What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-28 compared with 2026-01-30 · 204 added, 108 removed, 412 unchanged (43% of the section changed)

11 unchanged sentences

Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.

The initiation or unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or inquiries, including the Western Asset Management (“WAM”) investigations described under the heading “Risk Factors” and in “Note 15 - Commitments and Contingencies” to our audited financial statements contained in our Annual Report on Form 10-K for fiscal year 2025, and in “Note 10 - Commitments and Contingencies” to our unaudited interim financial statements contained in this Form 10-Q, may result in additional costs, monetary judgments, settlements or other remedies, including fines, penalties, restitution and/or alterations in our business practices or those of our specialist investment managers.

In addition, these matters may cause reputational harm to us or our specialist investment managers and could result in additional expenses and collateral costs, outflows of assets under management or other financial impacts that could materially affect our results of operations and the price of our common stock.

In addition, these matters may cause reputational harm to us or our investment groups and could result in additional expenses and collateral costs, outflows of assets under management or other financial impacts that could materially affect our results of operations and the price of our common stock.

If a circumstance occurs after the date of this Form 10-Q that causes any of our forward-looking statements to be inaccurate, whether as a result of new information, future developments or otherwise, we undertake no obligation to announce publicly the change to our expectations, or to make any revision to our forward-looking statements, to reflect any change in assumptions, beliefs or expectations, or any change in events, conditions or circumstances upon which any forward-looking statement is based, unless required by law.

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These arrangements could change in the future.

During our first fiscal quarter, U.S.

and global equity markets provided positive returns, reflecting strong earnings growth in multiple sectors, easing inflation, and expectations of continued interest rate reductions.

The S&P 500 Index increased 2.7% and the MSCI World Index increased 3.2% for the quarter.

Global bond markets remained relatively flat as the Bloomberg Global Aggregate Index increased 0.2% during the quarter.

Our total AUM at December 31, 2025 was $1,684.0 billion, 1% higher than at September 30, 2025 and 7% higher than at December 31, 2024.

Monthly average AUM (“average AUM”) for the three months ended December 31, 2025 increased 3% from the same period in the prior fiscal year.

During our second fiscal quarter, U.S.

and global equity markets declined amid heightened volatility, driven by the escalation of geopolitical tensions in the Middle East, rising energy and gas prices, and renewed inflation concerns.

The S&P 500 Index and the MSCI World Index decreased by 4.3% and 3.5%, respectively, for the quarter, and by 1.8% and 0.4% for the fiscal year to date.

Global bond markets declined as the Bloomberg Global Aggregate Index decreased 1.1% during the quarter and 0.8% for the fiscal year to date.

Our total AUM at March 31, 2026 was $1,682.1 billion, 1% higher than at September 30, 2025 and 9% higher than at March 31, 2025.

Monthly average AUM (“average AUM”) for the three and six months ended March 31, 2026 increased 8% and 5% from the same periods in the prior fiscal year.

On October 1, 2025, we acquired Apera Asset Management (“Apera”), a pan-European private credit firm.

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Three Months Ended

Change Six Months Ended

(in millions, except per share data) 2026 2025 2026 2025

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Operating margin 1

14.1 % 6.9 % 13.1 % 8.4 %

Net income attributable to Franklin Resources, Inc.

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AUM by asset class was as follows:

(in billions) December 31,

2025 December 31,

(in billions) March 31,

2026 March 31,

$ 669.7 $ 598.1 12 %

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Change Mix of Average AUM

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

for the three months ended March 31, 2026 2025 2026 2025

$ 699.6 $ 619.7 13 % 41 % 40 %

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

(in billions) Average AUM 1

Change Mix of Average AUM

for the six months ended March 31, 2026 2025 2026 2025

$ 696.6 $ 625.1 11 % 41 % 39 %

Fixed Income 438.5 488.9 (10 %) 26 % 30 %

Alternative 272.8 249.6 9 % 16 % 16 %

Multi-Asset 201.2 176.2 14 % 12 % 11 %

Cash Management 80.5 66.5 21 % 5 % 4 %

Total $ 1,689.6 $ 1,606.3 5 % 100 % 100 %

_______________

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

Components of the change in AUM are shown below.

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(in billions) Three Months Ended

Six Months Ended

Beginning AUM $ 1,684.0 $ 1,575.7 $ 1,661.2 $ 1,678.6

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1 Beginning in fiscal year 2026, non-fee generating uncalled capital commitments, which were previously included in net market change, distributions, and other, are reflected in long-term inflows in the period the capital is committed.

2 Long-term inflows and outflows were each revised from previously reported amounts to reflect fund activity of $0.9 billion settling in January 2025.

The revision did not impact net flows or ending AUM.

