Item 1. Financial Statements.

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Item 1. Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited


	Three Months Ended June 30,				Nine Months Ended June 30,
(in millions, except per share data)	2022		2021		2022		2021
Operating Revenues
Investment management fees	$	1,636.1	$	1,697.3	$	5,045.8	$	4,836.1
Sales and distribution fees	335.6		416.9		1,104.0		1,227.4
Shareholder servicing fees	46.9		50.5		146.8		155.6
Other	12.7		8.2		39.7		25.4
Total operating revenues	2,031.3		2,172.9		6,336.3		6,244.5
Operating Expenses
Compensation and benefits	766.7		771.4		2,321.8		2,229.2
Sales, distribution and marketing	440.3		531.0		1,432.8		1,579.3
Information systems and technology	125.9		121.8		376.6		355.8
Occupancy	53.8		54.6		163.1		164.1
Amortization of intangible assets	81.8		58.0		200.5		174.1
General, administrative and other	158.1		158.0		416.1		398.5
Total operating expenses	1,626.6		1,694.8		4,910.9		4,901.0
Operating Income	404.7		478.1		1,425.4		1,343.5
Other Income (Expenses)
Investment and other income, net	13.0		52.9		97.7		197.2
Interest expense	(28.9)		(25.7)		(71.1)		(71.3)
Investment and other income (losses) of consolidated investment products, net	(74.4)		61.0		33.3		263.3
Expenses of consolidated investment products	(1.3)		(10.9)		(10.1)		(26.5)
Other income (expenses), net	(91.6)		77.3		49.8		362.7
Income before taxes	313.1		555.4		1,475.2		1,706.2
Taxes on income	89.5		83.8		347.7		354.4
Net income	223.6		471.6		1,127.5		1,351.8
Less: net income (loss) attributable to
Redeemable noncontrolling interests	(0.5)		33.7		(50.2)		64.4
Nonredeemable noncontrolling interests	(32.3)		(0.5)		118.5		121.9
Net Income Attributable to Franklin Resources, Inc.	$	256.4	$	438.4	$	1,059.2	$	1,165.5

Earnings per Share
Basic	$	0.50	$	0.86	$	2.07	$	2.27
Diluted	0.50		0.86		2.07		2.27

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited


(in millions)		Three Months Ended June 30,						Nine Months Ended June 30,
	2022			2021			2022			2021
Net Income		$	223.6		$	471.6		$	1,127.5		$	1,351.8
Other Comprehensive Income (Loss)
Currency translation adjustments, net of tax		(100.6)			22.6			(123.8)			81.3
Net unrealized gains (losses) on defined benefit plans, net of tax		(2.4)			(0.2)			(2.2)			0.2

Total other comprehensive income (loss)		(103.0)			22.4			(126.0)			81.5
Total comprehensive income		120.6			494.0			1,001.5			1,433.3
Less: comprehensive income (loss) attributable to
Redeemable noncontrolling interests		(0.5)			33.7			(50.2)			64.4
Nonredeemable noncontrolling interests		(32.3)			(0.5)			118.5			121.9
Comprehensive Income Attributable to Franklin Resources, Inc.		$	153.4		$	460.8		$	933.2		$	1,247.0

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

Unaudited


(in millions, except share and per share data)	June 30, 2022		September 30, 2021
Assets
Cash and cash equivalents	$	3,806.3	$	4,357.8
Receivables	1,414.8		1,428.2
Investments (including $660.8 and $588.3 at fair value at June 30, 2022 and September 30, 2021)	1,658.5		1,510.3
Assets of consolidated investment products
Cash and cash equivalents	672.4		289.4
Investments, at fair value	7,475.3		5,820.1
Property and equipment, net	759.1		770.0
Goodwill	5,807.1		4,457.7
Intangible assets, net	5,177.4		4,710.2
Operating lease right-of-use assets	486.8		448.4
Other	338.3		376.3
Total Assets	$	27,596.0	$	24,168.4

