What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-01 compared with 2025-05-02 · 148 added, 148 removed, 459 unchanged (39% of the section changed)

31 unchanged sentences

These arrangements could change in the future.

During our second fiscal quarter, global equity markets provided mixed results.

markets declined, reflecting uncertainty regarding trade tariffs and other U.S.

economic policies, while European and emerging markets produced gains.

The S&P 500 Index and MSCI World Index decreased 4.3% and 1.7% for the quarter and 2.0%,and 1.8% for the fiscal year to date.

Global bond markets improved during the quarter, as a result of weaker economic conditions.

The Bloomberg Global Aggregate Index increased 2.6% during the quarter and decreased 2.6% for the fiscal year to date.

Our total AUM at March 31, 2025 was $1,540.6 billion, 8% lower than at September 30, 2024 and 6% lower than at March 31, 2024.

Monthly average AUM (“average AUM”) for the three and six months ended March 31, 2025 decreased 1% and increased 8% from the same periods in the prior fiscal year.

During our third fiscal quarter, U.S.

and global equity markets rebounded, despite significant volatility driven by uncertainty regarding U.S.

trade tariffs.

The S&P 500 Index and MSCI World Index increased 10.9% and 11.6% for the quarter and 8.8% and 9.7% for the fiscal year to date.

Global bond markets provided positive results and the Bloomberg Global Aggregate Index increased 4.5% during the quarter and 1.8% for the fiscal year to date.

Our total AUM at June 30, 2025 was $1,611.8 billion, 4% lower than at September 30, 2024 and 2% lower than at June 30, 2024.

Monthly average AUM (“average AUM”) for both the three and nine months ended June 30, 2025 decreased 4% from the same periods in the prior fiscal year.

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

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Three Months Ended

Change Six Months Ended

Change Nine Months Ended

(in millions, except per share data) 2025 2024 2025 2024

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AUM by asset class was as follows:

(in billions) March 31,

2025 March 31,

(in billions) June 30,

2025 June 30,

$ 656.6 $ 595.0 10 %

7 unchanged sentences

Change Mix of Average AUM

for the three months ended March 31, 2025 2024 2025 2024

for the three months ended June 30, 2025 2024 2025 2024

$ 620.5 $ 584.0 6 % 40 % 36 %

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Change Mix of Average AUM

for the six months ended March 31, 2025 2024 2025 2024

for the nine months ended June 30, 2025 2024 2025 2024

$ 626.0 $ 521.6 20 % 39 % 34 %

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_______________

1 Average AUM is calculated as the average of the month-end AUM for the trailing seven months.

1 Average AUM is calculated as the average of the month-end AUM for the trailing ten months.

Components of the change in AUM are shown below.

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(in billions) Three Months Ended

Six Months Ended

Nine Months Ended

Beginning AUM $ 1,540.6 $ 1,644.7 $ 1,678.6 $ 1,374.2

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_______________

1 Cash management at March 31, 2025 includes $6.3 billion of AUM and $3.7 billion of net inflows related to two money market mutual fund share classes previously closed to third-party investors.

1 On March 31, 2025, cash management AUM and net flows were updated to include $6.3 billion of AUM and $3.7 billion of net inflows related to two money market mutual fund share classes previously closed to third-party investors.

Components of the change in AUM by asset class were as follows:

2 unchanged sentences

for the three months ended

March 31, 2025

AUM at January 1, 2025 $ 620.0 $ 469.5 $ 248.8 $ 174.0 $ 63.4 $ 1,575.7

June 30, 2025

AUM at April 1, 2025 $ 598.1 $ 446.0 $ 251.8 $ 175.8 $ 68.9 $ 1,540.6

Long-term inflows 32.0 28.2 5.6 9.8 — 75.6

3 unchanged sentences

Total net flows (0.6) (13.0) 2.5 1.8 2.7 (6.6)

Net market change, distributions and other

— (0.1) (0.1) — — (0.2)

AUM at March 31, 2025 $ 598.1 $ 446.0 $ 251.8 $ 175.8 $ 68.9 $ 1,540.6

Net market change, distributions and other

59.1 8.8 4.2 5.6 0.3 78.0

1 Cash management at March 31, 2025 includes $6.3 billion of AUM and $3.7 billion of net inflows related to two money market mutual fund share classes previously closed to third-party investors.

AUM decreased $35.1 billion, or 2%, during the three months ended March 31, 2025 due to $26.2 billion of long-term net outflows, inclusive of $33.6 billion of long-term net outflows at WAM and $3.3 billion of long-term reinvested distributions, and the negative impact of $11.6 billion of net market change, distributions and other, partially offset by $2.7 billion of cash management net inflows.

Net market change, distributions and other primarily consists of $8.2 billion of distributions, and $8.2 billion of market depreciation, partially offset by a $4.8 billion increase from foreign exchange revaluation.

The market depreciation occurred primarily in the equity asset class partially offset by appreciation in the fixed income asset class.

AUM at June 30, 2025 $ 656.6 $ 441.7 $ 258.4 $ 183.2 $ 71.9 $ 1,611.8

AUM increased $71.2 billion, or 5%, during the three months ended June 30, 2025 due to the positive impact of $78.0 billion of net market change, distributions and other, and $2.7 billion of cash management net inflows, partially offset by $9.3 billion of long-term net outflows, inclusive of $17.1 billion of long-term net outflows at WAM and $3.9 billion of long-term reinvested distributions, and $0.2 billion from the disposition of funds.

Net market change, distributions and other primarily consists of $76.7 billion of market appreciation, and a $10.9 billion increase from foreign exchange revaluation, partially offset by $9.6 billion of distributions.

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

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

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

dollar compared to the Euro and Japanese Yen.

Long-term inflows increased 2% to $86.8 billion, compared to the prior year period, driven by higher inflows in alternative private funds, equity, alternative and multi-asset open end funds, and equity retail separately managed accounts, exchange traded funds, institutional separate accounts and sub-advised mutual funds, partially offset by decreased inflows across multiple fixed income vehicles at WAM.