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

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for the three months ended

December 31, 2025

AUM at October 1, 2025 $ 686.2 $ 438.7 $ 263.9 $ 193.9 $ 78.5 $ 1,661.2

March 31, 2026

AUM at January 1, 2026 $ 697.2 $ 437.7 $ 273.8 $ 198.8 $ 76.5 $ 1,684.0

Long-term inflows 53.6 31.9 14.3 18.4 — 118.2

6 unchanged sentences

(22.8) (3.1) (3.4) (0.8) (0.1) (30.2)

AUM at December 31, 2025 $ 697.2 $ 437.7 $ 273.8 $ 198.8 $ 76.5 $ 1,684.0

AUM at March 31, 2026 $ 669.7 $ 434.3 $ 282.8 $ 207.5 $ 87.8 $ 1,682.1

_______________

AUM increased $22.8 billion, or 1%, during the three months ended December 31, 2025 due to $28.0 billion of long-term net inflows, inclusive of $6.6 billion of long-term net outflows at WAM, and $6.1 billion from the acquisition of Apera, partially offset by the negative impact of $10.1 billion of net market change, distributions and other, and $1.2 billion of cash management net outflows.

AUM decreased $1.9 billion during the three months ended March 31, 2026 due to the negative impact of $30.2 billion of net market change, distributions and other, partially offset by $16.9 billion of long-term net inflows, inclusive of $4.1 billion of long-term net outflows at WAM, and $11.4 billion of cash management net inflows.

Long-term net inflows include $3.2 billion of long-term reinvested distributions.

Net market change, distributions and other primarily consists of $43.2 billion of distributions, primarily from the equity asset class, partially offset by $33.7 billion of market appreciation.

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

Long-term inflows increased 22% to $118.6 billion, as compared to the prior period, driven by higher inflows in equity open-end funds, alternative private funds, equity and fixed income exchange traded funds, fixed income and multi-asset separately managed accounts, and fixed income institutional separate accounts, partially offset by lower inflows in equity sub-advised mutual funds.

Long-term outflows decreased 38% to $90.6 billion, substantially due to lower outflows across multiple fixed income vehicles at WAM, partially offset by slightly higher outflows in fixed income vehicles across other specialist investment managers and in alternative institutional separate accounts.

Net market change, distributions and other primarily consists of $17.3 billion of market depreciation and $10.9 billion of distributions.

The market depreciation occurred primarily in the equity asset class and reflected negative returns in the global equity markets, partially offset by appreciation in the alternative and multi-asset classes.

Long-term inflows increased 36% to $118.2 billion, as compared to the prior period, driven by higher inflows in equity, multi-asset and fixed income open-end funds, alternative private funds, equity exchange traded funds, multi-asset sub-advised mutual funds, equity and multi-asset separately managed accounts, and fixed income institutional separate accounts.

Long-term outflows decreased 10% to $101.3 billion, substantially due to lower outflows across multiple fixed income vehicles at WAM, partially offset by higher outflows in equity open-end funds and exchange traded funds.

(in billions) Equity

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Multi-Asset Cash

Management Total

for the three months ended

December 31, 2024

March 31, 2025

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

Long-term inflows 38.9 26.5 8.5 12.9 — 86.8

Long-term outflows (44.3) (57.0) (2.1) (9.6) — (113.0)

Long-term net flows (5.4) (30.5) 6.4 3.3 — (26.2)

Cash management net flows — — — — 2.7 2.7

Total net flows (5.4) (30.5) 6.4 3.3 2.7 (23.5)

Net market change, distributions and other

(16.5) 7.0 (3.4) (1.5) 2.8 (11.6)

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

_______________

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.

(in billions) Equity

Fixed Income Alternative 1

Multi-Asset Cash

Management Total

for the six months ended

March 31, 2026

AUM at October 1, 2025 $ 686.2 $ 438.7 $ 263.9 $ 193.9 $ 78.5 $ 1,661.2

4 unchanged sentences

Total net flows 15.1 (2.7) 19.0 13.5 10.2 55.1

Acquisition — — 6.1 — — 6.1

Net market change, distributions and other

(31.6) (1.7) (6.2) 0.1 (0.9) (40.3)

AUM at December 31, 2024 $ 620.0 $ 469.5 $ 248.8 $ 174.0 $ 63.4 $ 1,575.7

AUM at March 31, 2026 $ 669.7 $ 434.3 $ 282.8 $ 207.5 $ 87.8 $ 1,682.1

_______________

1 Long-term inflows and outflows were each revised from previously reported amounts to reflect fund activity of $0.9 billion settling in January 2025.

The revision did not impact net flows or ending AUM.

AUM increased $20.9 billion, or 1%, during the six months ended March 31, 2026 due to $44.9 billion of long-term net inflows, inclusive of $10.6 billion of long-term net outflows at WAM, $10.2 billion of cash management net inflows, and $6.1 billion from the acquisition of Apera, partially offset by the negative impact of $40.3 billion of net market change, distributions and other.

Long-term net inflows include $32.1 billion of long-term reinvested distributions.

Net market change, distributions and other primarily consists of $54.1 billion of distributions, primarily from the equity and alternative asset classes, partially offset by $16.4 billion of market appreciation.

