Item 1. Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

												Three Months Ended December 31,
(in millions, except per share data)																		2021						2020
Operating Revenues
Investment management fees																		$	1,760.5					$	1,540.4
Sales and distribution fees																		398.2						396.9
Shareholder servicing fees																		47.7						49.4
Other																		17.6						8.4
Total operating revenues																		2,224.0						1,995.1
Operating Expenses
Compensation and benefits																		802.6						725.5
Sales, distribution and marketing																		510.1						506.5
Information systems and technology																		123.8						116.5
Occupancy																		56.3						55.7
Amortization of intangible assets																		58.3						58.2
General, administrative and other																		115.2						123.6
Total operating expenses																		1,666.3						1,586.0
Operating Income																		557.7						409.1
Other Income (Expenses)
Investment and other income, net																		57.0						77.2
Interest expense																		(19.3)						(29.7)
Investment and other income of consolidated investment products, net																		104.7						91.1
Expenses of consolidated investment products																		(4.2)						(10.4)
Other income, net																		138.2						128.2
Income before taxes																		695.9						537.3
Taxes on income																		151.1						142.5
Net income																		544.8						394.8
Less: net income attributable to
Redeemable noncontrolling interests																		7.5						18.7
Nonredeemable noncontrolling interests																		84.1						30.8
Net Income Attributable to Franklin Resources, Inc.																		$	453.2					$	345.3
Earnings per Share
Basic																		$	0.89					$	0.67
Diluted																		0.88						0.67

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited

(in millions)												Three Months Ended December 31,
															2021						2020
Net Income																		$	544.8					$	394.8
Other Comprehensive Income (Loss)
Currency translation adjustments, net of tax																		(6.9)						93.5
Net unrealized losses on defined benefit plans, net of tax																		(5.1)						(0.6)
Total other comprehensive income (loss)																		(12.0)						92.9
Total comprehensive income																		532.8						487.7
Less: comprehensive income attributable to
Redeemable noncontrolling interests																		7.5						18.7
Nonredeemable noncontrolling interests																		84.1						30.8
Comprehensive Income Attributable to Franklin Resources, Inc.																		$	441.2					$	438.2

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

Unaudited

(in millions, except share and per share data)						December 31, 2021						September 30, 2021
Assets
Cash and cash equivalents						$	4,178.8					$	4,357.8
Receivables						1,434.7						1,428.2
Investments (including $731.9 and $588.3 at fair value at December 31, 2021 and September 30, 2021)						1,663.2						1,510.3
Assets of consolidated investment products
Cash and cash equivalents						365.5						289.4
Investments, at fair value						6,341.6						5,820.1
Property and equipment, net						756.4						770.0
Goodwill						4,724.5						4,457.7
Intangible assets, net						4,784.4						4,710.2
Operating lease right-of-use assets						422.5						448.4
Other						323.5						376.3
Total Assets						$	24,995.1					$	24,168.4
Liabilities
Compensation and benefits						$	906.0					$	1,179.3
Accounts payable and accrued expenses						519.4						479.3
Commissions						237.1						259.8
Income taxes						866.7						693.6
Debt						3,393.7						3,399.4
Liabilities of consolidated investment products
Accounts payable and accrued expenses						631.9						558.0
Debt						4,178.6						3,671.0
Deferred tax liabilities						218.5						311.7
Operating lease liabilities						491.3						518.4
Other						372.1						354.3
Total liabilities						11,815.3						11,424.8
Commitments and Contingencies (Note 9)
Redeemable Noncontrolling Interests						983.4						933.0
Stockholders’ Equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none issued						—						—
Common stock, $0.10 par value, 1,000,000,000 shares authorized; 502,519,277 and 501,807,677 shares issued and outstanding at December 31, 2021 and September 30, 2021						50.3						50.2
Retained earnings						11,892.2						11,550.8
Accumulated other comprehensive loss						(389.6)						(377.6)
Total Franklin Resources, Inc. stockholders’ equity						11,552.9						11,223.4
Nonredeemable noncontrolling interests						643.5						587.2
Total stockholders’ equity						12,196.4						11,810.6
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity						$	24,995.1					$	24,168.4

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Unaudited

						Franklin Resources, Inc.																																				Non- redeemable Non- controlling Interests						Total Stockholders’ Equity
			Common Stock												Capital in Excess of Par Value						Retained Earnings						Accum- ulated Other Compre- hensive Loss						Stockholders’ Equity
(in millions)
for the three months ended December 31, 2021			Shares						Amount
Balance at October 1, 2021						501.8						$	50.2					$	—					$	11,550.8					$	(377.6)					$	11,223.4					$	587.2					$	11,810.6
Net income																								453.2												453.2						84.1						537.3
Other comprehensive loss																														(12.0)						(12.0)												(12.0)
Dividends declared on common stock ($0.29 per share)																								(148.9)												(148.9)												(148.9)
Repurchase of common stock						(0.7)						—						(58.8)						37.1												(21.7)												(21.7)
Issuance of common stock						1.4						0.1						47.6																		47.7												47.7
Stock-based compensation																		11.2																		11.2												11.2
Net distributions and other																																										(27.8)						(27.8)
Balance at December 31, 2021						502.5						$	50.3					$	—					$	11,892.2					$	(389.6)					$	11,552.9					$	643.5					$	12,196.4

