FRANKLIN TEMPLETON INC 10-Q

Item 1. Financial Statements. FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF INCOME Unaudited Three Months Ended December 31, (in millions, except per share data) 2024 2023 Operating Revenues Investment management fees $ 1,799.3 $ 1,652.2 Sales and distribution fees 375.5 296.4 Shareholder servicing fees 63.5 32.5 Other 13.3 10.0 Total operating revenues 2,251.6 1,991.1 Operating Expenses Compensation and benefits 991.4 968.3 Sales, distribution and marketing 512.3 400.8 Information systems and technology 156.0 131.0 Occupancy 75.1 66.7 Amortization of intangible assets 112.6 85.8 General, administrative and other 185.2 132.0 Total operating expenses 2,032.6 1,784.6 Operating Income 219.0 206.5 Other Income (Expenses) Investment and other income, net 10.5 173.2 Interest expense ( 23.1 ) ( 18.8 ) Investment and other income (losses) of consolidated investment products, net 114.1 ( 23.8 ) Expenses of consolidated investment products ( 7.3 ) ( 5.9 ) Other income, net 94.2 124.7 Income before taxes 313.2 331.2 Taxes on income 81.1 74.9 Net income 232.1 256.3 Less: net income (loss) attributable to Redeemable noncontrolling interests 49.6 9.5 Nonredeemable noncontrolling interests 18.9 ( 4.5 ) Net Income Attributable to Franklin Resources, Inc. $ 163.6 $ 251.3 Earnings per Share Basic $ 0.29 $ 0.50 Diluted 0.29 0.50 See Notes to Consolidated Financial Statements. 3 Table of Contents FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Unaudited (in millions) Three Months Ended December 31, 2024 2023 Net Income $ 232.1 $ 256.3 Other Comprehensive Income (Loss) Currency translation adjustments, net of tax ( 105.1 ) 59.1 Net unrealized gains (losses) on defined benefit plans, net of tax 0.3 ( 0.1 ) Total other comprehensive income (loss) ( 104.8 ) 59.0 Total comprehensive income 127.3 315.3 Less: comprehensive income (loss) attributable to Redeemable noncontrolling interests 49.6 9.5 Nonredeemable noncontrolling interests 18.9 ( 4.5 ) Comprehensive Income Attributable to Franklin Resources, Inc. $ 58.8 $ 310.3 See Notes to Consolidated Financial Statements. 4 Table of Contents FRANKLIN RESOURCES, INC. CONSOLIDATED BALANCE SHEETS Unaudited (in millions, except share and per share data) December 31, 2024 September 30, 2024 Assets Cash and cash equivalents $ 2,808.0 $ 3,309.5 Receivables 1,393.8 1,479.1 Investments (including $ 806.9 and $ 838.0 at fair value at December 31, 2024 and September 30, 2024) 2,392.5 2,338.4 Assets of consolidated investment products Cash and cash equivalents 837.1 1,099.4 Investments, at fair value 11,897.4 11,034.9 Property and equipment, net 977.7 946.4 Goodwill 6,193.9 6,211.4 Intangible assets, net 4,677.3 4,802.1 Operating lease right-of-use assets 795.1 823.3 Other 417.2 420.0 Total Assets $ 32,390.0 $ 32,464.5 Liabilities Compensation and benefits $ 1,131.8 $ 1,801.3 Accounts payable and accrued expenses 585.0 551.5 Income taxes 461.4 406.4 Debt 2,775.8 2,780.3 Liabilities of consolidated investment products Accounts payable and accrued expenses 861.2 861.3 Debt 9,055.3 9,341.5 Deferred tax liabilities 279.8 284.9 Operating lease liabilities 946.2 965.1 Other 953.8 907.4 Total liabilities 17,050.3 17,899.7 Commitments and Contingencies (Note 10) Redeemable Noncontrolling Interests 2,106.0 1,321.8 Stockholders’ Equity Preferred stock, $ 1.00 par value, 1,000,000 shares authorized; none issued — — Common stock, $ 0.10 par value, 1,000,000,000 shares authorized; 523,967,899 and 523,596,548 shares issued and outstanding at December 31, 2024 and September 30, 2024 52.4 52.4 Capital in excess of par 1,014.9 947.6 Retained earnings 11,919.1 11,927.6 Accumulated other comprehensive loss ( 524.3 ) ( 419.5 ) Total Franklin Resources, Inc. stockholders’ equity 12,462.1 12,508.1 Nonredeemable noncontrolling interests 771.6 734.9 Total stockholders’ equity 13,233.7 13,243.0 Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity $ 32,390.0 $ 32,464.5 See Notes to Consolidated Financial Statements. 