The market appreciation occurred in all asset classes.

Long-term inflows increased 29% to $236.8 billion, as compared to the prior period, driven by higher inflows in equity, multi-asset, and fixed income open-end funds, alternative private funds, equity and fixed income exchange traded funds, fixed income, multi-asset, and equity separately managed accounts, alternative and fixed income institutional separate accounts, and multi-asset and fixed income sub-advised mutual funds, partially offset by lower inflows in equity sub-advised mutual funds.

Long-term outflows decreased 26% to $191.9 billion, substantially due to lower outflows across multiple fixed income vehicles at WAM, partially offset by slightly higher outflows in equity and fixed income vehicles across other investment groups.

(in billions) Equity

Fixed Income Alternative

Multi-Asset Cash

for the six months ended

March 31, 2025

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

Long-term inflows 94.8 52.9 11.9 24.1 — 183.7

Long-term outflows (87.7) (150.1) (4.7) (17.4) — (259.9)

Long-term net flows 7.1 (97.2) 7.2 6.7 — (76.2)

Cash management net flows — — — — 2.7 2.7

Total net flows 7.1 (97.2) 7.2 6.7 2.7 (73.5)

Net market change, distributions and other

(41.1) (13.2) (5.3) (7.1) 2.2 (64.5)

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

_______________

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 by sales region was as follows:

(in billions) December 31,

2025 December 31,

(in billions) March 31,

2026 March 31,

United States 1

4 unchanged sentences

Asia-Pacific 2

180.1 171.0 5 %

Americas, excl.

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1 Effective in fiscal year 2026, Cayman-domiciled money market fund assets are included in United States reflecting the underlying investor base.

This change resulted in a 12% reduction of AUM in the Americas, excluding U.S.

This change resulted in an 11% reduction of AUM in the Americas, excluding U.S.

2 Effective January 1, 2026, Asia-Pacific includes India.

Prior periods have been revised to reflect the current presentation.

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

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Exceeding Benchmark

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

as of March 31, 2026 1-Year 3-Year 5-Year 10-Year 1-Year 3-Year 5-Year 10-Year

Equity 49 % 56 % 53 % 58 % 40 % 40 % 39 % 55 %

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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%, 39%, 38% and 36% of our total AUM as of December 31, 2025.

Total mutual fund AUM measured for the 1-, 3-, 5- and 10-year periods represents 39%, 39%, 38% and 35% of our total AUM as of March 31, 2026.

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%, 55% and 50% of our total AUM as of December 31, 2025.

Total strategy composite AUM measured for the 1-, 3-, 5- and 10-year periods represents 55%, 54%, 54% and 50% of our total AUM as of March 31, 2026.

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 12% of our total AUM at December 31, 2025.

Alternative and multi-asset AUM represent 17% and 12% of our total AUM at March 31, 2026.

Mutual fund performance data includes U.S.

9 unchanged sentences

(in millions) Three Months Ended

Change Six Months Ended

2026 2025 2026 2025

Investment management fees $ 1,819.3 $ 1,673.6 9 % $ 3,667.2 $ 3,472.9 6 %

4 unchanged sentences

Investment Management Fees

Investment management fees increased $48.6 million for the three months ended December 31, 2025 primarily due to an increase in average equity, multi-asset, and alternative AUM, and the acquisition of Apera, partially offset by the impact of WAM outflows and a decrease in performance fees.

Our effective investment management fee rate excluding performance fees (annualized investment management fees excluding performance fees divided by average AUM) was 40.6 basis points for the three months ended December 31, 2025, as compared to 40.2 basis points for the three months ended December 31, 2024.

Performance fees were $131.6 million and $141.6 million for the three months ended December 31, 2025 and 2024.

The decrease was primarily due to changes in the amount of performance fees earned by our alternative specialist investment managers.

Investment management fees increased $145.7 million and $194.3 million for the three and six months ended March 31, 2026 primarily due to an increase in average equity, multi-asset, and alternative AUM, an increase in performance fees and the acquisition of Apera, partially offset by the impact of WAM outflows.

Our effective investment management fee rate excluding performance fees (annualized investment management fees excluding performance fees divided by average AUM) was 41.0 and 40.8 basis points for the three and six months ended March 31, 2026, as compared to 41.4 and 40.7 basis points for the same periods in the prior fiscal year.

Performance fees were $100.8 million and $232.4 million for the three and six months ended March 31, 2026 and $71.9 million and $213.5 million for the same periods in prior fiscal year.

The increase for both periods was primarily due to changes in the amount of performance fees earned by our alternative and equity investment groups.

Sales and Distribution Fees

1 unchanged sentence

(in millions) Three Months Ended

Change Six Months Ended

2026 2025 2026 2025

Asset-based fees $ 321.0 $ 297.2 8 % $ 645.6 $ 606.3 6 %

1 unchanged sentence

Sales and Distribution Fees $ 396.6 $ 364.9 9 % $ 785.3 $ 740.4 6 %

Asset-based distribution fees increased $15.5 million for the three months ended December 31, 2025 primarily due to an increase of 3% in the related average AUM and a higher mix of non-U.S.

