

Repurchase of common stock ( 0.4 ) ( 0.1 ) ( 11.6 ) — ( 11.7 ) ( 11.7 )

Issuance of common stock 0.3 — 10.7 10.7 10.7

Stock-based compensation 86.3 86.3 86.3

31.6 3.2 936.9 940.1 25.8 965.9

Net subscriptions and other 63.1 63.1

Net deconsolidation of investment products ( 12.6 ) ( 12.6 )

Adjustment to fair value of redeemable noncontrolling interests ( 91.9 ) ( 91.9 ) ( 91.9 )

Balance at March 31, 2024 526.2 $ 52.6 $ 1,022.3 $ 12,265.4 $ ( 479.2 ) $ 12,861.1 $ 720.6 $ 13,581.7

Net income 174.0 174.0 15.0 189.0

Other comprehensive loss ( 8.7 ) ( 8.7 ) ( 8.7 )

Dividends declared on common stock ($ 0.31 per share)

( 167.0 ) ( 167.0 ) ( 167.0 )

Repurchase of common stock ( 4.3 ) ( 0.4 ) ( 101.1 ) — ( 101.5 ) ( 101.5 )

Issuance of common stock 0.2 — 4.5 4.5 4.5

Stock-based compensation 58.9 58.9 58.9

Net subscriptions and other 29.4 29.4

Adjustment to fair value of redeemable noncontrolling interests 48.9 48.9 48.9

Balance at June 30, 2024 522.1 $ 52.2 $ 984.6 $ 12,321.3 $ ( 487.9 ) $ 12,870.2 $ 765.0 $ 13,635.2

See Notes to Consolidated Financial Statements.

Franklin Resources, Inc.

6 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 3.5 169.1

Other comprehensive income 124.7 124.7 124.7

Dividends declared on common stock ($ 0.30 per share)

( 153.6 ) ( 153.6 ) ( 153.6 )

Repurchase of common stock ( 0.5 ) ( 0.1 ) ( 69.1 ) 55.0 ( 14.2 ) ( 14.2 )

Issuance of common stock 1.2 0.1 33.5 33.6 33.6

Stock-based compensation 35.6 35.6 35.6

Net subscriptions and other 97.1 97.1

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 (loss) 251.3 251.3 ( 4.5 ) 246.8

6 unchanged sentences

Net subscriptions and other 9.6 9.6

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 ( 7.7 ) 219.8

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 ( 11.3 ) ( 11.3 )

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

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

See Notes to Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Three Months Ended

(in millions) 2024 2023

Net Income $ 232.1 $ 256.3

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 73.2 66.8

2 unchanged sentences

Amortization of intangible assets 112.6 85.8

Net gains on investments ( 17.3 ) ( 62.3 )

Income from investments in equity method investees ( 122.3 ) ( 43.5 )

Net losses on investments of consolidated investment products 19.4 116.0

Net losses (gains) on investments 57.1 ( 60.1 )

Losses (income) from investments in equity method investees 7.6 ( 56.9 )

Net (gains) losses on investments of consolidated investment products ( 87.2 ) 66.0

Net purchase of investments by consolidated investment products ( 83.9 ) ( 147.5 )

2 unchanged sentences

Changes in operating assets and liabilities:

Increase in receivables and other assets ( 61.4 ) ( 69.8 )

Decrease (increase) in receivables and other assets 10.2 ( 36.7 )

Decrease in investments, net 1.1 0.2

Decrease in accrued compensation and benefits ( 654.3 ) ( 508.0 )

Decrease in income taxes payable ( 127.8 ) ( 58.9 )

Increase in income taxes payable 55.0 107.9

Increase (decrease) in accounts payable, accrued expenses and other liabilities 95.0 ( 39.7 )

Increase (decrease) in accounts payable and accrued expenses of consolidated investment products ( 47.3 ) 1.0

Net cash provided by operating activities 413.1 324.7

Net cash used in operating activities ( 145.2 ) ( 251.9 )

Purchase of investments ( 458.0 ) ( 267.4 )

3 unchanged sentences

Additions of property and equipment, net ( 71.8 ) ( 19.5 )

Acquisitions, net of cash acquired (including $ 281.4 in cash and cash equivalents of consolidated investment products in fiscal year 2024)