5 Table of Contents FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY Unaudited Franklin Resources, Inc. Non- redeemable Non- controlling Interests Total Stockholders’ Equity Common Stock Capital in Excess of Par Value Retained Earnings Accum- ulated Other Compre- hensive Loss Stockholders’ Equity (in millions) 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 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) ( 173.6 ) ( 173.6 ) ( 173.6 ) Repurchase of common stock ( 0.3 ) — ( 5.8 ) — ( 5.8 ) ( 5.8 ) Issuance of common stock 0.7 — 21.5 21.5 21.5 Stock-based compensation 51.6 51.6 51.6 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 Franklin Resources, Inc. Non- redeemable Non- controlling Interests Total Stockholders’ Equity Common Stock Capital in Excess of Par Value Retained Earnings Accum- ulated Other Compre- hensive Loss Stockholders’ Equity (in millions) 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 (loss) 251.3 251.3 ( 4.5 ) 246.8 Other comprehensive income 59.0 59.0 59.0 Dividends declared on common stock ($ 0.31 per share) ( 167.6 ) ( 167.6 ) ( 167.6 ) Repurchase of common stock ( 2.4 ) ( 0.2 ) ( 66.6 ) 8.0 ( 58.8 ) ( 58.8 ) Issuance of common stock 1.2 0.1 26.7 26.8 26.8 Stock-based compensation 39.9 39.9 39.9 Net subscriptions and other 9.6 9.6 Adjustment to fair value of redeemable noncontrolling interests ( 65.9 ) ( 65.9 ) ( 65.9 ) 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. 6 Table of Contents FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited Three Months Ended December 31, (in millions) 2024 2023 Net Income $ 232.1 $ 256.3 Adjustments to reconcile net income to net cash used in operating activities: Stock-based compensation 73.2 66.8 Amortization of deferred sales commissions 20.2 13.4 Depreciation and other amortization 30.2 25.7 Amortization of intangible assets 112.6 85.8 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 ) Deferred income taxes 1.6 ( 57.7 ) Other 31.6 31.6 Changes in operating assets and liabilities: 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 ) 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 used in operating activities ( 145.2 ) ( 251.9 ) Purchase of investments ( 458.0 ) ( 267.4 ) Liquidation of investments 168.4 317.6 Purchase of investments by consolidated collateralized loan obligations ( 1,291.1 ) ( 794.0 ) Liquidation of investments by consolidated collateralized loan obligations 1,001.1 697.0 Additions of property and equipment, net ( 71.8 ) ( 19.5 ) Payments of deferred consideration liability — ( 60.8 ) Net deconsolidation of investment products ( 5.1 ) ( 10.5 ) Net cash used in investing activities ( 656.5 ) ( 137.6 ) [Table continued on next page] See Notes to Consolidated Financial Statements. 7 Table of Contents FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited [Table continued from previous page] Three Months Ended December 31, (in millions) 2024 2023 Dividends paid on common stock $ ( 166.2 ) $ ( 155.7 ) Repurchase of common stock ( 5.8 ) ( 58.8 ) Proceeds from repurchase agreement 38.9 — Payments on repurchase agreement ( 29.6 ) — Proceeds from debt of consolidated investment products 794.4 39.8 Payments on debt of consolidated investment products ( 714.9 ) ( 22.0 ) Payments on contingent consideration liabilities ( 0.7 ) — Noncontrolling interests 171.8 37.7 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 Decrease in cash and cash equivalents ( 763.8 ) ( 522.8 ) Cash and cash equivalents, beginning of period 4,408.9 4,402.4 Cash and Cash Equivalents, End of Period $ 3,645.1 $ 3,879.6 Supplemental Disclosure of Cash Flow Information Cash paid for income taxes $ 27.9 $ 26.8 Cash paid for interest 9.9 10.6 Cash paid for interest by consolidated investment products 202.0 161.6 See Notes to Consolidated Financial Statements. 