Asset-based distribution fees increased $23.8 million and $39.3 million for the three and six months ended March 31, 2026 primarily due to increases of 6% and 4% in the related average AUM and a higher mix of non-U.S.

equity and multi-asset funds and U.S.

equity and alternative funds, which generate higher fees.

Sales-based fees decreased $2.3 million for the three months ended December 31, 2025, primarily due to a decrease of 6% in commissionable sales.

Sales-based fees increased $7.9 million and $5.6 million for the three and six months ended March 31, 2026, primarily due to increases of 20% and 7% in commissionable sales, partially offset by a higher mix of non-U.S.

sales, which generate lower fees.

Shareholder Servicing Fees

Shareholder servicing fees increased $7.4 million for the three months ended December 31, 2025 primarily due to higher levels of related AUM and increased revenue related to fees earned on a contractual basis.

Other revenue increased $6.3 million for the three months ended December 31, 2025 primarily due to higher loan origination fees earned by certain of our alternative asset managers.

Shareholder servicing fees increased $7.1 million and $14.5 million for the three and six months ended March 31, 2026 primarily due to higher levels of related AUM and increased revenue related to fees earned on a contractual basis.

Other revenue increased $5.3 million for the six months ended March 31, 2026 primarily due to higher loan origination fees earned by certain of our alternative investment groups.

OPERATING EXPENSES

1 unchanged sentence

Three Months Ended

Change Six Months Ended

(in millions) 2026 2025 2026 2025

4 unchanged sentences

Amortization of intangible assets 50.6 112.5 (55 %) 105.7 225.1 (53 %)

Impairment of intangible assets

— 24.4 NM — 24.4 NM

General, administrative and other 187.6 182.8 3 % 383.2 368.0 4 %

3 unchanged sentences

Three Months Ended

Change Six Months Ended

(in millions) 2026 2025 2026 2025

12 unchanged sentences

and special termination benefits.

Salaries, wages and benefits increased $4.9 million for the three months ended December 31, 2025, primarily due to annual salary increases, higher employee insurance costs, and the acquisition of Apera, partially offset by the impact of headcount reductions resulting from cost savings initiatives.

Incentive compensation increased $31.6 million for the three months ended December 31, 2025, primarily due to higher bonus expense based on expectations of our annual performance, higher deferred compensation expense and higher sales-related commissions.

Acquisition-related retention expenses decreased $10.1 million for the three months ended December 31, 2025, primarily due to lower costs associated with recent acquisitions.

Other compensation and benefits increased $30.2 million for the three months ended December 31, 2025, primarily due to a $15.6 million increase in special termination benefits, primarily due to higher costs associated with workforce optimization initiatives, and higher net market gains on investments related to our deferred compensation plans.

At December 31, 2025, our global workforce decreased to approximately 9,900 employees from approximately 10,100 at December 31, 2024.

Salaries, wages and benefits increased $11.8 million and $16.7 million for the three and six months ended March 31, 2026, primarily due to annual salary increases, higher post-retirement and employee insurance costs, and the acquisition of Apera, partially offset by the impact of cost savings initiatives.

Incentive compensation increased $28.3 million and $59.9 million for the three and six months ended March 31, 2026, primarily due to higher bonus expense based on expectations of our annual performance, and higher deferred compensation expense for the six month period, partially offset by lower sales-related commissions.

Acquisition-related retention expenses decreased $4.3 million and $14.4 million for the three and six months ended March 31, 2026, primarily due to lower costs associated with recent acquisitions.

Other compensation and benefits increased $13.4 million for the three months ended March 31, 2026, primarily due to a $12.8 million increase in special termination benefits, and increased $43.6 million for the six months ended March 31, 2026, primarily due to a $28.4 million increase in special termination benefits and higher net market gains on investments related to our deferred compensation plans.

The special termination benefits increased primarily due to higher costs associated with workforce optimization initiatives.

At March 31, 2026, our global workforce remained flat at approximately 10,000 employees, as compared to March 31, 2025.

Sales, Distribution and Marketing

1 unchanged sentence

Three Months Ended

Change Six Months Ended

(in millions) 2026 2025 2026 2025

3 unchanged sentences

Sales, Distribution and Marketing $ 544.0 $ 498.1 9 % $ 1,084.9 $ 1,010.4 7 %

Asset-based expenses increased $29.6 million for the three months ended December 31, 2025 primarily due to an increase of 4% in the related average AUM, higher marketing support fees, and a higher mix of non-U.S.

Asset-based expenses increased $36.4 million and $66.0 million for the three and six months ended March 31, 2026 primarily due to increases of 7% and 6% in the related average AUM, higher marketing support fees, and a higher mix of non-U.S.

equity and multi-asset funds and U.S.

equity and alternative funds, which generate higher fees.

equity and alternative funds, which incur higher 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 decreased $3.6 million for the three months ended December 31, 2025 primarily due to a decrease of 6% in commissionable sales.