Long-term outflows increased 45% to $113.0 billion, substantially due to higher outflows across multiple fixed income vehicles at WAM, and to a lesser extent, higher outflows from equity sub-advised and open end funds, institutional separate accounts and retail separately managed accounts.

WAM outflows have increased significantly following investment performance issues and the announcement of ongoing regulatory investigations.

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

Long-term inflows decreased 9% to $75.6 billion, compared to the prior year period, driven by lower inflows for WAM institutional separate accounts, partially offset by by higher inflows in alternative and equity private funds and equity exchange traded funds.

Long-term outflows decreased 1% to $84.9 billion, due to lower outflows for fixed income and equity institutional separate accounts, equity separately managed accounts, and equity and multi-asset open end funds, partially offset by higher outflows for multiple fixed income vehicles, equity sub-advised mutual funds and exchange traded funds, alternative private funds, and multi-asset separately managed accounts.

(in billions) Equity

2 unchanged sentences

for the three months ended

March 31, 2024

AUM at January 1, 2024 $ 467.5 $ 511.7 $ 256.2 $ 154.6 $ 65.5 $ 1,455.5

June 30, 2024

AUM at April 1, 2024 $ 592.7 $ 571.4 $ 255.5 $ 163.4 $ 61.7 $ 1,644.7

Long-term inflows 32.0 37.4 3.4 9.9 — 82.7

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Total net flows (1.6) (4.8) 1.4 1.8 3.0 (0.2)

81.3 59.3 0.7 5.8 1.2 148.3

Net market change, distributions and other

3.9 (2.1) (2.4) 2.9 (0.2) 2.1

AUM at March 31, 2024 $ 592.7 $ 571.4 $ 255.5 $ 163.4 $ 61.7 $ 1,644.7

AUM at June 30, 2024 $ 595.0 $ 564.5 $ 254.5 $ 168.1 $ 64.5 $ 1,646.6

(in billions) Equity

Fixed Income Alternative Multi-Asset Cash

for the six months ended

March 31, 2025

for the nine months ended

June 30, 2025

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

4 unchanged sentences

Total net flows 6.5 (110.2) 9.7 8.5 5.4 (80.1)

— (0.1) (0.1) — — (0.2)

Net market change, distributions and other

18.0 (4.4) (1.1) (1.5) 2.5 13.5

AUM at March 31, 2025 $ 598.1 $ 446.0 $ 251.8 $ 175.8 $ 68.9 $ 1,540.6

AUM at June 30, 2025 $ 656.6 $ 441.7 $ 258.4 $ 183.2 $ 71.9 $ 1,611.8

_______________

1 Cash management at March 31, 2025 includes $6.3 billion of AUM and $3.7 billion of net inflows related to two money market mutual fund share classes previously closed to third-party investors.

AUM decreased $138.0 billion, or 8%, during the six months ended March 31, 2025 due to $76.2 billion of long-term net outflows, inclusive of $101.5 billion of long-term net outflows at WAM and $23.4 billion of long-term reinvested distributions, and the negative impact of $64.5 billion of net market change, distributions and other, partially offset by $2.7 billion of cash management net inflows.

Net market change, distributions and other primarily consists of $38.3 billion of distributions, primarily from the equity asset class, $16.7 billion of market depreciation and a $9.5 billion decrease from foreign exchange revaluation.

The market depreciation occurred primarily in the equity asset class.

AUM decreased $66.8 billion, or 4%, during the nine months ended June 30, 2025 due to $85.5 billion of long-term net outflows, inclusive of $118.6 billion of long-term net outflows at WAM and $27.3 billion of long-term reinvested distributions, and $0.2 billion from the disposition of funds, partially offset by the positive impact of $13.5 billion of net market change, distributions and other, and $5.4 billion of cash management net inflows.

Net market change, distributions and other primarily consists of $60.0 billion of market appreciation and a $1.4 billion increase from foreign exchange revaluation, partially offset by $47.9 billion of distributions, primarily from the equity asset class.

The market appreciation occurred in all asset classes, 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 Australian dollar, Canadian dollar, Euro and Japanese Yen.

Long-term inflows increased 19% to $183.7 billion, as compared to the prior year period, driven by higher inflows in equity, multi-asset, and alternative perpetual vehicles, and equity sub-advised mutual funds, retail separately managed accounts, institutional separate accounts and exchange traded funds, partially offset by lower inflows across multiple fixed income vehicles at WAM.

Long-term outflows increased 71% to $259.9 billion, substantially due to higher outflows across multiple fixed income vehicles at WAM, and to a lesser extent, higher outflows from equity open end funds, sub-advised mutual funds, institutional separate accounts, and retail separately managed accounts.

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

dollar compared to the Euro, partially offset by a stronger U.S.

dollar compared to the Australian Dollar, Canadian Dollar and Indian Rupee.

Long-term inflows increased 10% to $259.3 billion, as compared to the prior year period, driven by higher inflows in equity, alternative, and multi-asset open end funds, equity sub-advised mutual funds, equity separately managed accounts and exchange traded funds, and equity and alternative private funds, partially offset by lower inflows for WAM institutional separate accounts and sub-advised mutual funds.

Long-term outflows increased 45% to $344.8 billion, substantially due to higher outflows across multiple fixed income vehicles at WAM, and slightly higher outflows in equity open end funds, sub-advised mutual funds, institutional separate accounts, and retail separately managed accounts.