Liabilities
Compensation and benefits	$	1,234.3	$	1,179.3
Accounts payable and accrued expenses	541.7		479.3
Commissions	209.8		259.8
Income taxes	521.2		693.6
Debt	3,382.2		3,399.4
Liabilities of consolidated investment products
Accounts payable and accrued expenses	451.4		558.0
Debt	5,496.5		3,671.0
Deferred tax liabilities	290.9		311.7
Operating lease liabilities	555.3		518.4
Other	1,133.9		354.3
Total liabilities	13,817.2		11,424.8
Commitments and Contingencies (Note 11)
Redeemable Noncontrolling Interests	1,493.7		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; 498,356,132 and 501,807,677 shares issued and outstanding at June 30, 2022 and September 30, 2021	49.8		50.2
Retained earnings	11,997.5		11,550.8
Accumulated other comprehensive loss	(503.6)		(377.6)
Total Franklin Resources, Inc. stockholders’ equity	11,543.7		11,223.4
Nonredeemable noncontrolling interests	741.4		587.2
Total stockholders’ equity	12,285.1		11,810.6
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	27,596.0	$	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 nine months ended June 30, 2022	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
Net income										349.6						349.6		66.7		416.3
Other comprehensive loss													(11.0)			(11.0)				(11.0)
Dividends declared on common stock ($0.29 per share)										(148.3)						(148.3)				(148.3)
Repurchase of common stock		(2.7)		(0.4)			(66.7)			(13.7)						(80.8)				(80.8)
Issuance of common stock		0.6		0.1			18.5									18.6				18.6
Stock-based compensation							48.2									48.2				48.2
Net distributions and other																		(21.7)		(21.7)
Net deconsolidation of investment products																		(39.6)		(39.6)
Adjustment to fair value of redeemable noncontrolling interests										(188.5)						(188.5)				(188.5)
Balance at March 31, 2022		500.4		$	50.0		$	—		$	11,891.3		$	(400.6)		$	11,540.7	$	648.9	$	12,189.6
Net income (loss)										256.4						256.4		(32.3)		224.1
Other comprehensive loss													(103.0)			(103.0)				(103.0)
Dividends declared on common stock ($0.29 per share)										(147.7)						(147.7)				(147.7)
Repurchase of common stock		(2.0)		(0.2)			(48.3)			(2.5)						(51.0)				(51.0)
Issuance of common stock		—		—			1.8									1.8				1.8
Stock-based compensation							46.5									46.5				46.5
Net distributions and other																		(24.8)		(24.8)
Net deconsolidation of investment products																		(0.3)		(0.3)
Acquisition																		149.9		149.9
Balance at June 30, 2022		498.4		$	49.8		$	—		$	11,997.5		$	(503.6)		$	11,543.7	$	741.4	$	12,285.1

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 nine months ended June 30, 2021	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
Net income										381.8						381.8		91.6		473.4
Other comprehensive loss													(33.8)			(33.8)				(33.8)
Dividends declared on common stock ($0.28 per share)										(143.7)						(143.7)				(143.7)
Repurchase of common stock		(1.7)		(0.2)			(56.2)			10.6						(45.8)				(45.8)
Issuance of common stock		0.5		0.1			14.1									14.2				14.2
Stock-based compensation							42.1									42.1				42.1
Net subscriptions and other																		16.5		16.5
Net deconsolidation of investment products																		(31.6)		(31.6)
Adjustment to fair value of redeemable noncontrolling interests										(52.3)						(52.3)				(52.3)
Balance at March 31, 2021		504.3		$	50.4		$	—		$	10,861.5		$	(348.5)		$	10,563.4	$	955.2	$	11,518.6
Net income (loss)										438.4						438.4		(0.5)		437.9
Other comprehensive income													22.4			22.4				22.4
Dividends declared on common stock ($0.28 per share)										(143.3)						(143.3)				(143.3)
Repurchase of common stock		(1.4)		(0.1)			(40.7)			(5.6)						(46.4)				(46.4)
Issuance of common stock		—		—			0.2									0.2				0.2
Stock-based compensation							40.5									40.5				40.5
Net subscriptions and other																		87.9		87.9
Net deconsolidation of investment products																		(487.0)		(487.0)
Balance at June 30, 2021		502.9		$	50.3		$	—		$	11,151.0		$	(326.1)		$	10,875.2	$	555.6	$	11,430.8

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited


	Nine Months Ended June 30,
(in millions)	2022		2021

Net Income	$	1,127.5	$	1,351.8
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	160.9		126.6
Amortization of deferred sales commissions	49.6		58.8
Depreciation and other amortization	68.8		70.9
Amortization of intangible assets	200.5		174.1
Net losses (gains) on investments	32.9		(67.7)
Income from investments in equity method investees	(51.6)		(123.8)
Net losses (gains) on investments of consolidated investment products	22.0		(176.1)
Net purchase of investments by consolidated investment products	(312.2)		(434.4)
Deferred income taxes	55.9		(42.3)
Other	33.0		12.3
Changes in operating assets and liabilities:
Increase in receivables and other assets	(97.3)		(115.2)
Decrease (increase) in investments, net	(33.2)		15.6
Increase (decrease) in accrued compensation and benefits	45.1		(88.9)
Increase (decrease) in commissions payable	(50.0)		14.2
Decrease in income taxes payable	(176.3)		(50.4)
Increase (decrease) in accounts payable, accrued expenses and other liabilities	40.9		(1.7)
Increase (decrease) in accounts payable and accrued expenses of consolidated investment products	(26.2)		15.5
Net cash provided by operating activities	1,090.3		739.3
Purchase of investments	(676.5)		(624.8)
Liquidation of investments	872.0		383.7
Purchase of investments by consolidated collateralized loan obligations	(3,198.4)		(2,731.1)
Liquidation of investments by consolidated collateralized loan obligations	1,501.4		1,148.7
Decrease in loans receivable, net	—		42.7
Additions of property and equipment, net	(55.6)		(34.9)
Acquisitions, net of cash acquired	(1,354.7)		—
Payments of contingent consideration asset	20.9		15.6
Net consolidation (deconsolidation) of investment products	211.0		(135.9)
Net cash used in investing activities	(2,679.9)		(1,936.0)