						Franklin Resources, Inc.																																				Non- redeemable Non- controlling Interests						Total Stockholders’ Equity
			Common Stock												Capital in Excess of Par Value						Retained Earnings						Accum- ulated Other Compre- hensive Loss						Stockholders’ Equity
(in millions)
for the three months ended December 31, 2020			Shares						Amount
Balance at October 1, 2020						495.1						$	49.5					$	—					$	10,472.6					$	(407.6)					$	10,114.5					$	754.6					$	10,869.1
Adoption of new accounting guidance																								(3.3)												(3.3)												(3.3)
Net income																								345.3												345.3						30.8						376.1
Other comprehensive income																														92.9						92.9												92.9
Dividends declared on common stock ($0.28 per share)																								(144.0)												(144.0)												(144.0)
Repurchase of common stock						(2.1)						(0.2)						(39.9)						(5.5)												(45.6)												(45.6)
Issuance of common stock						12.5						1.2						32.5																		33.7												33.7
Stock-based compensation																		7.4																		7.4												7.4
Net subscriptions and other																																										93.3						93.3
Balance at December 31, 2020						505.5						$	50.5					$	—					$	10,665.1					$	(314.7)					$	10,400.9					$	878.7					$	11,279.6

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

						Three Months Ended December 31,
(in millions)						2021						2020
Net Income						$	544.8					$	394.8
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation						59.4						41.0
Amortization of deferred sales commissions						18.4						19.0
Depreciation and other amortization						22.4						21.8
Amortization of intangible assets						58.3						58.2
Net gains on investments						(25.8)						(47.8)
Income from investments in equity method investees						(24.7)						(38.5)
Net gains on investments of consolidated investment products						(88.0)						(55.2)
Net purchase of investments by consolidated investment products						(67.9)						(106.2)
Deferred income taxes						(34.8)						(17.5)
Other						8.3						(5.6)
Changes in operating assets and liabilities:
Increase in receivables and other assets						(140.6)						(14.4)
Increase in investments, net						(44.6)						—
Decrease in accrued compensation and benefits						(273.1)						(104.2)
Increase (decrease) in commissions payable						(22.7)						11.4
Increase in income taxes payable						174.5						135.3
Increase in accounts payable, accrued expenses and other liabilities						16.4						12.3
Decrease in accounts payable and accrued expenses of consolidated investment products						(13.9)						(13.2)
Net cash provided by operating activities						166.4						291.2
Purchase of investments						(321.7)						(193.7)
Liquidation of investments						388.8						82.9
Purchase of investments by consolidated collateralized loan obligations						(839.2)						(915.6)
Liquidation of investments by consolidated collateralized loan obligations						435.2						187.9
Decrease in loans receivable, net						—						28.2
Additions of property and equipment, net						(16.7)						(13.6)
Acquisitions, net of cash acquired						(372.3)						—
Payments of contingent consideration asset						3.9						2.8
Net (deconsolidation) consolidation of investment products						(6.6)						9.5
Net cash used in investing activities						(728.6)						(811.6)

[Table continued on next page]

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

[Table continued from previous page]

						Three Months Ended December 31,
(in millions)						2021						2020
Dividends paid on common stock						$	(143.1)					$	(134.8)
Repurchase of common stock						(21.7)						(45.1)
Proceeds from issuance of debt						—						748.3
Payment of debt issuance costs						—						(6.7)
Proceeds from debt of consolidated investment products						1,727.6						543.1
Payments on debt of consolidated investment products						(1,228.1)						(207.4)
Payments on contingent consideration liabilities						(4.0)						—
Noncontrolling interests						136.6						63.4
Net cash provided by financing activities						467.3						960.8
Effect of exchange rate changes on cash and cash equivalents						(8.0)						27.7
Increase (decrease) in cash and cash equivalents						(102.9)						468.1
Cash and cash equivalents, beginning of period						4,647.2						3,989.8
Cash and Cash Equivalents, End of Period						$	4,544.3					$	4,457.9
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes						$	17.6					$	22.7
Cash paid for interest						8.5						10.9
Cash paid for interest by consolidated investment products						37.4						23.4

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021

(Unaudited)

Note 1 – Basis of Presentation

The unaudited interim financial statements of Franklin Resources, Inc. (“Franklin”) and its consolidated subsidiaries (collectively, the “Company”) included herein have been prepared in accordance with the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission. Under these rules and regulations, some information and footnote disclosures normally included in financial statements prepared under accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been shortened or omitted. Management believes that all adjustments necessary for a fair statement of the financial position and the results of operations for the periods shown have been made. All adjustments are normal and recurring. Management also believes that the accounting estimates are appropriate, and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates, actual amounts may differ from these estimates. These financial statements should be read together with the Company’s audited financial statements included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2021 (“fiscal year 2021”). Certain comparative amounts for the prior fiscal year period have been reclassified to conform to the financial statement presentation as of and for the period ended December 31, 2021.