(in billions) Equity

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Management Total

for the six months ended

March 31, 2024

for the nine months ended

June 30, 2024

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

7 unchanged sentences

90.0 27.0 (6.2) 12.1 (0.4) 122.5

AUM at March 31, 2024 $ 592.7 $ 571.4 $ 255.5 $ 163.4 $ 61.7 $ 1,644.7

AUM at June 30, 2024 $ 595.0 $ 564.5 $ 254.5 $ 168.1 $ 64.5 $ 1,646.6

AUM by sales region was as follows:

(in billions) March 31,

2025 March 31,

(in billions) June 30,

2025 June 30,

United States $ 1,114.9 $ 1,155.0 (3 %)

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Exceeding Benchmark

as of March 31, 2025 1-Year 3-Year 5-Year 10-Year 1-Year 3-Year 5-Year 10-Year

as of June 30, 2025 1-Year 3-Year 5-Year 10-Year 1-Year 3-Year 5-Year 10-Year

Equity 41 % 63 % 51 % 59 % 31 % 45 % 35 % 44 %

3 unchanged sentences

1 Mutual fund performance is sourced from Morningstar and measures the percent of ranked AUM in the top two quartiles versus peers.

Total mutual fund AUM measured for the 1-, 3-, 5- and 10-year periods represents 39%, 38%, 38% and 35% of our total AUM as of March 31, 2025.

Total mutual fund AUM measured for the 1-, 3-, 5- and 10-year periods represents 39%, 39%, 38% and 36% of our total AUM as of June 30, 2025.

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

The benchmark comparisons are based on each account’s/composite’s (strategy composites may include retail separately managed accounts and mutual fund assets managed as part of the same strategy) return as compared to a market index that has been selected to be generally consistent with the asset class of the account/composite.

Total strategy composite AUM measured for the 1-, 3-, 5- and 10-year periods represents 55%, 55%, 54% and 49% of our total AUM as of March 31, 2025.

Total strategy composite AUM measured for the 1-, 3-, 5- and 10-year periods represents 56%, 55%, 55% and 50% of our total AUM as of June 30, 2025.

3 Total mutual fund AUM includes performance of our alternative and multi-asset funds, and total strategy composite AUM includes performance of our alternative composites.

Alternative and multi-asset AUM represent 16% and 11% of our total AUM at March 31, 2025.

Alternative and multi-asset AUM represent 16% and 11% of our total AUM at June 30, 2025.

Mutual fund performance data includes U.S.

9 unchanged sentences

(in millions) Three Months Ended

Change Six Months Ended

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2025 2024 2025 2024

5 unchanged sentences

Investment Management Fees

Investment management fees decreased $40.3 million for the three months ended March 31, 2025 primarily due to a 1% decrease in average AUM and a decrease in performance fees.

The decrease in average AUM for the three months ended March 31, 2025 primarily occurred in the fixed income asset class, substantially offset by increases in the equity and multi-asset asset classes.

Investment management fees increased $106.8 million for the six months ended March 31, 2025, primarily due to one additional quarter of revenue earned by Putnam, which was acquired on January 1, 2024, and an 8% increased in average AUM, partially offset by a decrease in performance fees and catch-up fees recognized in the prior year at the closing of fundraising rounds in a secondary private equity fund, which ended in January 2024.

The increase in average AUM for the six months ended March 31, 2025 primarily occurred in the equity and multi-asset asset classes, partially offset by a decrease in the fixed income asset class.

Our effective investment management fee rate excluding performance fees (annualized investment management fees excluding performance fees divided by average AUM) was 41.4 basis points for both the three months ended March 31, 2025 and 2024, and decreased to 40.7 basis points for the six months ended March 31, 2025 from 41.7 basis points for the same period in the prior fiscal year.

The fee rate remained flat for the three month period and decreased for the six month period primarily due to higher AUM in lower fee equity products, including those from the acquisition of Putnam, partially offset by a reduction in lower fee fixed income AUM at WAM.

The decrease for the six month period was also due to catch-up fees recognized in the prior year at the closing of fundraising rounds in a secondary private equity fund,

Performance fees decreased to $71.9 million and $213.5 million for the three and six months ended March 31, 2025 from $85.2 million and $251.6 million for the same periods in the prior fiscal year due to lower performance fees earned by certain of our alternative specialist investment managers.

Investment management fees decreased $49.1 million for the three months ended June 30, 2025 primarily due to a 4% decrease in average AUM, partially offset by a slight increase in performance fees.

The decrease in average AUM for the three months ended June 30, 2025 primarily occurred in the fixed income asset class, partially offset by increases in the equity and multi-asset asset classes.

Investment management fees increased $57.7 million for the nine months ended June 30, 2025 primarily due to one additional quarter of revenue earned by Putnam, which was acquired on January 1, 2024, and an increase in average equity and multi-asset AUM, partially offset by the impact of WAM outflows, a decrease in performance fees and catch-up fees recognized in the prior year at the closing of fundraising rounds in a secondary private equity fund, which ended in January 2024.

Our effective investment management fee rate excluding performance fees (annualized investment management fees excluding performance fees divided by average AUM) was 40.5 basis points for both the three and nine months ended June 30, 2025, as compared to 40.2 and 41.4 basis points for the same period in the prior fiscal year.

The increase in the fee rate for the three month period was primarily due to the impact of outflows at WAM, partially offset by significant intra-quarter daily volatility in the current year period that caused an unusual dispersion between simple monthly average AUM and daily average AUM, while the decrease for the nine month period was primarily due to higher AUM in lower fee equity products and catch-up fees recognized in the prior year at the closing of fundraising rounds in a secondary private equity fund, partially offset by the impact of outflows at WAM.

Performance fees were $60.6 million and $274.1 million for the three and nine months ended June 30, 2025 as compared to $56.6 million and $308.2 million for the same periods in the prior fiscal year.

The increase for the three month period and decrease for the nine month period were primarily due to changes in the amount of performance fees earned by our alternative specialist investment managers.

Sales and Distribution Fees

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2 unchanged sentences

Sales and Distribution Fees $ 351.9 $ 358.3 (2 %) $ 1,092.3 $ 1,013.0 8 %

Asset-based distribution fees increased $5.7 million and $68.8 million for the three and six months ended March 31, 2025 primarily due to increases of 9% and 13% in the related average AUM, partially offset by a higher mix of lower fee assets.

The six months ended March 31, 2025 also includes one additional quarter of revenue related to Putnam products.