175.1 ( 500.5 )

Payments of contingent consideration asset — 5.5

Payments of deferred consideration liability — ( 60.8 )

Net consolidation (deconsolidation) of investment products 12.0 ( 43.8 )

Net deconsolidation of investment products ( 5.1 ) ( 10.5 )

Net cash used in investing activities ( 656.5 ) ( 137.6 )

4 unchanged sentences

[Table continued from previous page]

Nine Months Ended

Three Months Ended

(in millions) 2024 2023

Issuance of common stock $ 7.3 $ 13.4

Dividends paid on common stock $ ( 166.2 ) $ ( 155.7 )

6 unchanged sentences

Noncontrolling interests 171.8 37.7

Net cash provided by financing activities 506.4 2,492.6

Net cash provided by (used in) financing activities 87.9 ( 159.0 )

Effect of exchange rate changes on cash and cash equivalents ( 50.0 ) 25.7

9 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

December 31, 2024

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, 2024 (“fiscal year 2024”).

During the quarter ended March 31, 2024, the Company identified that it did not eliminate the investment income from certain consolidated limited partnerships for the fiscal year ended September 30, 2023, resulting in offsetting adjustments to investment and other income, net and net income attributable to nonredeemable noncontrolling interest.

The Company is not entitled to the economic returns associated with the underlying investments held by these limited partnerships.

There is no impact on operating income, net income attributable to Franklin Resources, Inc., earnings per share, total assets, total liabilities, retained earnings or total shareholders’ equity.

There is no impact on the financial results attributable to the Company’s shareholders.

The Company has determined this did not result in a material misstatement to its previously issued consolidated financial statements.

For comparability, the Company has revised the comparative prior period amounts included in the consolidated statements of income, consolidated statements of stockholders’ equity, consolidated statements of cash flows, and related footnote disclosures.

The impacts on the consolidated statements of income for the three and nine months ended June 30, 2023 are as follows:

(in millions) Three Months Ended

June 30, 2023 Nine Months Ended

June 30, 2023

Operating Income $ 314.9 $ — $ 314.9 $ 764.0 $ — $ 764.0

Other income, net

Investment and other income, net

51.2 ( 1.4 ) 49.8 267.9 ( 67.6 ) 200.3

Other income, net

17.2 ( 1.4 ) 15.8 228.2 ( 67.6 ) 160.6

Income before taxes

332.1 ( 1.4 ) 330.7 992.2 ( 67.6 ) 924.6

248.0 ( 1.4 ) 246.6 754.9 ( 67.6 ) 687.3

net income (loss) attributable to nonredeemable noncontrolling interest

( 6.3 ) ( 1.4 ) ( 7.7 ) 59.1 ( 67.6 ) ( 8.5 )

Net Income Attributable to Franklin Resources, Inc.

227.5 — 227.5 587.3 — 587.3

The impact on the consolidated statement of cash flows for the nine months ended June 30, 2023 are as follows:

(in millions) Nine Months Ended

June 30, 2023

Net cash provided by (used in) operating activities

$ 365.3 $ ( 40.6 ) $ 324.7

Net cash used in investing activities

( 3,251.2 ) ( 27.0 ) ( 3,278.2 )

Net cash provided by financing activities 2,425.0 67.6 2,492.6

Decrease in cash and cash equivalents

( 394.9 ) — ( 394.9 )

Note 2 – New Accounting Guidance

2 unchanged sentences

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 – Acquisition

Putnam Investments

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

(“Great-West”) for 31.6 1 million shares of its common stock, cash consideration paid at close 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 close and the deferred cash consideration were funded from existing cash.

See below for a summary of the total purchase consideration transferred at closing:

(in millions)

Equity consideration 1, 2

Cash consideration

Deferred cash consideration

Other adjustments 3

Total Purchase Consideration

1 Excludes shares granted under a deferred compensation program.

2 Market price on closing date of $ 29.79 .

3 Primarily relates to payments treated as future compensation expense.

Great-West became a long-term shareholder of the Company with an approximate 6.0 % stake in the common stock of the Company as of the acquisition date.

Shares representing 4.9 % of the Company’s outstanding Common Stock at closing are subject to a five -year lock-up.

The remaining shares were subject to a 180-day lock-up following the date of closing which has expired.

