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)	2023		2022		2023		2022
Operating Revenues
Investment management fees	$	1,613.4	$	1,636.1	$	4,818.5	$	5,045.8
Sales and distribution fees	304.0		335.6		897.3		1,104.0
Shareholder servicing fees	38.8		46.9		115.5		146.8
Other	12.8		12.7		32.0		39.7
Total operating revenues	1,969.0		2,031.3		5,863.3		6,336.3
Operating Expenses
Compensation and benefits	841.2		766.7		2,667.7		2,321.8
Sales, distribution and marketing	406.8		440.3		1,202.0		1,432.8
Information systems and technology	127.3		125.9		376.7		376.6
Occupancy	56.9		53.8		171.1		163.1
Amortization of intangible assets	85.4		81.8		254.6		200.5
General, administrative and other	136.5		158.1		427.2		416.1
Total operating expenses	1,654.1		1,626.6		5,099.3		4,910.9
Operating Income	314.9		404.7		764.0		1,425.4
Other Income (Expenses)
Investment and other income, net	51.2		13.0		267.9		97.7
Interest expense	(34.9)		(28.9)		(99.3)		(71.1)
Investment and other income (losses) of consolidated investment products, net	1.7		(74.4)		75.3		33.3
Expenses of consolidated investment products	(0.8)		(1.3)		(15.7)		(10.1)
Other income (expenses), net	17.2		(91.6)		228.2		49.8
Income before taxes	332.1		313.1		992.2		1,475.2
Taxes on income	84.1		89.5		237.3		347.7
Net income	248.0		223.6		754.9		1,127.5
Less: net income (loss) attributable to
Redeemable noncontrolling interests	26.8		(0.5)		108.5		(50.2)
Nonredeemable noncontrolling interests	(6.3)		(32.3)		59.1		118.5
Net Income Attributable to Franklin Resources, Inc.	$	227.5	$	256.4	$	587.3	$	1,059.2

Earnings per Share
Basic	$	0.44	$	0.50	$	1.14	$	2.07
Diluted	0.44		0.50		1.14		2.07

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,
	2023			2022			2023			2022
Net Income		$	248.0		$	223.6		$	754.9		$	1,127.5
Other Comprehensive Income (Loss)
Currency translation adjustments, net of tax		16.5			(100.6)			159.7			(123.8)
Net unrealized losses on defined benefit plans, net of tax		(0.6)			(2.4)			(1.4)			(2.2)
Net unrealized gains on investments, net of tax		—			—			0.2			—
Total other comprehensive income (loss)		15.9			(103.0)			158.5			(126.0)
Total comprehensive income		263.9			120.6			913.4			1,001.5
Less: comprehensive income (loss) attributable to
Redeemable noncontrolling interests		26.8			(0.5)			108.5			(50.2)
Nonredeemable noncontrolling interests		(6.3)			(32.3)			59.1			118.5
Comprehensive Income Attributable to Franklin Resources, Inc.		$	243.4		$	153.4		$	745.8		$	933.2

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

Unaudited


(in millions, except share and per share data)	June 30, 2023		September 30, 2022
Assets
Cash and cash equivalents	$	3,728.6	$	4,134.9
Receivables	1,341.9		1,264.8
Investments (including $867.3 and $613.5 at fair value at June 30, 2023 and September 30, 2022)	2,249.1		1,651.3
Assets of consolidated investment products
Cash and cash equivalents	659.0		647.6
Investments, at fair value	9,639.0		7,898.1
Property and equipment, net	806.1		743.3
Goodwill	6,012.3		5,778.6
Intangible assets, net	4,994.9		5,082.1
Operating lease right-of-use assets	431.0		464.5
Other	372.7		395.4
Total Assets	$	30,234.6	$	28,060.6

Liabilities
Compensation and benefits	$	1,461.2	$	1,464.4
Accounts payable and accrued expenses	563.5		466.2

Income taxes	448.6		523.1
Debt	3,358.7		3,376.4
Liabilities of consolidated investment products
Accounts payable and accrued expenses	565.4		646.9
Debt	7,988.7		5,457.7
Deferred tax liabilities	450.7		347.8
Operating lease liabilities	494.8		528.4
Other	1,313.7		1,425.0
Total liabilities	16,645.3		14,235.9
Commitments and Contingencies (Note 10)
Redeemable Noncontrolling Interests	1,050.1		1,525.8
Stockholders’ Equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none issued	—		—
Common stock, $0.10 par value, 1,000,000,000 shares authorized; 499,012,841 and 499,575,175 shares issued and outstanding at June 30, 2023 and September 30, 2022	49.9		50.0
Retained earnings	12,360.7		12,045.6
Accumulated other comprehensive loss	(462.5)		(621.0)
Total Franklin Resources, Inc. stockholders’ equity	11,948.1		11,474.6
Nonredeemable noncontrolling interests	591.1		824.3
Total stockholders’ equity	12,539.2		12,298.9
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	30,234.6	$	28,060.6