During the quarter ended June 30, 2021, the Company identified an error related to the accounting of its indirect interests in certain collateralized loan obligations (“CLOs”) held through a limited partnership and the Company’s conclusion to consolidate that limited partnership. In accordance with U.S. GAAP, the Company should have consolidated the CLOs as the Company is the primary beneficiary of these entities and should not have consolidated the limited partnership. The error had no impact to net income attributable to the Company, earnings per share, retained earnings, or total Franklin Resources, Inc. stockholders’ equity.

The Company determined that the error did not result in a material misstatement to its previously issued consolidated financial statements. Nonetheless, for comparability, the Company has revised the comparative prior period amounts included in the consolidated statements of cash flows and related footnote disclosures.

The impact of the error on the consolidated statement of cash flows for the three months ended December 31, 2020 is as follows:

(in millions)						As Reported						Adjustments						As Revised
Net cash provided by operating activities						$	290.0					$	1.2					$	291.2
Net cash used in investing activities						(521.8)						(289.8)						(811.6)
Net cash provided by financing activities						666.1						294.7						960.8

Note 2 – Earnings per Share

The components of basic and diluted earnings per share were as follows:

(in millions, except per share data)												Three Months Ended December 31,
															2021						2020
Net income attributable to Franklin Resources, Inc.																		$	453.2					$	345.3
Less: allocation of earnings to participating nonvested stock and stock unit awards																		19.3						14.6
Net Income Available to Common Stockholders																		$	433.9					$	330.7
Weighted-average shares outstanding – basic																		489.8						491.1
Dilutive effect of nonparticipating nonvested stock unit awards																		0.8						0.6
Weighted-Average Shares Outstanding – Diluted																		490.6						491.7
Earnings per Share
Basic																		$	0.89					$	0.67
Diluted																		0.88						0.67

Nonparticipating nonvested stock unit awards excluded from the calculation of diluted earnings per share because their effect would have been antidilutive were insignificant and 0.4 million for the three months ended December 31, 2021 and 2020.

Note 3 – Revenues

Operating revenues by geographic area were as follows:

(in millions)						United States						Luxembourg						Americas Excluding United States						Asia-Pacific						Europe, Middle East and Africa, Excluding Luxembourg						Total
for the three months ended December 31, 2021
Investment management fees						$	1,284.0					$	258.4					$	70.3					$	81.8					$	66.0					$	1,760.5
Sales and distribution fees						278.4						98.8						13.4						7.6						—						398.2
Shareholder servicing fees						36.8						10.1						0.1						0.4						0.3						47.7
Other						17.1						0.3						—						0.2						—						17.6
Total						$	1,616.3					$	367.6					$	83.8					$	90.0					$	66.3					$	2,224.0

(in millions)						United States						Luxembourg						Americas Excluding United States						Asia-Pacific						Europe, Middle East and Africa, Excluding Luxembourg						Total
for the three months ended December 31, 2020
Investment management fees						$	1,112.1					$	221.8					$	70.0					$	78.7					$	57.8					$	1,540.4
Sales and distribution fees						277.9						89.8						12.3						14.0						2.9						396.9
Shareholder servicing fees						38.0						5.8						0.1						1.9						3.6						49.4
Other						6.5						0.3						—						0.3						1.3						8.4
Total						$	1,434.5					$	317.7					$	82.4					$	94.9					$	65.6					$	1,995.1

Operating revenues are attributed to geographic areas based on the locations of the subsidiaries that provide the services, which may differ from the regions in which the related investment products are sold.

Revenues earned from sponsored funds were 81% and 80% of the Company’s total operating revenues for the three months ended December 31, 2021 and 2020.

Note 4 – Investments

The disclosures below include details of the Company’s investments, excluding those of consolidated investment products (“CIPs”). See Note 6 – Consolidated Investment Products for information related to the investments held by these entities.

Investments consisted of the following:

(in millions)						December 31, 2021						September 30, 2021
Investments, at fair value
Sponsored funds and separate accounts						$	497.2					$	368.3
Investments related to long-term incentive plans						184.2						160.0
Other equity and debt investments						50.5						60.0
Total investments, at fair value						731.9						588.3
Investments in equity method investees						760.9						814.3
Other investments						170.4						107.7
Total						$	1,663.2					$	1,510.3

Note 5 – Fair Value Measurements

The disclosures below include details of the Company’s fair value measurements, excluding those of CIPs. See Note 6 – Consolidated Investment Products for information related to fair value measurements of the assets and liabilities of these entities.