The acquisition of Putnam accelerates the Company’s growth in the retirement sector by increasing the amount of the Company’s defined contribution AUM.

Additionally, the acquisition expands the Company’s insurance assets, further strengthening its presence in these key market segments to better serve clients.

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.

The issuance of common stock consideration represents a non-cash financing activity related to the statement of cash flows.

(in millions) Initial Estimated Fair Value

Revised Estimated Fair Value

as of January 1, 2024

Cash and cash equivalents $ 101.1 $ — $ 101.1

Receivables 118.9 — 118.9

Investments 111.2 — 111.2

Assets of consolidated investment products

Cash and cash equivalents 281.4 — 281.4

Investments, at fair value 849.5 — 849.5

Property and equipment

87.1 ( 5.7 ) 81.4

189.8 0.4 190.2

Indefinite-lived intangible assets

542.5 14.7 557.2

Definite-lived intangible asset

52.9 4.8 57.7

Operating lease right-of-use assets

109.2 — 109.2

Other assets 20.4 — 20.4

Compensation and benefits

( 57.8 ) — ( 57.8 )

Accounts payable and accrued expenses

( 40.9 ) ( 11.4 ) ( 52.3 )

Liabilities of consolidated investment products

Accounts payable and accrued expenses ( 259.6 ) — ( 259.6 )

Debt ( 706.8 ) — ( 706.8 )

Operating lease liabilities

( 109.2 ) — ( 109.2 )

Other liabilities

( 12.1 ) — ( 12.1 )

Redeemable noncontrolling interests

( 20.2 ) — ( 20.2 )

Nonredeemable noncontrolling interests

( 25.8 ) — ( 25.8 )

Total Identifiable Net Assets $ 1,231.6 $ 2.8 $ 1,234.4

The adjustments to the initial estimated fair values are primarily a result of new information obtained about 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 expected to be deductible for tax purposes.

The definite-lived intangible asset relates to trade name, which is amortized over its estimated useful life of 10.0 years.

Amortization expense related to the trade name was $ 1.6 million and $ 2.9 million for the three and nine months ended June 30, 2024.

The estimated remaining amortization expense is $ 1.4 million for the year and $ 5.8 million per year thereafter.

Transaction costs incurred in connection with the acquisition were $ 18.3 million for the nine months ended June 30, 2024.

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

The Company also incurred $ 132.0 million of acquisition-related compensation and benefits expense during the period, primarily related to the acceleration of expense for historical Putnam compensation arrangements, retention bonuses and termination benefits.

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.

Operating revenues of the acquired business from January 1, 2024 through June 30, 2024 were approximately $ 430 million.

Net income is not available to be separately reported due to the ongoing integration of the combined businesses.

The Company will adopt the annual disclosures in its Annual Report on Form 10-K for the fiscal year ending September 30, 2025 and interim disclosure in its Quarterly report on Form 10-Q for the quarter ending December 31, 2025.

There were no other significant updates to the new accounting guidance that the Company has not yet adopted as disclosed in its Form 10-K for fiscal year 2024.

Note 3 – Earnings per Share

1 unchanged sentence

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

Nine Months Ended

2024 2023 2024 2023

Net income attributable to Franklin Resources, Inc.

1 unchanged sentence

allocation of earnings to participating nonvested stock and stock unit awards

7.5 10.2 23.8 26.7

Net Income Available to Common Stockholders $ 148.2 $ 241.6

1 unchanged sentence

Dilutive effect of nonparticipating nonvested stock unit awards

0.7 0.7 0.8 0.7

Weighted-Average Shares Outstanding – Diluted 518.2 487.9

2 unchanged sentences

Diluted 0.29 0.50

There were no nonparticipating nonvested stock unit awards excluded from the calculation of diluted earnings per share because their effect would have been antidilutive for the three and nine months ended June 30, 2024 and such awards were insignificant for the three and nine months ended June 30, 2023.

There were no nonparticipating nonvested stock unit awards excluded from the calculation of diluted earnings per share because their effect would have been antidilutive for the three months ended December 31, 2024 and such awards were insignificant for the three months ended December 31, 2023.