[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]


	Nine Months Ended June 30,
(in millions)	2022		2021

Issuance of common stock	$	13.6	$	11.0
Dividends paid on common stock	(437.1)		(418.6)
Repurchase of common stock	(154.0)		(135.8)
Proceeds from issuance of debt	—		748.3
Payment of debt issuance costs	—		(6.7)
Payment on debt	—		(250.0)
Proceeds from debt of consolidated investment products	4,345.2		1,636.2
Payments on debt of consolidated investment products	(2,469.3)		(488.7)
Payments on contingent consideration liabilities	(4.1)		—
Noncontrolling interests	194.9		447.2
Net cash provided by financing activities	1,489.2		1,542.9
Effect of exchange rate changes on cash and cash equivalents	(68.1)		25.1
Increase (decrease) in cash and cash equivalents	(168.5)		371.3
Cash and cash equivalents, beginning of period	4,647.2		3,989.8
Cash and Cash Equivalents, End of Period	$	4,478.7	$	4,361.1

Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	$	456.7	$	434.6
Cash paid for interest	61.8		76.2
Cash paid for interest by consolidated investment products	107.0		75.7

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(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 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 June 30, 2022.

Note 2 – Acquisitions

Lexington Partners L.P.

On April 1, 2022, the Company acquired all of the outstanding ownership interests in Lexington Partners L.P. (“Lexington”), a leading global manager of secondary private equity and co-investment funds, for cash consideration of $984.7 million paid at the time of close and deferred consideration of $750.0 million that has an acquisition-date fair value of $706.4 million. The consideration paid at close was funded from existing cash. In connection with the acquisition, the Company granted a 25% profits interest in Lexington and performance-based cash retention awards that both vest over approximately five years. The acquisition bolsters the Company’s alternative asset capabilities, complementing its existing strengths in real estate, private credit, and hedge fund strategies.

The preliminary allocation of estimated fair values of the assets acquired and liabilities and noncontrolling interests assumed was as follows:


(in millions)	Estimated Fair Value
as of April 1, 2022
Goodwill	$	1,105.3
Definite-lived intangible assets	552.0
Investments	163.0
Operating lease right-of-use assets	84.4
Other assets and liabilities, net	28.1
Operating lease liabilities	(91.8)
Nonredeemable noncontrolling interests	(149.9)
Total Identifiable Net Assets	$	1,691.1

The goodwill is primarily attributable to expected growth opportunities from the combined operations and is deductible for tax purposes. The definite-lived intangible assets relate to acquired investment management contracts and trade names, which are amortized over their estimated useful lives ranging from 6.0 years to 20.0 years. Amortization expense related to the definite-lived intangible assets was $21.3 million for the period ended June 30, 2022. These assets had a weighted-average remaining useful life of 7.3 years at June 30, 2022, with estimated remaining amortization expense as follows:


(in millions)
for the fiscal years ending September 30,	Amount
2022 (remainder of year)		$	21.3
2023		85.3
2024		85.3
2025		85.3
2026		85.3
Thereafter		168.2
Total		$	530.7

Costs incurred in connection with the acquisition were $16.3 million for the nine months ended June 30, 2022.

Lexington contributed $90.7 million of revenue and did not have a material impact to net income attributable to Franklin Resources, Inc. for the period ended June 30, 2022. Consequently, the Company has not presented pro forma combined results of operations for this acquisition.

O’Shaughnessy Asset Management, LLC

On December 31, 2021, the Company acquired all of the outstanding ownership interests in O’Shaughnessy Asset Management, LLC (“OSAM”), a leading quantitative asset management firm, for cash consideration paid of approximately $300.0 million, excluding future payments to be made subject to the attainment of certain performance measures. The acquisition resulted in $262.3 million of goodwill attributable to expected growth opportunities and synergies from the combined operations and is deductible for tax purposes.