The assets and liabilities measured at fair value on a recurring basis were as follows:

(in millions)						Level 1						Level 2						Level 3						NAV as a Practical Expedient						Total
as of December 31, 2021
Assets
Investments, at fair value
Sponsored funds and separate accounts						$	360.0					$	46.7					$	18.2					$	72.3					$	497.2
Investments related to long-term incentive plans						183.7						0.5						—						—						184.2
Other equity and debt investments						3.4						13.6						—						33.5						50.5
Contingent consideration asset						—						—						15.5						—						15.5
Total Assets Measured at Fair Value						$	547.1					$	60.8					$	33.7					$	105.8					$	747.4
Liabilities
Contingent consideration liabilities						$	—					$	—					$	56.7					$	—					$	56.7

(in millions)						Level 1						Level 2						Level 3						NAV as a Practical Expedient						Total
as of September 30, 2021
Assets
Investments, at fair value
Sponsored funds and separate accounts						$	241.3					$	18.4					$	24.6					$	84.0					$	368.3
Investments related to long-term incentive plans						160.0						—						—						—						160.0
Other equity and debt investments						3.3						13.3						—						43.4						60.0
Contingent consideration asset						—						—						19.4						—						19.4
Total Assets Measured at Fair Value						$	404.6					$	31.7					$	44.0					$	127.4					$	607.7
Liabilities
Contingent consideration liabilities						$	—					$	—					$	42.4					$	—					$	42.4

Investments for which fair value was estimated using reported NAV as a practical expedient primarily consist of nonredeemable private debt, equity and infrastructure funds, and redeemable global equity and private real estate funds. These investments were as follows:

(in millions)						December 31, 2021						September 30, 2021
Nonredeemable investments****1
Investments with unknown liquidation periods						$	46.4					$	46.6
Investments with known liquidation periods						32.3						53.9
Redeemable investments****2						27.1						26.9
Unfunded commitments						51.7						51.8

---

1The investments are expected to be returned through distributions over the life of the funds as a result of liquidations of the funds’ underlying assets. Investments with known liquidation periods have an expected weighted-average life of 4.0 years at both December 31, 2021 and September 30, 2021.

2Investments are redeemable on a monthly and quarterly basis.

Changes in the Level 3 assets and liabilities were as follows:

						2021																		2020
(in millions)						Investments						Contingent Consideration Asset						Contingent Consideration Liabilities						Investments						Contingent Consideration Asset						Contingent Consideration Liabilities
for the three months ended December 31,
Balance at beginning of period						$	24.6					$	19.4					$	(42.4)					$	17.4					$	39.7					$	(25.3)
Acquisitions						—						—						(24.5)						—												—
Total realized and unrealized gains (losses)
Included in investment and other income, net						0.2						—						—						(0.1)						—						—
Included in general, administrative and other expense						—						—						1.1						—						—						—
Purchases						3.5						—						—						5.5						—						—
Sales						(5.0)						—						—						(4.3)						—						—
Settlements						(3.2)						(3.9)						9.0						(0.5)						(2.8)						—
Transfers out of Level 3						(1.9)						—						—						(0.2)						—						—
Foreign exchange revaluation						—						—						0.1						—						—						(0.2)
Balance at End of Period						$	18.2					$	15.5					$	(56.7)					$	17.8					$	36.9					$	(25.5)
Change in unrealized gains (losses) included in net income relating to assets and liabilities held at end of period						$	(0.2)					$	—					$	1.3					$	(0.1)					$	—					$	—

Financial instruments that were not measured at fair value were as follows:

(in millions)						Fair Value Level						December 31, 2021												September 30, 2021
						Carrying Value						Estimated Fair Value						Carrying Value						Estimated Fair Value
Financial Assets
Cash and cash equivalents						1						$	4,178.8					$	4,178.8					$	4,357.8					$	4,357.8
Other investments
Time deposits						2						12.2						12.2						13.2						13.2
Equity securities						3						158.2						158.2						94.5						99.1
Financial Liability
Debt						2						$	3,393.7					$	3,395.1					$	3,399.4					$	3,434.1

Note 6 – Consolidated Investment Products

CIPs consist of mutual and other investment funds, limited partnerships and similar structures and CLOs, all of which are sponsored by the Company, and include both voting interest entities and variable interest entities. The Company had 63 CIPs, including 11 CLOs, as of December 31, 2021 and 60 CIPs, including 10 CLOs, as of September 30, 2021.

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

(in millions)						December 31, 2021						September 30, 2021
Assets
Cash and cash equivalents						$	365.5					$	289.4
Receivables						197.1						127.8
Investments, at fair value						6,341.6						5,820.1
Total Assets						$	6,904.2					$	6,237.3
Liabilities
Accounts payable and accrued expenses						$	631.9					$	558.0
Debt						4,178.6						3,671.0
Other liabilities						17.6						13.8
Total liabilities						4,828.1						4,242.8
Redeemable Noncontrolling Interests						662.5						622.5
Stockholders’ Equity
Franklin Resources, Inc.’s interests						980.0						1,000.7
Nonredeemable noncontrolling interests						433.6						371.3
Total stockholders’ equity						1,413.6						1,372.0
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity						$	6,904.2					$	6,237.3

The CIPs did not have a significant impact on net income attributable to the Company during the three months ended December 31, 2021 and 2020.

The Company has no right to the CIPs’ assets, other than its direct equity investments in them and investment management and other fees earned from them. The debt holders of the CIPs have no recourse to the Company’s assets beyond the level of its direct investment, therefore the Company bears no other risks associated with the CIPs’ liabilities.