Note 4 – Revenues

3 unchanged sentences

Luxembourg Total

for the three months ended June 30, 2024

Investment management fees

$ 1,273.7 $ 216.2 $ 71.8 $ 59.1 $ 69.1 $ 1,689.9

Sales and distribution fees

256.8 86.7 4.7 10.1 — 358.3

Shareholder servicing fees

53.2 8.1 0.5 — — 61.8

12.7 — 0.2 — — 12.9

$ 1,596.4 $ 311.0 $ 77.2 $ 69.2 $ 69.1 $ 2,122.9

(in millions) United States Luxembourg Asia-Pacific Americas

States Europe,

Luxembourg Total

for the nine months ended June 30, 2024

Investment management fees

$ 3,819.8 $ 630.1 $ 210.2 $ 173.8 $ 222.1 $ 5,056.0

Sales and distribution fees

718.8 250.3 14.3 29.6 — 1,013.0

Shareholder servicing fees

136.8 23.6 1.8 0.1 — 162.3

31.1 0.7 3.4 — 0.3 35.5

$ 4,706.5 $ 904.7 $ 229.7 $ 203.5 $ 222.4 $ 6,266.8

(in millions) United States Luxembourg Asia-Pacific Americas

States Europe,

Luxembourg Total

for the three months ended June 30, 2023

for the three months ended December 31, 2024

Investment management fees

9 unchanged sentences

Luxembourg Total

for the nine months ended June 30, 2023

for the three months ended December 31, 2023

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 82 % of the Company’s total operating revenues for the three and nine months ended June 30, 2024 and 83 % for the three and nine months ended June 30, 2023.

Revenues earned from sponsored funds were 83 % of the Company’s total operating revenues for the three months ended December 31, 2024 and 2023.

Note 5 – Investments

2 unchanged sentences

Investments consisted of the following:

(in millions) June 30,

(in millions) December 31,

2024 September 30,

8 unchanged sentences

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

As of June 30, 2024, other liabilities includes repurchase agreements of $ 135.9 million with investments of $ 148.6 million in carrying value pledged as collateral.

As of December 31, 2024 and September 30, 2024, other liabilities includes repurchase agreements of $ 116.5 million and $ 111.4 million with investments of $ 122.5 million and $ 121.7 million in carrying value pledged as collateral.

The repurchase agreements have contractual maturity dates ranging between 2030 to 2038.

5 unchanged sentences

Expedient Total

as of June 30, 2024

as of December 31, 2024

Investments, at fair value

17 unchanged sentences

Total Liabilities Measured at Fair Value $ 178.1 $ — $ 28.2 $ — $ 206.3

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,

2024 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 2.3 years and 2.9 years at June 30, 2024 and September 30, 2023.

Investments with known liquidation periods have an expected weighted-average life of 1.9 years at December 31, 2024 and September 30, 2024.

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

1 unchanged sentence

(in millions) Fair Value

Level June 30, 2024 September 30, 2023

Level December 31, 2024 September 30, 2024

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 85 CIPs, including 25 CLOs, as of June 30, 2024 and 70 CIPs, including 20 CLOs, as of September 30, 2023.

The Company had 75 CIPs, including 22 CLOs, as of December 31, 2024 and 77 CIPs, including 22 CLOs, as of September 30, 2024.

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

(in millions) June 30,

(in millions) December 31,

2024 September 30,

14 unchanged sentences

$ 12,876.0 $ 12,351.8

The CIPs did not have a significant impact on net income attributable to the Company during the three and nine months ended June 30, 2024 and 2023.

The CIPs did not have a significant impact on net income attributable to the Company during the three months ended December 31, 2024 and 2023.

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, 2024

as of December 31, 2024

Cash and cash equivalents of CLOs $ 519.3 $ — $ — $ — $ 519.3

14 unchanged sentences

These investments were as follows:

(in millions) June 30,

(in millions) December 31,

2024 September 30,

2 unchanged sentences

Redeemable investments 2

Unfunded commitments 3

_______________

1 unchanged sentence

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

3 Of the total unfunded commitments, the Company was contractually obligated to fund $ 9.9 million based on its ownership percentage in the CIPs, at December 31, 2024 and September 30, 2024.