Occupancy expenses decreased $8.3 million for the three months ended December 31, 2025, primarily due to consolidation of our office space in New York City.

Sales-based expenses increased $3.0 million for the three months ended March 31, 2026 primarily due to an increase of 20% in commissionable sales, partially offset by a higher mix of non-U.S.

sales, and decreased $0.6 million for the six months ended March 31, 2026 primarily due to a higher mix of non-U.S.

sales, partially offset by an increase of 7% in commissionable sales and lower sales-based marketing support fees.

Occupancy expenses decreased $2.2 million and $10.5 million for the three and six months ended March 31, 2026, primarily due to consolidation of our office space in New York City.

Information Systems and Technology

Information systems and technology expenses increased $1.0 million for the three months ended December 31, 2025, primarily due to higher software costs partially offset by lower technology consulting costs.

Information systems and technology expenses decreased $1.1 million and $0.1 million for the three and six months ended March 31, 2026, primarily due to lower technology consulting and spending related to strategic initiatives, substantially offset by higher costs for software and external data services.

Amortization of Intangible Assets

Amortization of intangible assets decreased $57.5 million for the three months ended December 31, 2025, primarily due to intangible assets which became fully amortized during prior year, partially offset by an increase in amortization due to the reclassification of certain indefinite-lived intangible assets to definite lived intangible assets and a reduction in the useful lives of certain definite-lived intangible assets related to trade names.

Amortization of intangible assets decreased $61.9 million and $119.4 million for the three and six months ended March 31, 2026, primarily due to intangible assets which became fully amortized during the prior fiscal year, partially offset by an increase in amortization due to the reclassification of certain indefinite-lived intangible assets to definite lived intangible assets and a reduction in the useful lives of certain definite-lived intangible assets related to trade names.

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.

General, Administrative and Other

General, administrative and other operating expenses increased $10.4 million for the three months ended December 31, 2025, primarily due to an increase of $15.5 million in fund-related expenses, driven by higher transfer agency expenses, higher placement fees, and higher sub-advisory expenses, an increase of $4.3 million in advertising expenses, and a $2.3 million increase in travel and entertainment.

These increases were partially offset by a $13.1 million decrease in legal and other professional fees, inclusive of a $10.0 million increase in insurance recoveries.

General, administrative and other operating expenses increased $4.8 million and $15.2 million for the three and six months ended March 31, 2026.

The increase for the three months ended March 31, 2026 was primarily due to an increase of $11.6 million in legal and other professional fees, driven by a $7.6 million decrease in insurance recoveries, and an increase of $2.4 million in fund-related expenses, driven by higher transfer agency and sub-advisory expenses, partially offset by lower fund administration costs and lower placement and platform fees.

These increases were partially offset by a $10.6 million decrease in advertising expenses.

The increase for the six months ended March 31, 2026, was primarily due to an increase of $17.9 million in fund-related expenses, driven by higher transfer agency and sub-advisory expenses, and an increase of $3.1 million in travel and entertainment, partially offset by a $6.3 million decrease in advertising expenses.

OTHER INCOME (EXPENSES)

1 unchanged sentence

Three Months Ended

Change Six Months Ended

(in millions) 2026 2025 2026 2025

2 unchanged sentences

$ 38.7 $ 19.4 99 % $ 93.3 $ 62.5 49 %

Losses on investments, net (8.6) (57.1) (85 %)

Income (losses) from investments in equity method investees 11.5 (7.6) NM

Losses on crypto assets, net (6.4) — NM

Gains (losses) on investments, net (20.7) 46.8 NM (29.3) (10.3) 184 %

Income from investments in equity method investees 24.3 23.1 5 % 35.8 15.5 131 %

Losses on crypto assets, net (12.4) — NM (18.8) — NM

Rental income

11.6 10.9 6 % 22.9 22.1 4 %

Foreign currency exchange (losses) gains, net (4.0) 14.5 NM

Foreign currency exchange gains (losses), net 1.5 (7.5) NM (2.5) 7.0 NM

13.0 1.4 829 % 34.9 7.8 347 %

1 unchanged sentence

Interest expense (19.9) (20.8) (4 %) (40.3) (43.9) (8 %)

Investment and other income of consolidated investment products, net 124.9 114.1 9 %

Investment and other income (losses) of consolidated investment products, net 96.5 (164.7) NM 221.4 (50.6) NM

Expenses of consolidated investment products (10.2) (11.5) (11 %) (24.2) (18.8) 29 %

Other Income, Net $ 170.8 $ 94.2 81 %

Dividend and interest income increased $11.5 million for the three months ended December 31, 2025, primarily due to a dividend earned from a strategic investment.

Investments held by the Company generated net losses of $8.6 million and $57.1 million for the three months ended December 31, 2025 and 2024.