Note 3 – Earnings per Share

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


(in millions, except per share data)		Three Months Ended June 30,						Nine Months Ended June 30,
	2022			2021			2022			2021
Net income attributable to Franklin Resources, Inc.		$	256.4		$	438.4		$	1,059.2		$	1,165.5
Less: allocation of earnings to participating nonvested stock and stock unit awards		11.2			19.4			45.6			50.6
Net Income Available to Common Stockholders		$	245.2		$	419.0		$	1,013.6		$	1,114.9

Weighted-average shares outstanding – basic		487.5			489.2			489.1			490.3
Dilutive effect of nonparticipating nonvested stock unit awards		0.4			0.7			0.6			0.6
Weighted-Average Shares Outstanding – Diluted		487.9			489.9			489.7			490.9

Earnings per Share
Basic		$	0.50		$	0.86		$	2.07		$	2.27
Diluted		0.50			0.86			2.07			2.27

Nonparticipating nonvested stock unit awards excluded from the calculation of diluted earnings per share because their effect would have been antidilutive were insignificant for the three and nine months ended June 30, 2022 and 2021.

Note 4 – Revenues

Operating revenues by geographic area were as follows:



(in millions)	United States		Luxembourg		Asia-Pacific		Americas Excluding United States		Europe, Middle East and Africa, Excluding Luxembourg		Total
for the three months ended June 30, 2022
Investment management fees	$	1,234.7	$	211.6	$	71.2	$	59.4	$	59.2	$	1,636.1
Sales and distribution fees	238.1		80.2		5.8		11.5		—		335.6
Shareholder servicing fees	37.5		8.5		0.4		0.1		0.4		46.9
Other	12.0		0.3		0.2		—		0.2		12.7
Total	$	1,522.3	$	300.6	$	77.6	$	71.0	$	59.8	$	2,031.3


(in millions)	United States		Luxembourg		Asia-Pacific		Americas Excluding United States		Europe, Middle East and Africa, Excluding Luxembourg		Total
for the nine months ended June 30, 2022
Investment management fees	$	3,720.8	$	707.2	$	242.5	$	194.3	$	181.0	$	5,045.8
Sales and distribution fees	778.1		268.3		20.0		37.6		—		1,104.0
Shareholder servicing fees	116.4		27.9		1.1		0.2		1.2		146.8
Other	38.2		0.8		0.5		—		0.2		39.7
Total	$	4,653.5	$	1,004.2	$	264.1	$	232.1	$	182.4	$	6,336.3



(in millions)	United States		Luxembourg		Asia-Pacific		Americas Excluding United States		Europe, Middle East and Africa, Excluding Luxembourg		Total
for the three months ended June 30, 2021
Investment management fees	$	1,213.0	$	269.9	$	85.7	$	73.1	$	55.6	$	1,697.3
Sales and distribution fees	293.7		100.5		8.4		14.0		0.3		416.9
Shareholder servicing fees	38.3		10.1		2.0		0.1		—		50.5
Other	7.8		0.3		0.1		—		—		8.2
Total	$	1,552.8	$	380.8	$	96.2	$	87.2	$	55.9	$	2,172.9


(in millions)	United States		Luxembourg		Asia-Pacific		Americas Excluding United States		Europe, Middle East and Africa, Excluding Luxembourg		Total
for the nine months ended June 30, 2021
Investment management fees	$	3,416.1	$	803.2	$	248.0	$	212.7	$	156.1	$	4,836.1
Sales and distribution fees	852.4		295.2		37.4		38.9		3.5		1,227.4
Shareholder servicing fees	119.9		26.0		5.9		0.2		3.6		155.6
Other	17.9		0.8		1.6		—		5.1		25.4
Total	$	4,406.3	$	1,125.2	$	292.9	$	251.8	$	168.3	$	6,244.5

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

Revenues earned from sponsored funds were 83% and 81% of the Company’s total operating revenues for the three and nine months ended June 30, 2022 and 78% and 80% for the three and nine months ended June 30, 2021.

Note 5 – Investments

The disclosures below include details of the Company’s investments, excluding those of consolidated investment products (“CIPs”). See Note 8 – Consolidated Investment Products for information related to the investments held by these entities.

Investments consisted of the following:


(in millions)	June 30, 2022		September 30, 2021
Investments, at fair value
Sponsored funds and separate accounts	$	463.5	$	368.3
Investments related to long-term incentive plans	141.0		160.0
Other equity and debt investments	56.3		60.0
Total investments, at fair value	660.8		588.3
Investments in equity method investees	744.5		814.3
Other investments	253.2		107.7
Total	$	1,658.5	$	1,510.3

The Company recognized other-than-temporary impairment of $8.7 million and $29.9 million in earnings during the three and nine months ended June 30, 2022.