8 Table of Contents FRANKLIN RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 (Unaudited) Note 1 – Basis of Presentation The unaudited interim financial statements of Franklin Resources, Inc. (“Franklin”) and its consolidated subsidiaries (collectively, the “Company”) included herein have been prepared in accordance with the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Under these rules and regulations, some information and footnote disclosures normally included in financial statements prepared under accounting principles generally accepted in the United States of America have been shortened or omitted. Management believes that all adjustments necessary for a fair statement of the financial position and the results of operations for the periods shown have been made. All adjustments are normal and recurring. Management also believes that the accounting estimates are appropriate, and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates, actual amounts may differ from these estimates. 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”). Note 2 – New Accounting Guidance Accounting Guidance Not Yet Adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued an amendment to the existing segment reporting guidance. The amendment requires annual and interim disclosures of significant segment expenses that are regularly provided to the chief operating decision maker by reportable segment and clarifies that single reportable segment entities are required to apply all existing segment disclosures in the guidance. The 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 The components of basic and diluted earnings per share were as follows: (in millions, except per share data) Three Months Ended December 31, 2024 2023 Net income attributable to Franklin Resources, Inc. $ 163.6 $ 251.3 Less: allocation of earnings to participating nonvested stock and stock unit awards 15.4 9.7 Net Income Available to Common Stockholders $ 148.2 $ 241.6 Weighted-average shares outstanding – basic 517.4 487.0 Dilutive effect of nonparticipating nonvested stock unit awards 0.8 0.9 Weighted-Average Shares Outstanding – Diluted 518.2 487.9 Earnings per Share Basic $ 0.29 $ 0.50 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 months ended December 31, 2024 and such awards were insignificant for the three months ended December 31, 2023. 9 Table of Contents Note 4 – Revenues Operating revenues by geographic area were as follows: (in millions) United States Luxembourg Asia-Pacific Americas Excluding United States Europe, Middle East and Africa, Excluding Luxembourg Total for the three months ended December 31, 2024 Investment management fees $ 1,361.4 $ 223.9 $ 75.8 $ 53.6 $ 84.6 $ 1,799.3 Sales and distribution fees 267.1 93.4 4.9 10.0 0.1 375.5 Shareholder servicing fees 55.1 8.0 0.4 — — 63.5 Other 13.1 — 0.2 — — 13.3 Total $ 1,696.7 $ 325.3 $ 81.3 $ 63.6 $ 84.7 $ 2,251.6 (in millions) United States Luxembourg Asia-Pacific Americas Excluding United States Europe, Middle East and Africa, Excluding Luxembourg Total for the three months ended December 31, 2023 Investment management fees $ 1,260.6 $ 191.7 $ 68.5 $ 51.5 $ 79.9 $ 1,652.2 Sales and distribution fees 205.7 76.5 4.6 9.6 — 296.4 Shareholder servicing fees 24.2 7.6 0.6 0.1 — 32.5 Other 9.0 0.5 0.2 — 0.3 10.0 Total $ 1,499.5 $ 276.3 $ 73.9 $ 61.2 $ 80.2 $ 1,991.1 Operating revenues are attributed to geographic areas based on the locations of the subsidiaries that provide the services, which may differ from the regions in which the related investment products are sold. Revenues earned from sponsored funds were 83 % of the Company’s total operating revenues for the three months ended December 31, 2024 and 2023. Note 5 – Investments The disclosures below include details of the Company’s investments, excluding those of consolidated investment products (“CIPs”). See Note 7 – Consolidated Investment Products for information related to the investments held by these entities. Investments consisted of the following: (in millions) December 31, 2024 September 30, 2024 Investments, at fair value Sponsored funds and separate accounts $ 469.1 $ 509.1 Investments related to long-term incentive plans 266.3 271.6 Other equity and debt investments 71.5 57.3 Total investments, at fair value 806.9 838.0 Investments in equity method investees 1,175.5 1,219.7 Other investments 410.1 280.7 Total $ 2,392.5 $ 2,338.4 The Company has entered into repurchase agreements with a third-party financing company for certain investments held by the Company. 