The net losses in the current year were primarily from investments in nonconsolidated funds and separate accounts, partially offset by gains from assets invested for deferred compensation plans, while the net losses in the prior year were primarily from investments in nonconsolidated funds and separate accounts and assets invested for deferred compensation plans.

Equity method investees generated income of $11.5 million for the three months ended December 31, 2025, as compared to losses of $7.6 million in the prior year, largely related to various global alternative funds and global equity funds.

Net foreign currency exchange losses were $4.0 million for the three months ended December 31, 2025, as compared to net gains of $14.5 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 certain of our European subsidiaries, as compared to strengthening against the same currencies, which resulted in net foreign exchange gains, in the prior year period.

Other, net increased $15.5 million for the three months December 31, 2025, primarily due to a gain recognized on the sale of owned office space.

Interest expense decreased $2.7 million for the three months ended December 31, 2025 primarily due to interest recognized in the prior year on the $400 million senior notes which were repaid in March 31, 2025.

Investments held by consolidated investment products (“CIPs”) generated gains and other income of $124.9 million and $114.1 million for the three months ended December 31, 2025 and 2024, largely related to gains on holdings of various alternative, equity, and multi-asset funds, and in the prior year, fixed income funds.

Expenses of CIPs increased $6.7 million for the three months ended December 31, 2025, due to activity of the funds.

Other Income (Expenses), Net $ 122.4 $ (102.9) NM $ 293.2 $ (8.7) NM

Dividend and interest income increased $19.3 million and $30.8 million for the three and six months ended March 31, 2026, primarily due to higher dividend and interest income earned from strategic investments and assets invested for deferred compensation plans.

Investments held by the Company generated net losses of $20.7 million and $29.3 million for the three and six months ended March 31, 2026, as compared to net gains of $46.8 million and net losses of $10.3 million for the three and six months ended March 31, 2025.

The net losses in the three months ended March 31, 2026 were primarily from investments in nonconsolidated funds and separate accounts and assets invested for deferred compensation plans, partially offset by gains from investments measured at cost adjusted for observable price changes, while the net gains in the prior year period were primarily from investments in nonconsolidated funds and separate accounts and assets invested for deferred compensation plans, partially offset by losses from investments measured at cost adjusted for observable price changes.

The net losses in the six months ended March 31, 2026 were primarily from investments in nonconsolidated funds and separate accounts, partially offset by gains on investments measured at cost adjusted for observable price changes and assets invested for deferred compensation plans, while the net losses in the prior year were primarily from investments measured at cost adjusted for observable price changes and assets invested for deferred compensation plans, partially offset by losses on investments in nonconsolidated funds and separate accounts.

Equity method investees generated income of $24.3 million and $35.8 million for the three and six months ended March 31, 2026, as compared to income of $23.1 million and $15.5 million in the prior year, largely related to various global alternative funds.

Net foreign currency exchange gains were $1.5 million for the three months ended March 31, 2026, as compared to net losses of $7.5 million in the prior year period.

dollar strengthened in the three 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 certain of our European subsidiaries, as compared to weakening against the same currencies, which resulted in net foreign exchange gains, in the prior year period.

Net foreign currency exchange losses were $2.5 million for the six months ended March 31, 2026, as compared to net gains of $7.0 million in the prior year, as changes in the value of the U.S.

dollar against the Euro and British Pound resulted in net foreign exchange losses in the current year as compared to net gains in the prior year.

Other, net increased $11.6 million and $27.1 million for the three and six months ended March 31, 2026, primarily due to gains recognized on the sale of owned office space.

Interest expense decreased $0.9 million and $3.6 million for the three and six months ended March 31, 2026 primarily due to interest recognized in the prior year on the $400 million senior notes which were repaid in March 31, 2025, partially offset by interest recognized on borrowings under our revolving credit facility.

Investments held by consolidated investment products (“CIPs”) generated gains and other income of $96.5 million and $221.4 million for the three and six months ended March 31, 2026, largely related to gains on holdings of various alternative, equity, and multi-asset funds.

Investments held by CIPs generated losses of $164.7 million and $50.6 million for 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.

Expenses of CIPs decreased $1.3 million and increased $5.4 million for the three and six months ended March 31, 2026, due to activity of the funds.

TAXES ON INCOME

Our effective income tax rate was 23.2% and 25.9% for the three months ended December 31, 2025 and 2024.

The rate decrease for the three month period was primarily due to excess tax benefits related to stock-based compensation in the current year, as compared to excess tax expense in the prior year, and a higher proportion of foreign earnings in lower-tax jurisdictions, partially offset by activity of CIPs for which there is no related tax impact.

Our effective income tax rate was 22.2% and 22.7% for the three and six months ended March 31, 2026, as compared to 72.8% and 31.5% for the three and six months ended March 31, 2025.

The rate decrease for the three month period was primarily due to activity of CIPs for which there is no related tax impact and valuation allowances on net operating losses and capital losses recognized in the prior year period.