Sales-based fees increased $0.9 million for the three months ended March 31, 2025, as commissionable sales remained relatively flat, and increased $16.9 million for the six months ended March 31, 2025 primarily due to an increase of 13% in commissionable sales and one additional quarter of sales-based revenue related to Putnam products.

Asset-based distribution fees decreased $0.7 million for the three months ended June 30, 2025, primarily due to a higher mix of lower fee assets, partially offset by a slight increase in the related average AUM.

Asset-based distribution fees increased $68.1 million for the nine months ended June 30, 2025 primarily due to an increase of 6% in the related average AUM and one additional quarter of asset-based revenue related to Putnam products, partially offset by a higher mix of lower fee assets.

Sales-based fees decreased $5.7 million for the three months ended June 30, 2025, primarily due to a decrease of 12% in commissionable sales, and increased $11.2 million for the nine months ended June 30, 2025, primarily due to an increase of 2% in commissionable sales and one additional quarter of sales-based revenue related to Putnam products.

Shareholder Servicing Fees

Shareholder servicing fees decreased $6.1 million for the three months ended March 31, 2025, primarily due to lower margin-based fees, partially offset by higher AUM-based fees driven by higher levels of related AUM, and increased $24.9 million for the six months ended March 31, 2025 primarily due to one additional quarter of fees earned by Putnam, partially offset by lower margin-based fees.

Shareholder servicing fees decreased $1.9 million for the three months ended June 30, 2025, primarily due to lower levels of related AUM and increased $23.0 million for the nine months ended June 30, 2025 primarily due to one additional quarter of fees earned by Putnam, partially offset by lower margin-based fees.

OPERATING EXPENSES

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(in millions) 2025 2024 2025 2024

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Impairment of intangible assets

24.4 — 100 % 24.4 — 100 %

— — NM 24.4 — NM

General, administrative and other 183.7 180.1 2 % 551.7 507.2 9 %

Total Operating Expenses $ 1,909.9 $ 1,900.4 0 % $ 5,908.3 $ 5,708.5 4 %

The acquisition of Putnam on January 1, 2024 had a significant impact on operating expenses in the six months ended March 31, 2025, however, due to the ongoing integration of the combined businesses, it is not practicable to separately quantify the impact of the legacy Putnam business.

The acquisition of Putnam on January 1, 2024 had a significant impact on operating expenses in the nine months ended June 30, 2025, 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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(in millions) 2025 2024 2025 2024

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Acquisition-related performance fee pass through 1

16.2 14.4 13 % 85.3 87.0 (2 %)

2.1 — NM 87.4 87.0 0 %

41.1 28.8 43 % 90.8 131.2 (31 %)

5 unchanged sentences

and special termination benefits.

Salaries, wages and benefits decreased $7.9 million for the three months ended March 31, 2025, primarily due to the impact of headcount reductions, which were partially offset by annual salary increases.

Salaries, wages and benefits increased $44.8 million for the six months ended March 31, 2025, primarily due to annual salary increases and one additional quarter of expenses related to Putnam.

Incentive compensation decreased $3.5 million for the three months ended March 31, 2025, primarily due to lower incentive compensation at certain specialist investment managers and a decrease in expense for deferred compensation awards, partially offset by higher sales-related commissions.

Incentive compensation increased $17.6 million for the six months ended March 31, 2025, primarily due to one additional quarter of expenses related to Putnam, higher annual acceleration of deferred compensation expense related to retirement-eligible employees, and higher sales-related commissions, partially offset by lower incentive compensation at certain specialist investment managers and lower ongoing deferred compensation expense.

Acquisition-related retention expenses decreased $69.8 million and $93.1 million for the three and six months ended March 31, 2025, primarily due to lower costs associated with the acquisition of Putnam, and lower compensation associated with performance-based and time-based awards.

Other compensation and benefits decreased $28.8 million and $52.7 million for the three and six months ended March 31, 2025, primarily due to a decrease in special termination benefits and lower net market gains on investments related to our deferred compensation plans.

Special termination benefits decreased $23.0 million and $29.3 million for the three and six months ended March 31, 2025 primarily due to the higher costs associated with workforce optimization initiatives in the prior year.

At March 31, 2025, our global workforce decreased to approximately 10,000 employees from approximately 10,100 at March 31, 2024.

Salaries, wages and benefits increased $3.2 million for the three months ended June 30, 2025, primarily due to annual salary increases and higher employee insurance costs, partially offset by the impact of headcount reductions.

Salaries, wages and benefits increased $48.0 million for the nine months ended June 30, 2025, primarily due to annual salary increases and one additional quarter of expenses related to Putnam, partially offset by the impact of headcount reductions.

Incentive compensation decreased $14.5 million for the three months ended June 30, 2025, primarily due to lower incentive compensation at certain specialist investment managers, partially offset by an increase in expense for deferred compensation awards.

Incentive compensation increased $3.1 million for the nine months ended June 30, 2025, primarily due to one additional quarter of expenses related to Putnam, higher sales-related commissions, and higher annual acceleration of deferred compensation expense related to retirement-eligible employees, partially offset by lower incentive compensation at certain specialist investment managers and lower ongoing deferred compensation expense.

Acquisition-related retention expenses increased $4.2 million for the three months ended June 30, 2025, primarily due to higher compensation associated with performance-based and time-based awards, and decreased $88.9 million for the nine months ended June 30, 2025, primarily due to lower compensation associated with time-based and performance-based awards, and lower costs associated with the acquisition of Putnam.

Other compensation and benefits increased $12.3 million for the three months ended June 30, 2025, primarily due to an increase in special termination benefits and higher compensation expense related to minority interests;

and decreased $40.4 million for the nine months ended June 30, 2025, primarily due to lower net market gains on investments related to our deferred compensation plans and a decrease in special termination benefits.

Special termination benefits increased $10.2 million for the three months ended June 30, 2025 primarily due to higher costs associated with workforce optimization initiatives in the current year period and decreased $19.1 million for the nine months ended June 30, 2025 primarily due to higher costs associated with such initiatives in the prior year period.