Changes in Level 3 assets were as follows:

(in millions) Equity and Debt

for the three months ended June 30, 2024

Balance at April 1, 2024 $ 591.0

Losses included in investment and other income of consolidated investment products, net ( 29.8 )

Purchases 17.5

Balance at June 30, 2024 $ 578.0

Change in unrealized losses included in net income relating to assets held at June 30, 2024 $ ( 29.8 )

(in millions) Equity and Debt

for the nine months ended June 30, 2024

for the three months ended December 31, 2024

Balance at October 1, 2024 $ 550.1

Losses included in investment and other income of consolidated investment products, net ( 68.0 )

Gains included in investment and other income (losses) of consolidated investment products, net 22.0

Purchases 9.2

Net deconsolidations ( 12.5 )

Transfers into Level 3 1.1

Balance at June 30, 2024 $ 578.0

Change in unrealized losses included in net income relating to assets held at June 30, 2024 $ ( 67.4 )

Net consolidations 3.8

Balance at December 31, 2024 $ 573.5

Change in unrealized gains included in net income relating to assets held at December 31, 2024 $ 22.3

(in millions) Equity and Debt

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 of consolidated investment products, net ( 31.6 ) 0.1 ( 31.5 )

Purchases 61.2 ( 0.2 ) 61.0

( 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 of consolidated investment products, net ( 56.3 ) ( 9.0 ) 0.2 ( 65.1 )

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

Purchases 3.8 — 3.8

( 0.2 ) — ( 0.2 )

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

Transfers into Level 3 1.1 0.6 1.7

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 )

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 )

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

(in millions)

as of June 30, 2024 Fair Value Valuation Technique Significant Unobservable Inputs Range (Weighted Average 1 )

Equity and debt securities $ 253.0 Market pricing Private sale pricing $ 0.01 –$ 1,000.00 ($ 76.55 ) per share

as of December 31, 2024 Fair Value Valuation Technique Significant Unobservable Inputs Range (Weighted Average 1 )

Equity and debt securities $ 302.2 Market comparable companies Enterprise value/ Revenue multiple 1.4 – 28.7 ( 11.0 )

Discount for lack of marketability 5.8 %– 11.8 % ( 8.0 %)

282.1 Market comparable companies Enterprise value/ Revenue multiple 1.5 – 21.2 ( 13.1 )

219.1 Market pricing Private sale pricing $ 0.01 –$ 1,120.00 ($ 82.93 ) per share

Discount for lack of marketability 9.7 %– 13.3 % ( 10.4 %)

2 unchanged sentences

as of September 30, 2024 Fair Value Valuation Technique Significant Unobservable Inputs Range (Weighted Average 1 )

Equity and debt securities $ 346.0 Market pricing Private sale pricing $ 0.01 –$ 1,000.00 ($ 23.88 ) per share

Equity and debt securities $ 291.6 Market comparable companies Enterprise value/ Revenue multiple 1.2 – 22.8 ( 10.9 )

Discount for lack of marketability 0.1 %– 10.4 % ( 8.1 %)

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

214.5 Market pricing Private sale pricing $ 0.01 –$ 1,000.00 ($ 73.04 ) per share

Discount for lack of marketability 9.8 %– 17.5 % ( 11.5 %)

44.0 Discounted cash flow Discount rate 6.8 %

__________________

1 Based on the relative fair value of the instruments.

If the relevant significant inputs used in the market-based valuations, other than discount for lack of marketability, were independently higher (lower) as of June 30, 2024, the resulting fair value of the assets would be higher (lower).

If the relevant significant inputs used in the discounted cash flow, as well as the discount for lack of marketability used in the market-based valuations, were independently higher (lower) as of June 30, 2024, the resulting fair value of the assets would be lower (higher).

If the relevant significant inputs used in the market-based valuations, other than discount for lack of marketability, were independently higher (lower) as of December 31, 2024, the resulting fair value of the assets would be higher (lower).

If the relevant significant inputs used in the discounted cash flow, as well as the discount for lack of marketability used in the market-based valuations, were independently higher (lower) as of December 31, 2024, 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, 2024 September 30, 2023

Level December 31, 2024 September 30, 2024

Value Estimated

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2 or 3 $ 9,055.3 $ 8,858.1 $ 9,341.5 $ 9,167.3

Other debt 2 or 3 30.0 30.0 21.8 8.6

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1 Substantially all was Level 2.