Fair Value Measurements

Assets of CIPs measured at fair value on a recurring basis were as follows:

(in millions)						Level 1						Level 2						Level 3						NAV as a Practical Expedient						Total
as of December 31, 2021
Assets
Cash and cash equivalents of CLOs						$	249.9					$	—					$	—					$	—					$	249.9
Receivables of CLOs						—						88.0						—						—						88.0
Investments
Equity and debt securities						622.5						352.0						539.0						249.5						1,763.0
Loans						—						4,445.5						34.2						—						4,479.7
Real estate						—						—						98.9						—						98.9
Total Assets Measured at Fair Value						$	872.4					$	4,885.5					$	672.1					$	249.5					$	6,679.5

(in millions)						Level 1						Level 2						Level 3						NAV as a Practical Expedient						Total
as of September 30, 2021
Assets
Cash and cash equivalents of CLOs						$	145.4					$	—					$	—					$	—					$	145.4
Receivables of CLOs						—						84.0						—						—						84.0
Investments
Equity and debt securities						310.8						647.3						453.3						343.5						1,754.9
Loans						—						3,955.3						20.5						—						3,975.8
Real estate						—						—						89.4						—						89.4
Total Assets Measured at Fair Value						$	456.2					$	4,686.6					$	563.2					$	343.5					$	6,049.5

Investments for which fair value was estimated using reported NAV as a practical expedient consist of a redeemable global hedge fund, nonredeemable private equity funds and a redeemable U.S. equity fund. These investments were as follows:

(in millions)						December 31, 2021						September 30, 2021
Nonredeemable investments****1
Investments with known liquidation periods						$	53.8					$	141.4
Redeemable investments****2						195.7						202.1
Unfunded commitments3						0.5						0.5

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1The investments are expected to be returned through distributions over the life of the funds as a result of liquidations of the funds’ underlying assets. Investments have an expected weighted-average life of 1.0 year at December 31, 2021 and 1.3 years at September 30, 2021.

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

3Of the total unfunded commitments, the Company was contractually obligated to fund $0.2 million based on its ownership percentage in the CIPs, at December 31, 2021 and September 30, 2021.

Changes in Level 3 assets were as follows:

(in millions)						Equity and Debt Securities						Real Estate						Loans						Total Level 3 Assets
for the three months ended December 31, 2021
Balance at October 1, 2021						$	453.3					$	89.4					$	20.5					$	563.2
Realized and unrealized gains included in investment and other income of consolidated investment products, net						92.3						8.6						0.3						101.2
Purchases						18.2						0.9						14.0						33.1
Sales and settlements						(23.9)						—						(0.6)						(24.5)
Transfers into Level 3						0.1						—						—						0.1
Transfers out of Level 3						(1.0)						—						—						(1.0)
Balance at December 31, 2021						$	539.0					$	98.9					$	34.2					$	672.1
Change in unrealized gains included in net income relating to assets held at December 31, 2021						$	92.5					$	8.6					$	0.3					$	101.4

(in millions)						Equity and Debt Securities						Real Estate						Loans						Total Level 3 Assets
for the three months ended December 31, 2020
Balance at October 1, 2020						$	322.3					$	339.2					$	24.9					$	686.4
Realized and unrealized gains included in investment and other income of consolidated investment products, net						19.1						1.5						—						20.6
Purchases						12.6						51.1						—						63.7
Sales and settlements						(1.0)						—						(1.4)						(2.4)
Foreign exchange revaluation						3.0						16.0						—						19.0
Balance at December 31, 2020						$	356.0					$	407.8					$	23.5					$	787.3
Change in unrealized gains included in net income relating to assets held at December 31, 2020						$	18.3					$	1.5					$	0.1					$	19.9

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

(in millions)
as of December 31, 2021						Fair Value						Valuation Technique						Significant Unobservable Inputs						Range (Weighted Average1)
Equity and debt securities						$	404.0					Market pricing						Private sale pricing						$0.39–$100.00 ($21.11) per share
			85.2						Market comparable companies						Enterprise value/ EBITDA multiple						16.3–20.6 (18.7)
									Discount for lack of marketability						7.9%–25.5% (17.2%)
									Enterprise value/ Revenue multiple						0.6–7.2 (5.1)
									Price-to-book value ratio						0.7–1.8 (1.4)
									Control premium						20%
									Price-to-earnings ratio						27.9
			49.8						Discounted cash flow						Discount rate						3.1%–6.3% (4.2%)
Real estate						98.9						Discounted cash flow						Discount rate						5.5%–6.3% (5.9%)
									Exit capitalization rate						4.8%–5.0% (4.9%)

(in millions)
as of September 30, 2021						Fair Value						Valuation Technique						Significant Unobservable Inputs						Range (Weighted Average1)
Equity and debt securities						$	301.1					Market pricing						Private sale pricing						$0.39-$100.00 ($19.34) per share
102.3			Market comparable companies						Enterprise value/ EBITDA multiple						6.0–20.6 (13.7)
Discount for lack of marketability						6.0%–25.5% (17.6%)
Enterprise value/ Revenue multiple						0.6–7.2 (5.1)
Price-to-book value ratio						0.7–1.8 (1.4)
Control premium						20%
						Price-to-earnings ratio						28.8
49.9						Discounted cash flow						Discount rate						3.3%–6.3% (4.3%)
Real estate						89.4						Discounted cash flow						Discount rate						5.8%–6.0% (5.9%)
			Exit capitalization rate						5.0%–5.3% (5.1%)

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1Based on the relative fair value of the instruments.