The rate decrease for the six month period was primarily due to activity of CIPs for which there is no related tax impact, excess tax benefits related to stock-based compensation in the current year, as compared to excess tax expense in the prior year, and valuation allowances on net operating losses and capital losses recognized in the prior year.

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

2026 2025 2026 2025

Operating income $ 323.3 $ 145.6 $ 604.3 $ 364.6

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Acquisition-related retention

30.4 34.7 66.1 80.5

Compensation and benefits expense from gains on deferred compensation, net 3.8 3.6 17.4 4.5

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Amortization of intangible assets

50.6 112.5 105.7 225.1

Impairment of intangible assets

— 24.4 — 24.4

Special termination benefits

30.2 17.4 46.2 17.8

Compensation and benefits expense related to minority interests in certain subsidiaries 15.6 15.2 29.7 27.4

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

Six Months Ended

2026 2025 2026 2025

Net income attributable to Franklin Resources, Inc.

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Add (subtract):

Net loss of consolidated investment products* 0.7 4.2

Net (income) loss of consolidated investment products* (0.6) (8.3) 0.1 (4.1)

Acquisition-related retention

30.4 34.7 66.1 80.5

Other acquisition-related expenses 10.1 13.1 17.6 25.8

Amortization of intangible assets

50.6 112.5 105.7 225.1

Impairment of intangible assets

— 24.4 — 24.4

Special termination benefits

Net losses on deferred compensation plan investments not offset by compensation and benefits expense 3.5 1.3

Unrealized investment losses 20.2 31.5

30.2 17.4 46.2 17.8

Net (gains) losses on deferred compensation plan investments not offset by compensation and benefits expense (5.0) (1.1) (1.5) 0.2

Unrealized investment (gains) losses 32.7 (42.9) 52.9 (11.4)

Interest expense for amortization of debt premium (4.4) (5.0) (9.4) (9.9)

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(in millions) Three Months Ended

Six Months Ended

2026 2025 2026 2025

Elimination of operating revenues upon consolidation $ (15.5) $ (13.1) $ (31.5) $ (25.6)

Other income, net 74.8 61.5

income attributable to noncontrolling interests 59.5 53.2

Net loss $ (0.7) $ (4.2)

Other income (expense), net 76.2 (129.8) 151.0 (68.3)

income (loss) attributable to noncontrolling interests 60.1 (151.2) 119.6 (98.0)

Net income (loss) $ 0.6 $ 8.3 $ (0.1) $ 4.1

LIQUIDITY AND CAPITAL RESOURCES

Cash flows were as follows:

Three Months Ended

Six Months Ended

(in millions) 2026 2025

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Financing cash flows 1,978.5 380.3

Net cash used in operating activities increased during the three months ended December 31, 2025 primarily due to timing of cash payments and receipts, reflected in changes in accounts payable and accrued expenses and receivables partially offset by lower payments for incentive compensation and accounts payable and accrued expenses of CIPs.

Net cash used in investing activities decreased primarily due to lower net purchases of investments, proceeds from the sale of property, plant and equipment and lower net purchases of investments by collateralized loan obligations (“CLOs”) partially offset by cash paid for an acquisition in the current year.

Net cash provided by financing activities increased primarily due to higher net proceeds on debt of CIPs partially offset by lower net subscriptions in CIPs by noncontrolling interests.

Net cash used in operating activities increased during the six months ended March 31, 2026 primarily due to timing of cash receipts reflected in changes in receivables and lower net income adjusted for non-cash items, partially offset by lower payments for incentive compensation, accounts payable and accrued expenses.

Net cash used in investing activities increased primarily due to higher net purchases of investments by collateralized loan obligations (“CLOs”), higher net purchases of investments and cash paid for an acquisition in current year partially offset by net proceeds from the sale of property, plant and equipment.

Net cash provided by financing activities increased primarily due to higher net proceeds on debt of CIPs and higher net subscriptions in CIPs by noncontrolling interests.

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

We have no right to the CIPs’ assets, other than our direct equity investment in them and investment management and other fees earned from them.

The debt holders of the CIPs have no recourse to our assets beyond the level of our direct investment, therefore we bear no other risks associated with the CIPs’ liabilities.

Certain CIPs utilize revolving credit facilities and other short-term lines of credit to support liquidity, including funding investment activity and managing timing differences associated with investor subscriptions and redemptions.

Borrowings under these facilities, to the extent drawn, are generally secured by the assets of the respective CIPs and/or capital commitments from CIP equity investors.

These facilities are interest-bearing, typically provided by third-party lenders, and are subject to customary borrowing terms and conditions.

The debt holders of the CIPs have no recourse to our assets beyond the level of our direct investment and/or capital commitment, therefore we bear no other risks associated with the CIPs’ liabilities.

Accordingly, the assets and liabilities of CIPs, other than our direct investments in them, are excluded from the amounts and discussion below.