At June 30, 2025, our global workforce decreased to approximately 10,100 employees from approximately 10,300 at June 30, 2024.

Sales, Distribution and Marketing

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Sales, Distribution and Marketing $ 480.7 $ 481.1 0 % $ 1,491.1 $ 1,366.2 9 %

Asset-based expenses increased $5.7 million and $93.4 million for the three and six months ended March 31, 2025 primarily due to increases of 3% and 7% in the related average AUM, and higher marketing support fees, partially offset by a higher mix of lower-fee assets.

The six months ended March 31, 2025 also includes one additional quarter of expenses related to Putnam products.

Asset-based expenses were essentially flat for the three months ended June 30, 2025 and increased $93.1 million for the nine months ended June 30, 2025.

The increase for the nine month period was primarily due to one additional quarter of expenses related to Putnam products, an increase of 4% in the related average AUM 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 $4.2 million for the three months ended March 31, 2025, primarily due to higher marketing support expenses, and increased $21.2 million for the six months ended March 31, 2025 primarily due to increases of 13% in commissionable sales and one additional quarter of expenses related to Putnam products.

Occupancy expenses decreased $6.9 million and increased $1.5 million for the three and six months ended March 31, 2025.

Both the three and six month periods reflect lower costs due to the consolidation of office space in New York City, which were offset by one additional quarter of expenses incurred by Putnam in the six month period.

Sales-based expenses decreased $5.0 million for the three months ended June 30, 2025, primarily due to a decrease of 12% in commissionable sales, and increased $16.2 million for the nine months ended June 30, 2025 primarily due to one additional quarter of expenses related to Putnam products, higher marketing support fees and an increase of 2% in commissionable sales.

Occupancy expenses decreased $35.3 million and $33.8 million for the three and nine months ended June 30, 2025.

Both the three and nine month periods in the prior year included the impairment of the right of use asset related to office space vacated in connection with the consolidation of our office space in New York City, and the current year three and nine month periods reflect lower costs due to the office space consolidation.

The decrease for the nine month period was partially offset by one additional quarter of expenses incurred by Putnam.

Information Systems and Technology

Information systems and technology expenses increased $3.6 million for the three months ended March 31, 2025, primarily due to higher technology consulting and software costs, partially offset by lower costs for external data services, and increased $28.6 million for the six months ended March 31, 2025, primarily due to one additional quarter of expenses incurred by Putnam, and higher technology consulting and software costs, partially offset by lower costs for hardware purchases and maintenance.

Information systems and technology expenses increased $6.1 million for the three months ended June 30, 2025, primarily due to higher costs for technology consulting and external data services, and increased $34.7 million for the nine months ended June 30, 2025, primarily due to one additional quarter of expenses incurred by Putnam, and higher technology consulting and software costs, partially offset by lower costs for hardware maintenance and purchases.

Amortization of Intangible Assets

Amortization of intangible assets increased $27.9 million and $54.7 million for the three and six months ended March 31, 2025, primarily due to a reduction in the remaining useful life of definite-lived intangible assets related to WAM.

Amortization of intangible assets increased $28.2 million and $82.9 million for the three and nine months ended June 30, 2025, primarily due to a reduction in the remaining useful life of definite-lived intangible assets related to WAM.

Impairment of intangible assets

During the three months ended March 31, 2025, we recognized an impairment charge of $ 24.4 million related to certain indefinite-lived intangible assets for acquired mutual fund investment management contracts.

During the nine months ended June 30, 2025, we recognized an impairment charge of $ 24.4 million related to certain indefinite-lived intangible assets for acquired mutual fund investment management contracts.

See Critical Accounting Policies for additional information.

General, Administrative and Other

General, administrative and other operating expenses decreased $12.3 million and increased $40.9 million for the three and six months ended March 31, 2025.

The decrease for the three months ended March 31, 2025 was primarily due to a $19.5 million decrease in acquisition-related costs, primarily related to the acquisition of Putnam in the prior year quarter, and a $10.7 million decrease in legal and other professional fees, inclusive of $17.6 million of insurance recoveries, partially offset by increases in advertising and promotion costs and placement fees.

The increase for the six months ended March 31, 2025 was primarily due to one additional quarter of expenses incurred by Putnam, an $11.7 million increase in advertising and promotion costs, an $8.1 million increase in legal and other professional fees, net of $27.6 million of insurance recoveries, and an increase in fund-related expenses, partially offset by a $19.1 million decrease in acquisition-related costs, primarily related to the acquisition of Putnam.

General, administrative and other operating expenses increased $3.6 million and increased $44.5 million for the three and nine months ended June 30, 2025.

The increase for the three months ended June 30, 2025 was primarily due to increases of $4.8 million in placement and platform fees, $4.0 million in advertising and promotion costs, and $2.3 million in fund-related expenses, and a $2.9 million net credit recognized in the prior year to reduce the fair value of contingent consideration liabilities.

These increases were partially offset by a $10.3 million decrease in legal and other professional fees, inclusive of $18.0 million of insurance recoveries.

The increase for the nine months ended June 30, 2025 was primarily due to one additional quarter of expenses incurred by Putnam, and increases of $15.7 million in advertising and promotion costs, $8.0 million in placement and platform fees, and $6.4 million in fund-related expenses.

These increases were partially offset by a $15.8 million decrease in acquisition-related costs, primarily related to the acquisition of Putnam, and a $2.7 million decrease in legal and other professional fees, inclusive of $45.6 million of insurance recoveries.