Note 6 – Fair Value Measurements

The disclosures below include details of the Company’s fair value measurements, excluding those of CIPs. See Note 8 – 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 June 30, 2022
Assets
Investments, at fair value
Sponsored funds and separate accounts	$	334.2	$	48.4	$	19.2	$	61.7	$	463.5
Investments related to long-term incentive plans	141.0		—		—		—		141.0
Other equity and debt investments	3.2		19.5		—		33.6		56.3
Contingent consideration asset	—		—		8.8		—		8.8
Total Assets Measured at Fair Value	$	478.4	$	67.9	$	28.0	$	95.3	$	669.6

Liabilities
Contingent consideration liabilities	$	—	$	—	$	60.1	$	—	$	60.1


(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)	June 30, 2022		September 30, 2021
Nonredeemable investments1
Investments with unknown liquidation periods	$	35.8	$	46.6
Investments with known liquidation periods	33.9		53.9

Redeemable investments2	25.6		26.9

Unfunded commitments	51.4		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 3.6 years and 4.0 years at June 30, 2022 and September 30, 2021.

2Investments are redeemable on a monthly and quarterly basis.

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


	2022						2021
(in millions)	Investments		Contingent Consideration Asset		Contingent Consideration Liabilities		Investments		Contingent Consideration Asset		Contingent Consideration Liabilities
for the three months ended June 30,
Balance at beginning of period	$	21.9	$	17.1	$	(56.5)	$	19.5	$	29.1	$	(25.3)
Total realized and unrealized gains (losses)
Included in investment and other income, net	1.2		—		—		0.2		—		—
Included in general, administrative and other expense	—		—		(3.7)		—		—		—
Purchases	3.8		—		—		5.3		—		—
Sales	(1.6)		—		—		(0.3)		—		—
Settlements	(1.1)		(8.3)		—		—		(5.0)		—
Consolidation of investment product	(5.0)		—		—		—		—		—
Foreign exchange revaluation	—		—		0.1		—		—		—
Balance at End of Period	$	19.2	$	8.8	$	(60.1)	$	24.7	$	24.1	$	(25.3)
Change in unrealized gains (losses) included in net income relating to assets and liabilities held at end of period	$	(0.3)	$	—	$	(3.7)	$	0.2	$	—	$	—


	2022						2021
(in millions)	Investments		Contingent Consideration Asset		Contingent Consideration Liabilities		Investments		Contingent Consideration Asset		Contingent Consideration Liabilities
for the nine months ended June 30,
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	(0.4)		—		—		—		—		—
Included in general, administrative and other expense	—		10.3		(2.6)		—		—		—
Purchases	14.1		—		—		13.8		—		—
Sales	(7.9)		—		—		(5.8)		—		—
Settlements	(4.3)		(20.9)		9.1		(0.5)		(15.6)		—
Consolidation of investment product	(5.0)		—		—		—		—		—
Transfers out of Level 3	(1.9)		—		—		(0.2)		—		—
Foreign exchange revaluation	—		—		0.3		—		—		—
Balance at End of Period	$	19.2	$	8.8	$	(60.1)	$	24.7	$	24.1	$	(25.3)
Change in unrealized gains (losses) included in net income relating to assets and liabilities held at end of period	$	(0.7)	$	10.3	$	(2.4)	$	—	$	—	$	—

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


(in millions)	Fair Value Level	June 30, 2022				September 30, 2021
	Carrying Value	Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets
Cash and cash equivalents	1	$	3,806.3	$	3,806.3	$	4,357.8	$	4,357.8
Other investments
Time deposits	2	10.8		10.8		13.2		13.2
Equity securities	3	242.4		242.4		94.5		99.1

Financial Liability
Debt	2	$	3,382.2	$	2,878.6	$	3,399.4	$	3,434.1

Note 7 – Debt

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 an aggregate commitment of $500.0 million. As of June 30, 2022, there were no amounts outstanding.

There were no other material changes to the Company’s debt during the nine months ended June 30, 2022.

Note 8 – Consolidated Investment Products

CIPs consist of mutual and other investment funds, limited partnerships and similar structures and CLOs, all of which are sponsored by the Company, and include both voting interest entities and variable interest entities (“VIEs”). The Company had 58 CIPs, including 14 CLOs, as of June 30, 2022 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)	June 30, 2022		September 30, 2021
Assets
Cash and cash equivalents	$	672.4	$	289.4
Receivables	178.8		127.8
Investments, at fair value	7,475.3		5,820.1
Total Assets	$	8,326.5	$	6,237.3

Liabilities
Accounts payable and accrued expenses	$	451.4	$	558.0
Debt	5,496.5		3,671.0
Other liabilities	22.5		13.8
Total liabilities	5,970.4		4,242.8
Redeemable Noncontrolling Interests	994.5		622.5
Stockholders’ Equity
Franklin Resources, Inc.’s interests	957.7		1,000.7
Nonredeemable noncontrolling interests	403.9		371.3
Total stockholders’ equity	1,361.6		1,372.0
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	8,326.5	$	6,237.3

The CIPs did not have a significant impact on net income attributable to the Company during the three and nine months ended June 30, 2022 and 2021.