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. 10 Table of Contents Note 6 – Fair Value Measurements The disclosures below include details of the Company’s fair value measurements, excluding those of CIPs. See Note 7 – Consolidated Investment Products for information related to fair value measurements of the assets and liabilities of these entities. The assets and liabilities measured at fair value on a recurring basis were as follows: (in millions) Level 1 Level 2 Level 3 NAV as a Practical Expedient Total as of December 31, 2024 Assets Investments, at fair value Sponsored funds and separate accounts $ 257.6 $ 171.3 $ 4.7 $ 35.5 $ 469.1 Investments related to long-term incentive plans 237.1 — — 29.2 266.3 Other equity and debt investments 17.5 14.0 1.6 38.4 71.5 Total Assets Measured at Fair Value $ 512.2 $ 185.3 $ 6.3 $ 103.1 $ 806.9 Liabilities Securities sold short $ 244.9 $ — $ — $ — $ 244.9 Contingent consideration liabilities — — 27.5 — 27.5 Total Liabilities Measured at Fair Value $ 244.9 $ — $ 27.5 $ — $ 272.4 (in millions) Level 1 Level 2 Level 3 NAV as a Practical Expedient Total as of September 30, 2024 Assets Investments, at fair value Sponsored funds and separate accounts $ 306.3 $ 157.4 $ 5.2 $ 40.2 $ 509.1 Investments related to long-term incentive plans 242.5 — — 29.1 271.6 Other equity and debt investments 4.1 11.1 2.6 39.5 57.3 Total Assets Measured at Fair Value $ 552.9 $ 168.5 $ 7.8 $ 108.8 $ 838.0 Liabilities Securities sold short $ 178.1 $ — $ — $ — $ 178.1 Contingent consideration liabilities — — 28.2 — 28.2 Total Liabilities Measured at Fair Value $ 178.1 $ — $ 28.2 $ — $ 206.3 11 Table of Contents 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, private real estate funds and alternatives. These investments were as follows: (in millions) December 31, 2024 September 30, 2024 Nonredeemable investments 1 Investments with known liquidation periods $ 29.7 $ 32.4 Investments with unknown liquidation periods 15.7 16.1 Redeemable investments 2 57.7 60.3 Unfunded commitments 15.6 14.0 _______________ 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 1.9 years at December 31, 2024 and September 30, 2024. 2 Investments are redeemable on a semi-monthly, monthly and quarterly basis. Financial instruments that were not measured at fair value were as follows: (in millions) Fair Value Level December 31, 2024 September 30, 2024 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Financial Assets Cash and cash equivalents 1 $ 2,808.0 $ 2,808.0 $ 3,309.5 $ 3,309.5 Other investments Time deposits 2 8.7 8.7 9.8 9.8 Equity securities 3 401.4 401.4 270.9 270.9 Financial Liability Debt 2 $ 2,775.8 $ 2,315.0 $ 2,780.3 $ 2,387.0 12 Table of Contents Note 7 – Consolidated Investment Products CIPs consist of mutual and other investment funds, limited partnerships and similar structures and CLOs, all of which are sponsored by the Company, and include both voting interest entities and variable interest entities (“VIEs”). 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) December 31, 2024 September 30, 2024 Assets Cash and cash equivalents $ 837.1 $ 1,099.4 Receivables 141.5 217.5 Investments, at fair value 11,897.4 11,034.9 Total Assets $ 12,876.0 $ 12,351.8 Liabilities Accounts payable and accrued expenses $ 861.2 $ 861.3 Debt 9,055.3 9,341.5 Other liabilities 11.2 39.9 Total liabilities 9,927.7 10,242.7 Redeemable Noncontrolling Interests 1,466.5 687.8 Stockholders ’ Equity Franklin Resources, Inc.’s interests 1,098.0 1,080.9 Nonredeemable noncontrolling interests 383.8 340.4 Total stockholders’ equity 1,481.8 1,421.3 Total Liabilities, Redeemable Noncontrolling Interests and Stockholders ’ Equity $ 12,876.0 $ 12,351.8 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. The