Our liquid assets and debt consisted of the following:

(in millions) December 31,

(in millions) March 31,

2026 September 30,

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

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

Cash and cash equivalents at March 31, 2026 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 December 31, 2025, Franklin’s outstanding senior notes had an aggregate principal amount due of $1,200.0 million.

At March 31, 2026, 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 $1,189.3 million.

At December 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 $1,168.4 million at December 31, 2025.

At March 31, 2026, Legg Mason’s outstanding senior note had a principal amount due of $550.0 million.

The note has a fixed interest rate of 5.625% with interest paid semi-annually and had a carrying value, inclusive of unamortized premium, of $714.0 million at March 31, 2026.

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

We intend to repay the $450 million 4.750% senior notes due March 2026 from existing cash and other sources of liquidity.

We repaid the $450 million 4.750% senior notes due March 2026 using borrowings under our Amended and Restated Credit Agreement (the “Credit Agreement”) and existing cash.

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

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

On December 11, 2025, we entered into a Joinder and Commitment Increase Agreement (the “Joinder Agreement”) which amends the Amended and Restated Credit Agreement (the “Credit Agreement”) dated as of April 30, 2025.

On December 11, 2025, we entered into a Joinder and Commitment Increase Agreement (the “Joinder Agreement”) which amends the Credit Agreement dated as of April 30, 2025.

Pursuant to the Joinder Agreement, the aggregate commitments have increased by $400.0 million such that the total aggregate commitments under the Credit Agreement are $1.5 billion.

On January 8, 2026, we borrowed $150.0 million under the Credit Agreement.

The borrowing remains outstanding at the time of this filing and the proceeds were used for general corporate purposes.

We expect to utilize the Credit Agreement periodically as part of our normal operations.

On January 8, 2026, we borrowed $150.0 million under the Credit Agreement which was repaid on February 9, 2026.

On March 16, 2026, we borrowed $350.0 million under the Credit Agreement, the proceeds of which were used to repay the 4.750% Senior Notes due March 2026.

On April 13, 2026, we borrowed an additional $50.0 million under the Credit Agreement.

The aggregate borrowings of $400.0 million remain outstanding at the time of this filing.

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 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 December 31, 2025.

At December 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 March 31, 2026.

At March 31, 2026, 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 expect that our main uses of cash will be to invest in and grow our business including through acquisitions, pay stockholder dividends, invest in our products, pay income taxes and expenses of the business, enhance technology infrastructure and business processes, repurchase shares of our common stock, and repay and service debt.

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

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

We declared regular dividends of $0.33 per share during the three months ended December 31, 2025 and $0.32 per share during the three months ended December 31, 2024.

We declared regular dividends of $0.66 per share during the six months ended March 31, 2026 and $0.64 per share during the six months ended March 31, 2025.

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 months ended December 31, 2025, we repurchased 1.8 million shares of our common stock at a cost of $41.9 million and we repurchased 0.3 million shares of our common stock at a cost of $5.8 million in the prior year period.

During the three and six months ended March 31, 2026, we repurchased 2.3 million and 4.1 million shares of our common stock at a cost of $57.1 million and $99.0 million and 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 in the prior year periods.

In December 2025, our Board of Directors authorized the repurchase of up to an additional 20.8 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 as of such authorization date.

At December 31, 2025, 38.3 million shares remained available for repurchase under this authorization.

At March 31, 2026, 35.9 million shares remained available for repurchase under this authorization.

On October 1, 2025, we completed the acquisition of Apera Asset Management for cash consideration of €65.2 million net of closing adjustments, funded from existing cash.

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

As part of our acquisition of Putnam, which closed on January 1, 2024, we will pay up to $375.0 million between the third and seventh anniversaries of the closing date related to revenue growth targets from the strategic partnership with Great-West Lifeco, Inc.

which will be recognized in operating income.

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

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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 additional financial or other support to our sponsored funds during the three months ended December 31, 2025.

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

We did not provide significant additional financial or other support to our sponsored funds during the six months ended March 31, 2026.

Our cash, cash equivalents and investments portfolio by asset class and accounting classification at March 31, 2026, excluding third-party assets of CIPs, was as follows:

Accounting Classification 1

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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 three months ended December 31, 2025, there were no events

or circumstances which would indicate that goodwill, indefinite-lived intangible assets or definite-lived intangible assets might be impaired.

During the six months ended March 31, 2026, there were no events or circumstances which would indicate that goodwill, indefinite-lived intangible assets or definite-lived intangible assets might be impaired.

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

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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 December 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 no transfers into and $ 16.8 million transfers out of Level 3 during the three months ended December 31, 2025.

As of March 31, 2026, 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 $25.6 million of transfers into and $ 16.8 million of transfers out of Level 3 during the six months ended March 31, 2026.

Quantitative and Qualitative Disclosures About Market Risk.

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

During the six months ended March 31, 2026, there were no material changes from the market risk disclosures in our Form 10‑K for the fiscal year ended September 30, 2025.

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