If the relevant significant inputs used in the market-based valuations, other than discount for lack of marketability, were independently higher (lower) as of December 31, 2021, the resulting fair value of the assets would be higher (lower). If the relevant significant inputs used in the discounted cash flow valuations, as well as the discount for lack of marketability used in the market-based valuations, were independently higher (lower) as of December 31, 2021, the resulting fair value of the assets would be lower (higher).

Financial instruments of CIPs that were not measured at fair value were as follows:

(in millions)						Fair Value Level						December 31, 2021												September 30, 2021
						Carrying Value						Estimated Fair Value						Carrying Value						Estimated Fair Value
Financial Asset
Cash and cash equivalents						1						$	115.6					$	115.6					$	144.0					$	144.0
Financial Liabilities
Debt of CLOs1						2 or 3						$	4,134.8					$	4,140.0					$	3,634.1					$	3,610.6
Other debt						3						43.8						44.0						36.9						36.6

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1Substantially all was Level 2.

Debt

Debt of CIPs consisted of the following:

						December 31, 2021												September 30, 2021
(in millions)						Amount						Weighted- Average Effective Interest Rate						Amount						Weighted- Average Effective Interest Rate
Debt of CLOs						$	4,134.8					1.85%						$	3,634.1					2.11%
Other debt						43.8						1.94%						36.9						1.95%
Total						$	4,178.6											$	3,671.0

The debt of CLOs had fixed and floating interest rates ranging from 0.87% to 7.30% at December 31, 2021, and from 1.00% to 8.22% at September 30, 2021. The other debt had floating interest rates ranging from 1.63% to 2.42% at both December 31, 2021 and September 30, 2021. The floating rates were primarily based on LIBOR.

The contractual maturities for the debt of CIPs at December 31, 2021 were as follows:

(in millions)
for the fiscal years ending September 30,			Amount
2022 (remainder of year)						$	185.8
2023						—
2024						—
2025						9.8
2026						—
Thereafter						3,983.0
Total						$	4,178.6

Collateralized Loan Obligations

The unpaid principal balance and fair value of the investments of CLOs were as follows:

(in millions)						December 31, 2021						September 30, 2021
Unpaid principal balance						$	4,442.7					$	3,951.1
Difference between unpaid principal balance and fair value						20.1						20.9
Fair Value						$	4,462.8					$	3,972.0

There were no investments 90 days or more past due at December 31, 2021 and September 30, 2021.

The Company recognized $5.3 million and $0.9 million of net gains during the three months ended December 31, 2021 and 2020, related to its own economic interests in the CLOs. The aggregate principal amount due of the debt of CLOs was $4,136.9 million and $3,629.9 million at December 31, 2021 and September 30, 2021.

Note 7 – Redeemable Noncontrolling Interests

Changes in redeemable noncontrolling interests were as follows:

(in millions)						2021																		2020
			CIPs						Minority Interests						Total						CIPs						Minority Interests						Total
for the three months ended December 31,
Balance at beginning of period						$	622.5					$	310.5					$	933.0					$	397.3					$	144.6					$	541.9
Net income (loss)						(4.8)						12.3						7.5						13.0						5.7						18.7
Net subscriptions (distributions) and other						166.3						(1.9)						164.4						(29.9)						—						(29.9)
Net consolidations (deconsolidations)						(121.5)						—						(121.5)						84.9						—						84.9
Balance at End of Period						$	662.5					$	320.9					$	983.4					$	465.3					$	150.3					$	615.6

Note 8 – Nonconsolidated Variable Interest Entities

Variable interest entities (“VIEs”) for which the Company is not the primary beneficiary consist of sponsored funds and other investment products in which the Company has an equity ownership interest. The Company’s maximum exposure to loss from these VIEs consists of equity investments, investment management and other fee receivables as follows:

(in millions)						December 31, 2021						September 30, 2021
Investments						$	721.9					$	639.2
Receivables						153.5						172.1
Total						$	875.4					$	811.3

While the Company has no legal or contractual obligation to do so, it routinely makes cash investments in the course of launching sponsored funds. As it has done in the past, the Company also may voluntarily elect to provide its sponsored funds with additional direct or indirect financial support based on its business objectives. The Company did not provide financial or other support to its sponsored funds during the three months ended December 31, 2021. During the fiscal year ended September 30, 2020, the Company authorized loans to certain sponsored funds in India that experienced increased liquidity risks and redemptions. See Note 9 – Commitments and Contingencies for further information. The loans were fully repaid by March 31, 2021.