Debt of CIPs consisted of the following:

June 30, 2024 September 30, 2023

(in millions) Amount Weighted-

Interest Rate Amount Weighted-

Interest Rate

$ 9,607.7 7.44 % $ 8,210.0 7.12 %

30.0 4.19 % 21.8 6.00 %

$ 9,637.7 $ 8,231.8

The debt of CIPs had fixed and floating interest rates ranging from 0.25 % to 15.76 % at June 30, 2024, and from 2.39 % to 15.49 % at September 30, 2023.

Debt of CLOs totaled $ 9,055.3 million and $ 9,341.5 million at December 31, 2024 and September 30, 2024.

The debt had fixed and floating interest rates ranging from 2.39 % to 13.68 % with a weighted-average effective interest rate of 7.30 % at December 31, 2024, and from 2.39 % to 13.73 % with a weighted-average effective interest rate of 7.36 % at September 30, 2024.

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

The contractual maturities for the debt of CIPs at June 30, 2024 were as follows:

The contractual maturities for the debt of CLOs at December 31, 2024 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,

2024 September 30,

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Fair Value $ 9,396.7 $ 9,352.1

Investments 90 days or more past due were immaterial at June 30, 2024 and September 30, 2023.

The Company recognized $ 9.4 million and $ 39.9 million of net gains during the three and nine months ended June 30, 2024 and $ 6.5 million and $ 9.0 million of net gains during the three and nine months ended June 30, 2023, related to its own economic interests in the CLOs.

The aggregate principal amount due of the debt of CLOs was $ 9,488.5 million and $ 8,281.5 million at June 30, 2024 and September 30, 2023.

Investments 90 days or more past due were immaterial at December 31, 2024 and September 30, 2024.

The Company recognized $ 11.7 million and $ 20.8 million of net gains during the three months ended December 31, 2024 and 2023, related to its own economic interests in the CLOs.

The aggregate principal amount due of the debt of CLOs was $ 9,015.0 million and $ 9,282.8 million at December 31, 2024 and September 30, 2024.

Note 8 – Redeemable Noncontrolling Interests

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CIPs Minority Interests Total CIPs Minority Interests Total

for the three months ended June 30,

for the three months ended December 31,

Balance at beginning of period $ 687.8 $ 634.0 $ 1,321.8 $ 580.1 $ 446.0 $ 1,026.1

Net income 30.8 12.2 43.0 10.5 16.3 26.8

Net income (loss) 38.9 10.7 49.6 ( 2.9 ) 12.4 9.5

Net subscriptions (distributions) and other 175.6 ( 3.7 ) 171.9 38.1 ( 1.1 ) 37.0

2 unchanged sentences

Balance at End of Period $ 1,466.5 $ 639.5 $ 2,106.0 $ 555.3 $ 523.2 $ 1,078.5

(in millions) 2024 2023

CIPs Minority Interests Total CIPs Minority Interests Total

for the nine months ended June 30,

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

Net income 60.6 34.7 95.3 68.5 40.0 108.5

Net subscriptions (distributions) and other 171.9 ( 42.7 ) 129.2 498.2 ( 58.9 ) 439.3

Net deconsolidations ( 113.5 ) — ( 113.5 ) ( 918.0 ) — ( 918.0 )

20.2 — 20.2 — — —

Adjustment to fair value — 108.9 108.9 — ( 105.5 ) ( 105.5 )

Balance at End of Period $ 719.3 $ 546.9 $ 1,266.2 $ 590.9 $ 459.2 $ 1,050.1

Note 9 – Nonconsolidated Variable Interest Entities

1 unchanged sentence

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

(in millions) June 30,

(in millions) December 31,

2024 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, 2024 or fiscal year 2023.

The Company did not provide financial or other support to its sponsored funds assessed as VIEs during the three months ended December 31, 2024 or fiscal year 2024.

Note 10 – Commitments and Contingencies

1 unchanged sentence

India Credit Fund Closure Matters .

During the nine months ended June 30, 2024, there were no significant changes from the disclosure in the Form 10‑K for the fiscal year ended September 30, 2023.

During the three months ended December 31, 2024, there were no significant changes from the disclosure in the Form 10‑K for the fiscal year ended September 30, 2024.

Western Asset Management Investigations.