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 June 30, 2022
Assets
Cash and cash equivalents of CLOs	$	299.5	$	—	$	—	$	—	$	299.5
Receivables of CLOs	—		105.0		—		—		105.0
Investments
Equity and debt securities	79.5		875.2		557.0		217.7		1,729.4
Loans	—		5,467.8		37.6		—		5,505.4
Real estate	—		—		240.5		—		240.5
Total Assets Measured at Fair Value	$	379.0	$	6,448.0	$	835.1	$	217.7	$	7,879.8


(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)	June 30, 2022		September 30, 2021
Nonredeemable investments1
Investments with known liquidation periods	$	38.2	$	141.4
Investments with unknown liquidation periods	12.2		—

Redeemable investments2	167.3		202.1

Unfunded commitments3	0.2		0.5

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 0.5 year at June 30, 2022 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 $0.1 million and $0.2 million based on its ownership percentage in the CIPs, at June 30, 2022 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 June 30, 2022
Balance at April 1, 2022	$	595.4	$	175.4	$	33.6	$	804.4
Realized and unrealized gains (losses) included in investment and other income (losses) of consolidated investment products, net	(31.7)		4.1		0.2		(27.4)
Purchases	6.5		61.0		(0.1)		67.4
Sales and settlements	(13.1)		—		(0.1)		(13.2)
Deconsolidations	—		—		(1.7)		(1.7)
Transfers into Level 3	—		—		5.7		5.7
Transfers out of Level 3	(0.1)		—		—		(0.1)
Balance at June 30, 2022	$	557.0	$	240.5	$	37.6	$	835.1
Change in unrealized gains (losses) included in net income relating to assets held at June 30, 2022	$	(32.2)	$	4.1	$	0.2	$	(27.9)


(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
for the nine months ended June 30, 2022
Balance at October 1, 2021	$	453.3	$	89.4	$	20.5	$	563.2
Realized and unrealized gains (losses) included in investment and other income (losses) of consolidated investment products, net	138.6		18.4		0.2		157.2
Purchases	140.0		132.7		14.0		286.7
Sales and settlements	(118.9)		—		(1.1)		(120.0)
Deconsolidations	(55.0)		—		(1.7)		(56.7)
Transfers into Level 3	0.1		—		5.7		5.8
Transfers out of Level 3	(1.1)		—		—		(1.1)
Balance at June 30, 2022	$	557.0	$	240.5	$	37.6	$	835.1
Change in unrealized gains included in net income relating to assets held at June 30, 2022	$	126.6	$	18.4	$	—	$	145.0


(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
for the three months ended June 30, 2021
Balance at April 1, 2021	$	271.2	$	423.5	$	22.4	$	717.1
Realized and unrealized gains included in investment and other income (losses) of consolidated investment products, net	6.2		2.4		0.2		8.8
Purchases	14.0		44.2		—		58.2
Sales and settlements	(2.4)		—		(1.2)		(3.6)
Deconsolidations	—		(448.8)		—		(448.8)
Transfers into Level 3	0.9		—		—		0.9
Transfers out of Level 3	(1.0)		—		—		(1.0)
Foreign exchange revaluation	—		1.2		—		1.2
Balance at June 30, 2021	$	288.9	$	22.5	$	21.4	$	332.8
Change in unrealized gains (losses) included in net income relating to assets held at June 30, 2021	$	6.2	$	(0.5)	$	0.2	$	5.9


(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
for the nine months ended June 30, 2021
Balance at October 1, 2020	$	322.3	$	339.2	$	24.9	$	686.4
Realized and unrealized gains included in investment and other income (losses) of consolidated investment products, net	26.3		5.1		0.2		31.6
Purchases	34.1		116.5		—		150.6
Sales and settlements	(59.4)		—		(3.7)		(63.1)
Deconsolidations	(36.2)		(448.8)		—		(485.0)
Transfers into Level 3	2.1		—		—		2.1
Transfers out of Level 3	(1.0)		—		—		(1.0)
Foreign exchange revaluation	0.7		10.5		—		11.2
Balance at June 30, 2021	$	288.9	$	22.5	$	21.4	$	332.8
Change in unrealized gains included in net income relating to assets held at June 30, 2021	$	25.9	$	2.2	$	0.3	$	28.4

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


(in millions)
as of June 30, 2022		Fair Value			Valuation Technique		Significant Unobservable Inputs		Range (Weighted Average1)
Equity and debt securities		$	492.7		Market pricing		Private sale pricing		$0.39–$789.78 ($45.27) per share
	64.3			Market comparable companies		Enterprise value/ EBITDA multiple		14.7
				Discount for lack of marketability		14.6%–25.0% (19.4%)
				Price-to-book value ratio		1.2

Real estate		240.5			Discounted cash flow		Discount rate		5.5%–6.3% (6.0%)
				Exit capitalization rate		4.5%–5.5% (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%)

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 June 30, 2022, 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 June 30, 2022, the resulting fair value of the assets would be lower (higher).