Note 9 – Commitments and Contingencies

Legal Proceedings

India Credit Fund Closure Matters. Effective April 24, 2020, Franklin Templeton Trustee Services Private Limited (“FTTS”), a subsidiary of Franklin, announced its decision to wind up six fixed income mutual fund schemes of the Franklin Templeton Mutual Fund in India (referred to herein as the “Funds”), closing the Funds to redemptions. At the time, the Funds had collective assets under management of approximately $3.4 billion. In connection with the wind-up decision, FTTS sought to convene unitholder meetings for the Funds to approve the appointment of a liquidator and the asset management company to the Funds, Franklin Templeton Asset Management (India) Private Limited (“FTAMI”), ceased earning investment management fees on the Funds.

In May and June 2020, certain Fund unitholders and others commenced multiple writ petition actions in different courts in India against a number of respondents, including Franklin, its subsidiaries FTTS, FTAMI, and Templeton International, Inc., as sponsor of the Franklin Templeton Mutual Fund, and related individuals (collectively, the “Company Respondents”), the Securities and Exchange Board of India (“SEBI”), and other governmental entities. The petitioners challenged the decision to wind up the Funds and alleged that the Company Respondents violated various SEBI regulations, mismanaged the Funds, misrepresented or omitted certain information relating to the Funds, and/or engaged in other alleged misconduct. The petitioners requested a wide range of relief, including, among other items, an order quashing the winding up notices and blocking the unitholder votes, initiating investigations into the Company Respondents, and allowing the unitholder petitioners to redeem their investments with interest. One of the petitioners obtained an interim injunction order staying the operation and implementation of the unitholder voting process. Following appeals to the Supreme Court of India, the petitions were transferred to the High Court of Karnataka for further consolidated proceedings.

In October 2020, the High Court of Karnataka issued its judgment, in which it upheld the decision taken by FTTS to wind up the Funds and held that there was “nothing wrong with the decision making process,” but determined that, under applicable regulations, unitholder approval is required to implement the decision. Certain Company Respondents and other parties filed cross-appeals to the Supreme Court of India, and certain intervenors filed applications, challenging aspects of the High Court’s judgment. In December 2020, with the approval of the Supreme Court, and without prejudice to its arguments on appeal that unitholder approval of the wind-up decision is not required, FTTS proceeded to obtain approval from the majority of the voting unitholders for winding up the six Funds. In February 2021, the Supreme Court issued a decision confirming the results of the unitholder votes and appointed a third-party asset manager to serve as the liquidator and begin cash distributions to unitholders.

In July 2021, the Supreme Court issued a ruling interpreting applicable regulations to require unitholder consent to effect a trustee’s decision to wind up a fund, while finding that, upon the trustee’s publication of its decision to unitholders under applicable regulations, fund business activities, including redemptions, are suspended pending the results of the unitholder vote. The Supreme Court further found that FTTS’ April 2020 publication to unitholders of its wind-up decision complied with applicable regulations, effectively freezing redemptions. Further hearings are expected to occur in connection with the remaining issues on appeal.

FTAMI continues to cooperate with the court-appointed liquidator in its work to liquidate the Funds’ remaining investments and distribute proceeds to unitholders. As of December 2021, approximately $3.5 billion has been distributed to Fund unitholders.

Separately, following the completion of a forensic audit/inspection, in late November and early December 2020, SEBI initiated regulatory proceedings by issuing show cause notices against FTAMI, FTTS and certain FTAMI employees (including in their officer or director capacities), alleging certain deficiencies and areas of non-compliance in the management of the Funds. In June 2021, SEBI issued orders against FTAMI, FTTS, and the FTAMI employee respondents, finding violations of certain regulatory provisions, including with respect to similarity in investment strategies among the Funds, calculation of duration and valuation of portfolio securities, deficiencies in documentation relating to investment diligence and investment terms, and portfolio risk management. SEBI’s orders include, as applicable, aggregate monetary penalties of INR 20.0 crore (approximately $2.7 million); disgorgement of investment management and advisory fees, together with interest through the date of SEBI’s order, totaling INR 512.5 crore (approximately $68.8 million), with continuing accrual of 12% interest until paid; and a prohibition on FTAMI from launching new fixed income funds in India for a two-year period. The respondents filed appeals, as well as applications to stay enforcement of SEBI’s orders pending resolution of the appeals, with the Securities Appellate Tribunal (the “SAT”) in India. In June 2021, the SAT granted the stay requested by FTAMI, subject to FTAMI’s deposit of INR 250.0 crore (approximately $33.6 million) into an escrow account, which has been deposited. In July 2021, SEBI appealed the SAT’s stay order to the Supreme Court of India. Based on FTAMI’s submission that it would not launch new fixed income schemes in India pending resolution of its appeal, the Supreme Court of India did not interfere with the

SAT’s stay order with respect to the monetary amounts and disposed of SEBI’s appeal. In July 2021, the SAT also granted the stay requests of FTTS and the FTAMI employee respondents, subject to the deposit of an aggregate of INR 7.5 crore (approximately $1.0 million) into an escrow account. The SAT appeals remain pending.