OTHER INCOME (EXPENSES)

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Three Months Ended

Change Six Months Ended

Change Nine Months Ended

(in millions) 2025 2024 2025 2024

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$ 38.9 $ 39.8 (2 %) $ 101.4 $ 132.6 (24 %)

Gains (losses) on investments, net 46.8 (18.5) NM (10.3) 41.6 NM

Gains (losses) on investments, net (31.4) (24.3) 29 % (41.7) 17.3 NM

Income from investments in equity method investees 23.0 41.0 (44 %) 38.5 122.3 (69 %)

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Interest expense (25.8) (25.7) 0 % (69.7) (72.2) (3 %)

Investment and other income (losses) of consolidated investment products, net (164.7) 89.9 NM (50.6) 66.1 NM

Investment and other income (losses) of consolidated investment products, net 35.9 37.6 (5 %) (14.7) 103.7 NM

Expenses of consolidated investment products (11.0) (8.8) 25 % (29.8) (20.6) 45 %

Other Income (Expenses), Net $ (102.9) $ 108.8 NM $ (8.7) $ 233.5 NM

Dividend and interest income decreased $18.6 million and $30.3 million for the three and six months ended March 31, 2025, primarily due to lower yields and lower average balances.

Investments held by the Company generated net gains of $46.8 million, as compared to net losses of $18.5 million for the three months ended March 31, 2025 and 2024.

The net gains in the three months ended March 31, 2025 were primarily from investments in nonconsolidated funds and separate accounts, partially offset by net losses on investments measured at cost adjusted for observable price changes, while the net losses in the prior year period were primarily from investments in nonconsolidated funds and separate accounts, partially offset by net gains from assets invested for deferred compensation plans.

Investments held by the Company generated net losses of $10.3 million, as compared to net gains of $41.6 million for the six months ended March 31, 2025 and 2024.

The net losses in the six months ended March 31, 2025 were primarily from net losses on investments measured at cost adjusted for observable price changes, partially offset by net gains from investments in nonconsolidated funds and separate accounts, while the net gains in the prior year were primarily from assets invested for deferred compensation plans and investments in nonconsolidated funds and separate accounts, partially offset by net losses on investments measured at cost adjusted for observable price changes.

Equity method investees generated income of $23.1 million and $15.5 million for the three and six months ended March 31, 2025, as compared to income of $24.4 million and $81.3 million in the prior year, largely related to various global alternative funds and, in the prior year periods, equity funds.

Net foreign currency exchange losses increased $6.2 million for the three months ended March 31, 2025, primarily due to the U.S.

dollar weakening more in the current year period against the Euro and British Pound, which resulted in higher net foreign exchange losses on cash and cash equivalents denominated in U.S.

dollars held by our European subsidiaries.

foreign currency exchange gains were $7.0 million for the six months ended March 31, 2025, as compared to net losses of $8.7 million in the prior year.

dollar strengthened in the six month period against the Euro and British Pound, which resulted in net foreign exchange gains on cash and cash equivalents denominated in U.S.

dollars held by our European subsidiaries, as compared to net losses in the prior year.

Interest expense decreased $6.9 million for the three months ended March 31, 2025 primarily due to lower accretion on Lexington deferred purchase consideration and lower interest recognized on tax reserves, and $2.6 million for the six months ended March 31, 2025 primarily due to lower accretion on Lexington deferred purchase consideration and a net decrease in interest on debt, partially offset by an increase in interest recognized on tax reserves.

Investments held by consolidated investment products (“CIPs”) generated losses of $164.7 million and $50.6 million in the three and six months ended March 31, 2025, largely related to losses on holdings of various global equity funds, partially offset by gains on various alternative funds, and for the six month period, global fixed income and multi-asset funds.

Investments held by CIPs generated investment gains and other income of $89.9 million and $66.1 million in the three and six months ended March 31, 2024, largely related to gains on holdings of various fixed income, global equity and alternative funds, and for the six month period, multi-asset funds.

Expenses of CIPs increased $5.6 million and $7.0 million for the three and six months ended March 31, 2025, due to activity of the funds.

Our cash, cash equivalents and investments portfolio by asset class and accounting classification at March 31, 2025, excluding third-party assets of CIPs, was as follows:

Other Income, Net $ 22.5 $ 77.6 (71 %) $ 13.8 $ 311.1 (96 %)

Dividend and interest income decreased $0.9 million and $31.2 million for the three and nine months ended June 30, 2025.

The decrease for the nine months ended June 30, 2025 was primarily due to lower average balances and lower yields.

Investments held by the Company generated net losses of $31.4 million and $24.3 million for the three months ended June 30, 2025 and 2024.

The net losses in both the current and prior year periods were primarily from investments in nonconsolidated funds and separate accounts and investments measured at cost adjusted for observable price changes.

Investments held by the Company generated net losses of $41.7 million, as compared to net gains of $17.3 million for the nine months ended June 30, 2025 and 2024.

The net losses in the current year were primarily from investments measured at cost adjusted for observable price changes and investments in nonconsolidated funds and separate accounts, while the net gains in the prior year were primarily from assets invested for deferred compensation plans, partially offset by losses on investments measured at cost adjusted for observable price changes.

Equity method investees generated income of $23.0 million and $38.5 million for the three and nine months ended June 30, 2025, as compared to income of $41.0 million and $122.3 million in the prior year, largely related to various global alternative funds and global equity funds.

Net foreign currency exchange losses were $14.4 million for the three months ended June 30, 2025, as compared to net gains of $1.2 million in the prior year period.

dollar weakened in the current year period against the Euro and British Pound, which resulted in net foreign exchange losses on cash and cash equivalents denominated in U.S.

dollars held by our European subsidiaries, as compared to net gains in the prior year period.

Interest expense decreased $2.5 million for the nine months ended June 30, 2025 primarily due to lower accretion on Lexington deferred purchase consideration, partially offset by an increase in interest recognized on tax reserves.

Investments held by consolidated investment products (“CIPs”) generated gains of $35.9 million for the three months ended June 30, 2025, largely related to gains on holdings of various equity, fixed income, and multi-asset funds, and losses of $14.7 million for the nine months ended June 30, 2025, largely related to losses on holdings of various equity funds, partially offset by gains on holdings of various alternative, fixed income, and multi-asset funds.

Investments held by CIPs generated investment gains and other income of $37.6 million and $103.7 million in the three and nine months ended June 30, 2024, largely related to gains on holdings of various funds.