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


(in millions)	Fair Value Level	June 30, 2022				September 30, 2021
	Carrying Value	Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Asset
Cash and cash equivalents	1	$	372.9	$	372.9	$	144.0	$	144.0
Receivables of CLOs	2	16.7		16.7		—		—
Financial Liabilities
Debt of CLOs1	2 or 3	$	5,396.8	$	5,437.8	$	3,634.1	$	3,610.6
Other debt	3	99.7		92.9		36.9		36.6

1Substantially all was Level 2.

Debt

Debt of CIPs consisted of the following:


	June 30, 2022			September 30, 2021
(in millions)	Amount		Weighted- Average Effective Interest Rate	Amount		Weighted- Average Effective Interest Rate
Debt of CLOs	$	5,396.8	2.03%	$	3,634.1	2.11%
Other debt	99.7		3.73%	36.9		1.95%
Total	$	5,496.5		$	3,671.0

The debt of CLOs had fixed and floating interest rates ranging from 1.00% to 8.27% at June 30, 2022, and from 1.00% to 8.22% at September 30, 2021. The other debt had fixed and floating interest rates ranging from 3.31% to 6.00% at June 30, 2022, and from 1.63% to 2.42% at September 30, 2021. The floating rates were primarily based on LIBOR.

The contractual maturities for the debt of CIPs at June 30, 2022 were as follows:


(in millions)
for the fiscal years ending September 30,	Amount
2022 (remainder of year)		$	99.4
2023		21.9
2024		84.2
2025		—
2026		—
Thereafter		5,291.0
Total		$	5,496.5

Collateralized Loan Obligations

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


(in millions)	June 30, 2022		September 30, 2021
Unpaid principal balance	$	5,549.5	$	3,951.1
Difference between unpaid principal balance and fair value	(46.9)		20.9
Fair Value	$	5,502.6	$	3,972.0

There were no investments 90 days or more past due at June 30, 2022 and September 30, 2021.

The Company recognized $4.9 million and $17.8 million of net gains during the three and nine months ended June 30, 2022 and $1.1 million and $8.5 million of net gains during the three and nine months ended June 30, 2021, related to its own economic interests in the CLOs. The aggregate principal amount due of the debt of CLOs was $5,463.1 million and $3,629.9 million at June 30, 2022 and September 30, 2021.

Note 9 – Redeemable Noncontrolling Interests

Changes in redeemable noncontrolling interests were as follows:


(in millions)		2022									2021
	CIPs			Minority Interests			Total			CIPs			Minority Interests			Total
for the three months ended June 30,
Balance at beginning of period		$	625.3		$	512.8		$	1,138.1		$	609.9		$	205.8		$	815.7
Net income (loss)		(16.5)			16.0			(0.5)			23.5			10.2			33.7
Net subscriptions (distributions) and other		5.4			(29.6)			(24.2)			190.1			(18.1)			172.0
Net consolidations		380.3			—			380.3			31.3			—			31.3

Balance at End of Period		$	994.5		$	499.2		$	1,493.7		$	854.8		$	197.9		$	1,052.7


(in millions)		2022									2021
	CIPs			Minority Interests			Total			CIPs			Minority Interests			Total
for the nine months ended June 30,
Balance at beginning of period		$	622.5		$	310.5		$	933.0		$	397.3		$	144.6		$	541.9
Net income (loss)		(90.9)			40.7			(50.2)			42.9			21.5			64.4
Net subscriptions (distributions) and other		320.0			(40.5)			279.5			270.0			(20.5)			249.5
Net consolidations		142.9			—			142.9			144.6			—			144.6
Adjustment to fair value		—			188.5			188.5			—			52.3			52.3
Balance at End of Period		$	994.5		$	499.2		$	1,493.7		$	854.8		$	197.9		$	1,052.7

Note 10 – Nonconsolidated Variable Interest Entities

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


(in millions)	June 30, 2022		September 30, 2021
Investments	$	728.7	$	639.2
Receivables	175.9		172.1
Total	$	904.6	$	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 assessed as VIEs during the nine months ended June 30, 2022. 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. The loans were fully repaid by March 31, 2021. See Note 16 – Commitments and Contingencies in the notes to consolidated financial statements in Item 8 of Part II of our Annual Report on Form 10-K for fiscal year 2021 for further information.