The Company has also responded to related inquiries and investigations commenced by certain governmental agencies in India, including the previously-reported “first information report” (the preliminary step in an investigation) registered by the Economic Offences Wing of the Chennai police department against certain of the Company Respondents in connection with a complaint by two Fund unitholders, as well as a related investigation by India’s Enforcement Directorate commenced in or around April 2021. The Company has been cooperating in these matters.

The Company strongly believes that the decision taken by FTTS to wind up the Funds was in the best interests of unitholders. The Company further believes that it has meritorious defenses to the outstanding claims in the pending proceedings and intends to continue vigorously defending against the claims. The Company cannot at this time predict the eventual outcome of the matters described above or reasonably estimate the possible loss or range of loss that may arise from any final outcome of such matters, including due to the complexities and uncertainty involved in the appeals and the various questions of law and fact at issue.

Other Litigation Matters. The Company is from time to time involved in other litigation relating to claims arising in the normal course of business. Management is of the opinion that the ultimate resolution of such claims will not materially affect the Company’s business, financial position, results of operations or liquidity. In management’s opinion, an adequate accrual has been made as of December 31, 2021 to provide for any probable losses that may arise from such matters for which the Company could reasonably estimate an amount.

Indemnifications and Guarantees

In the ordinary course of business or in connection with certain acquisition agreements, the Company enters into contracts that provide for indemnifications by the Company in certain circumstances. In addition, certain Company entities guarantee certain financial and performance-related obligations of various Franklin subsidiaries. The Company is also subject to certain legal requirements and agreements providing for indemnifications of directors, officers and personnel against liabilities and expenses they may incur under certain circumstances in connection with their service in those positions. The terms of these indemnities and guarantees vary pursuant to applicable facts and circumstances, and from agreement to agreement. Future payments for claims against the Company under these indemnities or guarantees could negatively impact the Company’s financial condition. In management’s opinion, no material loss was deemed probable or reasonably possible pursuant to such indemnification agreements and/or guarantees as of December 31, 2021.

Other Commitments and Contingencies

At December 31, 2021, there were no material changes in the other commitments and contingencies as reported in the Company’s Annual Report on Form 10-K for fiscal year 2021.

Note 10 – Stock-Based Compensation

Stock and stock unit award activity was as follows:

(shares in thousands)						Time-Based Shares						Performance- Based Shares						Total Shares						Weighted- Average Grant-Date Fair Value
for the three months ended December 31, 2021
Nonvested balance at October 1, 2021						14,176						3,658						17,834						$	22.27
Granted						4,291						145						4,436						35.20
Vested						(1,653)						(98)						(1,751)						24.99
Forfeited/canceled						(207)						(156)						(363)						24.35
Nonvested Balance at December 31, 2021						16,607						3,549						20,156						$	24.53

Total unrecognized compensation expense related to nonvested stock and stock unit awards was $379.7 million at December 31, 2021. This expense is expected to be recognized over a remaining weighted-average vesting period of 2.4 years.

Note 11 – Investment and Other Income, Net

Investment and other income, net consisted of the following:

												Three Months Ended December 31,
(in millions)																		2021						2020
Dividend and interest income																		$	6.1					$	5.1
Gains on investments, net																		25.8						48.7
Income from investments in equity method investees																		24.7						38.5
Rental income																		9.7						7.7
Foreign currency exchange gains (losses), net																		3.9						(16.5)
Other, net																		(13.2)						(6.3)
Investment and other income, net																		$	57.0					$	77.2

Net gains (losses) recognized on equity securities measured at fair value and trading debt securities that were held by the Company at December 31, 2021 and 2020 were $(4.4) million for the three months ended December 31, 2021, and $30.4 million for the three months ended December 31, 2020.

Note 12 – Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component were as follows:

(in millions)						Currency Translation Adjustments						Unrealized Losses on Defined Benefit Plans						Total
for the three months ended December 31, 2021
Balance at October 1, 2021						$	(370.5)					$	(7.1)					$	(377.6)
Other comprehensive loss
Other comprehensive loss before reclassifications, net of tax						(6.9)						(4.6)						(11.5)
Reclassifications to compensation and benefits expense, net of tax						—						(0.5)						(0.5)
Total other comprehensive loss						(6.9)						(5.1)						(12.0)
Balance at December 31, 2021						$	(377.4)					$	(12.2)					$	(389.6)

(in millions)						Currency Translation Adjustments						Unrealized Losses on Defined Benefit Plans						Total
for the three months ended December 31, 2020
Balance at October 1, 2020						$	(399.6)					$	(8.0)					$	(407.6)
Other comprehensive income (loss)
Other comprehensive income (loss) before reclassifications, net of tax						93.4						(0.6)						92.8
Reclassifications to net investment and other income, net of tax						0.1						—						0.1
Total other comprehensive income (loss)						93.5						(0.6)						92.9
Balance at December 31, 2020						$	(306.1)					$	(8.6)					$	(314.7)

Note 13 – Subsequent Event

On January 10, 2022, the Company entered into a bi-lateral credit agreement with Bank of America, N.A. to establish a 364 day revolving credit facility with aggregate commitments of $500.0 million. As of the time of this filing, there were no amounts outstanding.