Expenses of CIPs increased $2.2 million and $9.2 million for the three and nine months ended June 30, 2025, due to activity of the funds.

Our cash, cash equivalents and investments portfolio by asset class and accounting classification at June 30, 2025, excluding third-party assets of CIPs, was as follows:

Accounting Classification 1

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1 See Note 1 – Significant Accounting Policies in the notes to consolidated financial statements in Item 8 of Part II of our Annual Report on Form 10-K for fiscal year 2024 for information on investment accounting classifications.

2 Total cash and cash equivalents and investments includes $4,362.2 million maintained for operational activities, including investments in sponsored funds and other products, and $446.1 million necessary to com ply with regulatory requirements.

2 Total cash and cash equivalents and investments includes $4,514.6 million maintained for operational activities, including investments in sponsored funds and other products, and $449.0 million necessary to comply with regulatory requirements.

3 Total cash and cash equivalents and investments includes approximately $366 million attributable to employee-owned and other third-party investments made through partnerships which are offset in noncontrolling interests, approximately $429 million of investments that are subject to long-term repurchase agreements and other net financing arrangements, and approximately $444 million of cash and investments related to deferred compensation plans.

TAXES ON INCOME

Our effective income tax rate was 72.8% and 31.5% for the three and six months ended March 31, 2025, as compared to 26.4% and 24.2% for the three and six months ended March 31, 2024.

The rate increase for the three month period was primarily due to losses of CIPs for which there are no related tax benefits and valuation allowance on net operating losses and capital losses, partially offset by discrete tax benefits from state audit settlements.

The rate increase for the six month period was primarily due to losses of CIPs for which there are no related tax benefits, a reduction in foreign rate benefits and tax expenses from stock-based compensation, partially offset by discrete tax benefits from state audit settlements.

Our effective income tax rate was 33.9% and 32.3% for the three and nine months ended June 30, 2025, as compared to 22.7% and 23.7% for the three and nine months ended June 30, 2024.

The rate increase for the three month period was primarily due to a reduction in foreign rate benefits, valuation allowance on net capital losses, and lower gains of CIPs for which there is no related tax expense.

The rate increase for the nine month period was primarily due to losses of CIPs for which there are no related tax benefits and a reduction in foreign rate benefits.

On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was signed into law.

While we are in the process of evaluating the impact of the Act on our consolidated financial statements, we do not expect there to be any material impact thereon.

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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(in millions) Three Months Ended

Six Months Ended

Nine Months Ended

2025 2024 2025 2024

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Impairment of intangible assets

24.4 — 24.4 —

Special termination benefits

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

Six Months Ended

Nine Months Ended

2025 2024 2025 2024

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Impairment of intangible assets

24.4 — 24.4 —

Special termination benefits

26.9 16.7 44.7 63.8

Net (gains) losses on deferred compensation plan investments not offset by compensation and benefits expense (1.1) (3.9) 0.2 (9.9)

Unrealized investment gains (42.9) (9.6) (11.4) (58.6)

Net gains on deferred compensation plan investments not offset by compensation and benefits expense (2.6) (1.1) (2.4) (11.0)

Unrealized investment (gains) losses 11.2 31.0 (0.2) (27.6)

Interest expense for amortization of debt premium (5.0) (6.4) (14.9) (19.2)

Net compensation and benefits expense related to minority interests in certain subsidiaries not offset by net income (loss) attributable to redeemable noncontrolling interests 7.4 0.4 11.5 (1.6)

Net compensation and benefits expense related to minority interests in certain subsidiaries not offset by net income attributable to redeemable noncontrolling interests 7.4 2.8 18.9 1.2

Net income tax expense of adjustments (43.8) (50.8) (143.8) (140.8)

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(in millions) Three Months Ended

Six Months Ended

Nine Months Ended

2025 2024 2025 2024

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Cash flows were as follows:

Six Months Ended

Nine Months Ended

(in millions) 2025 2024

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Financing cash flows 363.9 506.4

Net cash used in operating activities increased during the six months ended March 31, 2025 primarily due to higher payments for incentive compensation and income tax payments, partially offset by higher net income adjusted for non-cash items.

Net cash provided by operating activities increased during the nine months ended June 30, 2025 primarily due to higher net income adjusted for non-cash items and an increase in accounts payable and accrued expenses, partially offset by higher payments for incentive compensation and income tax payments.

Net cash used in investing activities increased primarily due to net purchases of investments as compared to liquidations in the prior year and higher net purchases of investments by collateralized loan obligations (“CLOs”).

Net cash provided by financing activities increased due to higher net proceeds on debt of CIPs, higher net subscriptions in CIPs by noncontrolling interests and lower repurchases of common stock, partially offset by net repayment of debt.

Net cash provided by financing activities decreased due to lower net proceeds on debt of CIPs and net repayment of debt, partially offset by net proceeds from repurchase agreements.

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

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Our liquid assets and debt consisted of the following:

(in millions) March 31,

(in millions) June 30,

2025 September 30,

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Liquid assets consist of cash and cash equivalents, receivables and certain investments.

Cash and cash equivalents at March 31, 2025 primarily consist of money market funds and deposits with financial institutions.

Cash and cash equivalents at June 30, 2025 primarily consist of money market funds and deposits with financial institutions.

Liquid investments consist of investments in sponsored and other funds, direct investments in redeemable CIPs, other equity and debt securities, and time deposits with maturities greater than three months.

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In prior fiscal years, we issued senior unsecured unsubordinated notes for general corporate purposes and to redeem outstanding notes.

At March 31, 2025, Franklin’s outstanding senior notes had an aggregate principal amount due of $1,200.0 million.

At June 30, 2025, Franklin’s outstanding senior notes had an aggregate principal amount due of $1,200.0 million.

The notes have fixed interest rates from 1.600% to 2.950% with interest paid semi-annually and have an aggregate carrying value, inclusive of unamortized discounts and debt issuance costs, of $1,488.2 million.