Note 11 – Commitments and Contingencies

Legal Proceedings

India Credit Fund Closure Matters. During the nine months ended June 30, 2022, there were no significant changes from the disclosure in the Form 10‑K for the fiscal year ended September 30, 2021. As of June 30, 2022, the amount reported as distributed to Fund unitholders is approximately $3.5 billion.

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 June 30, 2022 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 June 30, 2022.

Other Commitments and Contingencies

At June 30, 2022, 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 12 – 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 nine months ended June 30, 2022
Nonvested balance at October 1, 2021	14,176	3,658	17,834	$	22.27
Granted	4,713	227	4,940	34.36
Vested	(1,891)	(98)	(1,989)	25.43
Forfeited/canceled	(435)	(188)	(623)	26.20
Nonvested Balance at June 30, 2022	16,563	3,599	20,162	$	24.48

Total unrecognized compensation expense related to nonvested stock and stock unit awards was $286.4 million at June 30, 2022. This expense is expected to be recognized over a remaining weighted-average vesting period of 2.0 years.

Note 13 – Investment and Other Income, Net

Investment and other income, net consisted of the following:


	Three Months Ended June 30,				Nine Months Ended June 30,
(in millions)	2022		2021		2022		2021
Dividend and interest income	$	6.3	$	3.4	$	17.5	$	12.4
Gains (losses) on investments, net	(35.6)		17.3		(32.9)		76.2
Income (losses) from investments in equity method investees	(0.1)		39.4		51.6		123.8
Gains (losses) on derivatives, net	17.5		(9.1)		15.2		(25.2)
Rental income	9.6		7.2		27.9		22.7
Foreign currency exchange gains (losses), net	14.5		(7.2)		24.2		(17.2)
Other, net	0.8		1.9		(5.8)		4.5
Investment and other income, net	$	13.0	$	52.9	$	97.7	$	197.2

Net gains (losses) recognized on equity securities measured at fair value and trading debt securities that were held by the Company at June 30, 2022 and 2021 were $(50.3) million and $(79.1) million for the three and nine months ended June 30, 2022, and $(0.2) million and $27.2 million for the three and nine months ended June 30, 2021.

Note 14 – 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 June 30, 2022
Balance at April 1, 2022	$	(393.7)	$	(6.9)	$	(400.6)
Other comprehensive loss
Other comprehensive loss before reclassifications, net of tax	(101.5)		(2.4)		(103.9)

Reclassifications to net investment and other income, net of tax	0.9		—		0.9
Total other comprehensive loss	(100.6)		(2.4)		(103.0)
Balance at June 30, 2022	$	(494.3)	$	(9.3)	$	(503.6)


(in millions)	Currency Translation Adjustments		Unrealized Losses on Defined Benefit Plans		Total
for the nine months ended June 30, 2022
Balance at October 1, 2021	$	(370.5)	$	(7.1)	$	(377.6)
Other comprehensive loss
Other comprehensive loss before reclassifications, net of tax	(125.8)		(1.6)		(127.4)
Reclassifications to compensation and benefits expense, net of tax	—		(0.6)		(0.6)
Reclassifications to net investment and other income, net of tax	2.0		—		2.0
Total other comprehensive loss	(123.8)		(2.2)		(126.0)
Balance at June 30, 2022	$	(494.3)	$	(9.3)	$	(503.6)


(in millions)	Currency Translation Adjustments		Unrealized Losses on Defined Benefit Plans		Total
for the three months ended June 30, 2021
Balance at April 1, 2021	$	(340.9)	$	(7.6)	$	(348.5)
Other comprehensive income (loss)
Other comprehensive income (loss) before reclassifications, net of tax	21.5		(0.2)		21.3
Reclassifications to net investment and other income, net of tax	1.1		—		1.1
Total other comprehensive income (loss)	22.6		(0.2)		22.4
Balance at June 30, 2021	$	(318.3)	$	(7.8)	$	(326.1)


(in millions)	Currency Translation Adjustments		Unrealized Losses on Defined Benefit Plans		Total
for the nine months ended June 30, 2021
Balance at October 1, 2020	$	(399.6)	$	(8.0)	$	(407.6)
Other comprehensive income
Other comprehensive income before reclassifications, net of tax	79.3		0.2		79.5
Reclassifications to net investment and other income, net of tax	2.0		—		2.0
Total other comprehensive income	81.3		0.2		81.5
Balance at June 30, 2021	$	(318.3)	$	(7.8)	$	(326.1)

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