debt holders of the CIPs have no recourse to the Company’s assets beyond the level of its direct investment; therefore the Company bears no other risks associated with the CIPs’ liabilities. Fair Value Measurements Assets of CIPs measured at fair value on a recurring basis were as follows: (in millions) Level 1 Level 2 Level 3 NAV as a Practical Expedient Total as of December 31, 2024 Assets Cash and cash equivalents of CLOs $ 519.3 $ — $ — $ — $ 519.3 Receivables of CLOs — 80.8 — — 80.8 Investments Equity and debt securities 485.5 1,501.9 573.5 124.0 2,684.9 Loans — 9,212.3 0.2 — 9,212.5 Total Assets Measured at Fair Value $ 1,004.8 $ 10,795.0 $ 573.7 $ 124.0 $ 12,497.5 13 Table of Contents (in millions) Level 1 Level 2 Level 3 NAV as a Practical Expedient Total as of September 30, 2024 Assets Cash and cash equivalents of CLOs $ 764.3 $ — $ — $ — $ 764.3 Receivables of CLOs — 149.6 — — 149.6 Investments Equity and debt securities 229.7 889.4 550.1 187.1 1,856.3 Loans — 9,178.1 0.5 — 9,178.6 Total Assets Measured at Fair Value $ 994.0 $ 10,217.1 $ 550.6 $ 187.1 $ 11,948.8 Investments for which fair value was estimated using reported NAV as a practical expedient consist of a redeemable U.S. equity fund, a redeemable global hedge fund and nonredeemable private debt funds. These investments were as follows: (in millions) December 31, 2024 September 30, 2024 Nonredeemable investments 1 Investments with unknown liquidation periods $ 53.8 $ 49.0 Redeemable investments 2 70.2 138.1 Unfunded commitments 3 42.8 42.8 _______________ 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. 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 Securities for the three months ended December 31, 2024 Balance at October 1, 2024 $ 550.1 Gains included in investment and other income (losses) of consolidated investment products, net 22.0 Purchases 9.2 Sales ( 11.6 ) 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 14 Table of Contents (in millions) Equity and Debt Securities Loans Total Level 3 Assets for the three months ended December 31, 2023 Balance at October 1, 2023 $ 584.9 $ — $ 584.9 Losses included in investment and other income (losses) of consolidated investment products, net ( 38.1 ) — ( 38.1 ) Purchases 3.8 — 3.8 Sales ( 0.2 ) — ( 0.2 ) Transfers into Level 3 1.1 0.6 1.7 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 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 %) 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 %) 52.2 Discounted cash flow Discount rate 6.3 %– 6.4 % ( 6.3 %) (in millions) as of September 30, 2024 Fair Value Valuation Technique Significant Unobservable Inputs Range (Weighted Average 1 ) 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 %) 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 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). 15 Table of Contents Financial instruments of CIPs that were not measured at fair value were as follows: (in millions) Fair Value Level December 31, 2024 September 30, 2024 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Financial Asset Cash and cash equivalents 1 $ 317.8 $ 317.8 $ 335.1 $ 335.1 Financial Liabilities Debt of CLOs 1 2 or 3 $ 9,055.3 $ 8,858.1 $ 9,341.5 $ 9,167.3 __________________ 1 Substantially all was Level 2. Debt 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 CLOs at December 31, 2024 were as follows: (in millions) for the fiscal years ending September 30, Amount 2025 (remainder of year) $ 120.1 2026 — 2027 — 2028 — 2029 — Thereafter 8,935.2 Total $ 9,055.3 Collateralized Loan Obligations The unpaid principal balance and fair value of the investments of CLOs were as follows: (in millions) December 31, 2024 September 30, 2024 Unpaid principal balance $ 9,420.8 $ 9,371.9 Difference between unpaid principal balance and fair value ( 24.1 ) ( 19.8 ) Fair Value $ 9,396.7 $ 9,352.1 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. 