At March 31, 2025, Legg Mason’s outstanding senior notes had an aggregate principal amount due of $1,000.0 million.

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 $1,183.5 million at March 31, 2025.

At June 30, 2025, Legg Mason’s outstanding senior notes had an aggregate principal amount due of $1,000.0 million.

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 $1,178.5 million at June 30, 2025.

Franklin unconditionally and irrevocably guarantees all of the outstanding notes issued by Legg Mason.

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As of April 30, 2025, the $300.0 million of borrowings outstanding under our prior credit facility were transferred to the Amended and Restated Credit Agreement.

For additional information please see Part II.

Other Information - Entry into Amended and Restated Revolving Credit Agreement.

Interest is payable semi-annually on any outstanding amounts and is based on the Term Secured Overnight Financing Rate (“Term SOFR”) plus a credit spread of 87.5 basis points and a Term SOFR adjustment of 10 basis points.

The Amended and Restated Credit Agreement 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 were in compliance with all debt covenants at March 31, 2025.

At March 31, 2025, we had $500.0 million of short-term commercial paper available for issuance under an uncommitted private placement program which has been inactive since 2012 and is unrated.

We were in compliance with all debt covenants at June 30, 2025.

At June 30, 2025, we had $500.0 million of short-term commercial paper available for issuance under an uncommitted private placement program which has been inactive since 2012 and is unrated.

Our ability to access the capital markets in a timely manner depends on a number of factors, including our credit rating, the condition of the global economy, investors’ willingness to purchase our securities, interest rates, credit spreads and the valuation levels of equity markets.

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We typically declare cash dividends on a quarterly basis, subject to approval by our Board of Directors.

We declared regular dividends of $0.64 per share during the six months ended March 31, 2025 and $0.62 per share during the six months ended March 31, 2024.

We declared regular dividends of $0.96 per share during the nine months ended June 30, 2025 and $0.93 per share during the nine months ended June 30, 2024.

We currently expect to continue paying comparable regular dividends on a quarterly basis to holders of our common stock depending upon earnings and other relevant factors.

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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 the three and six months ended March 31, 2025, we repurchased 0.5 million and 0.8 million shares of our common stock at a cost of $10.0 million and $15.8 million.

During the three and six months ended March 31, 2024, we repurchased 0.4 million and 2.8 million shares of our common stock at a cost of $11.7 million and $70.5 million.

During the three and nine months ended June 30, 2025, we repurchased 7.3 million and 8.1 million shares of our common stock at a cost of $157.4 million and $173.2 million.

During the three and nine months ended June 30, 2024, we repurchased 4.3 million and 7.1 million shares of our common stock at a cost of $101.5 million and $172.0 million.

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.

At March 31, 2025, 29.2 million shares remained available for repurchase under this authorization.

At June 30, 2025, 21.9 million shares remained available for repurchase under this authorization.

On June 3, 2025, we entered into a definitive agreement to acquire a majority interest in Apera Asset Management for cash consideration of approximately €70.0 million.

In addition, we will pay up to €125.0 million in cash through the fifth anniversary of the closing date based on revenue targets.

The cash consideration is expected to be funded from existing cash and sources of liquidity.

The acquisition is expected to close during the first quarter of fiscal year 2026.

We will pay up to $375.0 million related to our acquisition of Putnam between the third and seventh anniversaries of the closing date related to revenue growth targets from the strategic partnership with Great-West Lifeco, Inc.

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Increased liquidity risks and redemptions have required, and may continue to require, increased cash in the form of loans or other lines of credit to help settle redemptions and for other related purposes.

While we have no legal or contractual obligation to do so, we have in certain instances voluntarily elected to provide the funds with direct or indirect financial support based on our business objectives.

We did not provide significant financial or other support to our sponsored funds during the six months ended March 31, 2025.

While we have no legal or contractual obligation to do so, we have in certain instances voluntarily elected to provide the funds with direct or indirect financial support based on our business

We did not provide significant financial or other support to our sponsored funds during the nine months ended June 30, 2025.

CRITICAL ACCOUNTING POLICIES

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Our VIEs are primarily investment products and our variable interests consist of our equity ownership interests in and investment management fees earned from these products.

As of March 31, 2025, we were the primary beneficiary of 64 investment product VIEs.

Business Combinations

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

During the six months ended March 31, 2025, there were no events or circumstances which would indicate that goodwill or definite-lived intangible assets were more likely than not impaired.

We performed a quantitative impairment test for certain indefinite-lived assets related to acquired mutual fund investment management contracts due to decreased AUM in the related products and recognized an impairment of $24.4 million.

During the nine months ended June 30, 2025, there were no events or circumstances which would indicate that goodwill or definite-lived intangible assets were more likely than not impaired.

We performed a quantitative impairment test for certain indefinite-lived assets related to acquired mutual fund investment management contracts due to decreased AUM in related products and recognized an impairment of $24.4 million during the quarter ended March 31, 2025.

There were no other impairments of indefinite-lived intangible assets, as no events occurred or circumstances changed that would indicate these assets might be impaired.

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We use a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on whether the inputs to those valuation techniques are observable or unobservable.

As of March 31, 2025, Level 3 assets represented 4% of total assets measured at fair value, which primarily related to CIPs’ investments in equity and debt securities.

There were insignificant transfers into and $39.2 million transfers out of Level 3 during the three months ended March 31, 2025.

As of June 30, 2025, Level 3 assets represented 4% of total assets measured at fair value, which primarily related to CIPs’ investments in equity and debt securities.

There were insignificant transfers into and $39.3 million transfers out of Level 3 during the nine months ended June 30, 2025.

Quantitative and Qualitative Disclosures About Market Risk.

During the six months ended March 31, 2025, there were no material changes from the market risk disclosures in our Form 10‑K for the fiscal year ended September 30, 2024.

During the nine months ended June 30, 2025, there were no material changes from the market risk disclosures in our Form 10‑K for the fiscal year ended September 30, 2024.

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 2. Management’s Discussion and Analysis