As previously disclosed, the Company launched an internal investigation into certain trade allocations of treasury derivatives in select Western Asset Management (“WAM”) managed accounts.

WAM received notification of parallel investigations by the SEC and the U.S.

Department of Justice (“DOJ”).

WAM also received notice of an investigation into these trading activities by the CFTC.

As previously disclosed, Ken Leech, the former co-Chief Investment Officer of WAM, received a “Wells Notice” from the staff of the SEC in August 2024 and is now on administrative leave.

On November 25, 2024, the SEC filed a complaint in the United States District Court for the Southern District of New York against Mr.

Leech alleging violations of certain laws related to trade allocations.

Concurrently, the DOJ filed an indictment with the United States District Court for the Southern District of New York against Mr.

Leech for similar allegations and for false statements made to the SEC.

The Company and WAM have fully cooperated, and will continue to fully cooperate with these investigations.

Blockchain Litigation.

The Company, two of its subsidiaries, the Company’s CEO, and an individual employee (collectively the “Defendants”) are named as defendants in litigation pending in the United States District Court for the Northern District of California.

The action was filed in November 2021 by Blockchain Innovation, LLC (the “Plaintiff”) and relates to a startup entity in which the Company subsidiary Defendant previously owned all voting shares.

The Plaintiff asserts it acquired the assets of the startup entity and claims that the Defendants improperly wound down the startup and misappropriated its intellectual property.

The action asserts claims for alleged breaches of fiduciary duties, aiding and abetting breaches of fiduciary duty, breach of contract, and misappropriation of trade secrets.

The Plaintiff is seeking various forms of relief, including, among other things, compensatory damages, punitive and exemplary damages, and an injunction including to prevent the Defendants from using any allegedly misappropriated trade secrets and technology.

The trial is scheduled to begin in March 2025.

The Defendants believe the claims are without merit and are vigorously defending against the action.

The Company cannot predict the outcome of this lawsuit and is unable to estimate any reasonably possible loss or range of loss (including with respect to indemnification of the individual Defendants) that may potentially result if the Plaintiff were to prevail on any of its claims.

Other Litigation and Regulatory Matters.

Following the launch of an internal investigation focusing on certain past trade allocations of treasury derivatives in select Western Asset Management (“WAM”) managed accounts, WAM received notification of parallel investigations by the SEC and U.S.

Department of Justice.

The Company is cooperating with the investigations.

The Company is from time to time involved in other litigation relating to claims arising in the normal course of business.

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, 2024 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, 2024 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, 2024.

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, 2024.

Other Commitments and Contingencies

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 June 30, 2024, 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.

At December 31, 2024, 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 2024.

Note 11 – Stock-Based Compensation

4 unchanged sentences

Shares Weighted-

for the nine months ended June 30, 2024

for the three months ended December 31, 2024

Nonvested balance at October 1, 2024 16,594 3,314 19,908 $ 24.03

2 unchanged sentences

Forfeited/canceled ( 226 ) ( 72 ) ( 298 ) 24.95

Nonvested Balance at June 30, 2024 23,131 3,064 26,195 $ 24.40

Total unrecognized compensation expense related to nonvested stock and stock unit awards was $ 254.6 million at June 30, 2024.

Nonvested Balance at December 31, 2024 23,656 3,245 26,901 $ 22.98

Total unrecognized compensation expense related to nonvested stock and stock unit awards was $ 310.4 million at December 31, 2024.

This expense is expected to be recognized over a remaining weighted-average vesting period of 2.1 years.

2 unchanged sentences

Three Months Ended

Nine Months Ended

(in millions) 2024 2023

7 unchanged sentences

Investment and other income, net $ 10.5 $ 173.2

Net gains (losses) recognized on equity securities measured at fair value and trading debt securities that were held by the Company were $( 6.9 ) million and $ 76.0 million for the three and nine months ended June 30, 2024 and $ 17.0 million and $ 95.7 million for the three and nine months ended June 30, 2023.

Note 14 - Subsequent Event

On July 15, 2024, the Company 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.

Net gains (losses) recognized on equity securities measured at fair value and trading debt securities that were held by the Company were $( 87.2 ) million for the three months ended December 31, 2024 and $ 68.5 million for the three months ended December 31, 2023.

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