16 Table of Contents Note 8 – Redeemable Noncontrolling Interests Changes in redeemable noncontrolling interests were as follows: (in millions) 2024 2023 CIPs Minority Interests Total CIPs Minority Interests Total 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 (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 Net consolidations (deconsolidations) 564.2 — 564.2 ( 60.0 ) — ( 60.0 ) Adjustment to fair value — ( 1.5 ) ( 1.5 ) — 65.9 65.9 Balance at End of Period $ 1,466.5 $ 639.5 $ 2,106.0 $ 555.3 $ 523.2 $ 1,078.5 Note 9 – Nonconsolidated Variable Interest Entities VIEs for which the Company is not the primary beneficiary consist of sponsored funds and other investment products in which the Company has an equity ownership interest. The Company’s maximum exposure to loss from these VIEs consists of equity investments, investment management and other fee receivables as follows: (in millions) December 31, 2024 September 30, 2024 Investments $ 1,106.8 $ 1,074.4 Receivables 219.8 226.0 Total $ 1,326.6 $ 1,300.4 While the Company has no legal or contractual obligation to do so, it routinely makes cash investments in the course of launching sponsored funds. As it has done in the past, the Company also may voluntarily elect to provide its sponsored funds with additional direct or indirect financial support based on its business objectives. The Company did not provide financial or other support to its sponsored funds assessed as VIEs during the three months ended December 31, 2024 or fiscal year 2024. Note 10 – Commitments and Contingencies Legal Proceedings India Credit Fund Closure Matters . 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. 17 Table of Contents 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. 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 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 In the ordinary course of business or in connection with certain acquisition agreements, the Company enters into contracts that provide for indemnifications by the Company in certain circumstances. In addition, certain Company entities guarantee certain financial and performance-related obligations of various Franklin subsidiaries. The Company is also subject to certain legal requirements and agreements providing for indemnifications of directors, officers and personnel against liabilities and expenses they may incur under certain circumstances in connection with their service. The terms of these indemnities and guarantees vary pursuant to applicable facts and circumstances, and from agreement to agreement. Future payments for claims against the Company under these indemnities or guarantees could negatively impact the Company’s financial condition. In management’s opinion, no material loss was deemed probable or reasonably possible pursuant to such indemnification agreements and/or guarantees as of December 31, 2024. Other Commitments and Contingencies 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 Stock and stock unit award activity was as follows: (shares in thousands) Time-Based Shares Performance- Based Shares Total Shares Weighted- Average Grant-Date Fair Value for the three months ended December 31, 2024 Nonvested balance at October 1, 2024 16,594 3,314 19,908 $ 24.03 Granted 7,812 169 7,981 20.73 Vested ( 524 ) ( 166 ) ( 690 ) 26.34 Forfeited/canceled ( 226 ) ( 72 ) ( 298 ) 24.95 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. 18 Table of Contents Note 12 – Investment and Other Income, Net Investment and other income, net consisted of the following: Three Months Ended December 31, (in millions) 2024 2023 Dividend and interest income $ 43.1 $ 54.8 Gains (losses) on investments, net ( 57.1 ) 60.1 Income (losses) from investments in equity method investees ( 7.6 ) 56.9 Gains (losses) on derivatives, net 6.6 ( 8.2 ) Rental income 11.2 10.8 Foreign currency exchange gains (losses), net 14.5 ( 7.4 ) Other, net ( 0.2 ) 6.2 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 $( 87.2 ) million for the three months ended December 31, 2024 and $ 68.5 million for the three months ended December 31, 2023. 19 Table of Contents