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, 2023	Shares		Amount
Balance at October 1, 2022		499.6		$	50.0		$	—		$	12,045.6		$	(621.0)		$	11,474.6	$	824.3	$	12,298.9
Net income										165.6						165.6		4.7		170.3
Other comprehensive income													124.7			124.7				124.7
Dividends declared on common stock ($0.30 per share)										(153.6)						(153.6)				(153.6)
Repurchase of common stock		(0.5)		(0.1)			(69.1)			55.0						(14.2)				(14.2)
Issuance of common stock		1.2		0.1			33.5									33.6				33.6
Stock-based compensation							35.6									35.6				35.6
Net subscriptions and other																		95.9		95.9
Net deconsolidation of investment products																		(35.7)		(35.7)
Balance at December 31, 2022		500.3		$	50.0		$	—		$	12,112.6		$	(496.3)		$	11,666.3	$	889.2	$	12,555.5
Net income										194.2						194.2		60.7		254.9
Other comprehensive income													17.9			17.9				17.9
Dividends declared on common stock ($0.30 per share)										(153.8)						(153.8)				(153.8)
Repurchase of common stock		(0.1)		—			(66.0)			62.4						(3.6)				(3.6)
Issuance of common stock		0.7		0.1			25.2									25.3				25.3
Stock-based compensation							40.8									40.8				40.8
Net distributions and other																		(14.9)		(14.9)
Net deconsolidation of investment products																		(324.2)		(324.2)
Adjustment to fair value of redeemable noncontrolling interests										44.7						44.7				44.7
Balance at March 31, 2023		500.9		$	50.1		$	—		$	12,260.1		$	(478.4)		$	11,831.8	$	610.8	$	12,442.6
Net income (loss)										227.5						227.5		(6.3)		221.2
Other comprehensive income													15.9			15.9				15.9
Dividends declared on common stock ($0.30 per share)										(152.9)						(152.9)				(152.9)
Repurchase of common stock		(2.0)		(0.2)			(15.9)			(34.8)						(50.9)				(50.9)
Issuance of common stock		0.1		—			3.6									3.6				3.6
Stock-based compensation							12.3									12.3				12.3
Net distributions and other																		(12.7)		(12.7)
Net deconsolidation of investment products																		(0.7)		(0.7)

Adjustment to fair value of redeemable noncontrolling interests										60.8						60.8				60.8
Balance at June 30, 2023		499.0		$	49.9		$	—		$	12,360.7		$	(462.5)		$	11,948.1	$	591.1	$	12,539.2

See Notes to Consolidated Financial Statements.


		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 CASH FLOWS

Unaudited


	Nine Months Ended June 30,
(in millions)	2023		2022

Net Income	$	754.9	$	1,127.5
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	137.9		160.9
Amortization of deferred sales commissions	37.2		49.6
Depreciation and other amortization	78.3		68.8
Amortization of intangible assets	254.6		200.5
Net (gains) losses on investments	(62.3)		32.9
Income from investments in equity method investees	(111.1)		(51.6)
Net losses on investments of consolidated investment products	116.0		22.0
Net purchase of investments by consolidated investment products	(833.2)		(312.2)
Deferred income taxes	50.8		55.9
Other	99.2		33.0
Changes in operating assets and liabilities:
Increase in receivables and other assets	(69.8)		(97.3)
Decrease (increase) in investments, net	6.4		(33.2)
Increase (decrease) in accrued compensation and benefits	(84.3)		45.1
Decrease in income taxes payable	(58.9)		(176.3)
Increase (decrease) in accounts payable, accrued expenses and other liabilities	48.3		(9.1)
Increase (decrease) in accounts payable and accrued expenses of consolidated investment products	1.3		(26.2)
Net cash provided by operating activities	365.3		1,090.3
Purchase of investments	(665.1)		(676.5)
Liquidation of investments	551.3		872.0
Purchase of investments by consolidated collateralized loan obligations	(3,465.6)		(3,198.4)
Liquidation of investments by consolidated collateralized loan obligations	1,230.3		1,501.4
Additions of property and equipment, net	(121.5)		(55.6)
Acquisitions, net of cash acquired	(500.5)		(1,354.7)
Payments of contingent consideration asset	5.5		20.9
Payments of deferred consideration liability	(241.8)		—
Net (deconsolidation) consolidation of investment products	(43.8)		211.0
Net cash used in investing activities	(3,251.2)		(2,679.9)

[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)	2023		2022

Issuance of common stock	$	13.4	$	13.6
Dividends paid on common stock	(454.8)		(437.1)
Repurchase of common stock	(70.0)		(154.0)



Proceeds from repurchase agreement	174.8		—
Proceeds from debt of consolidated investment products	3,213.6		4,345.2
Payments on debt of consolidated investment products	(926.9)		(2,469.3)
Payments on contingent consideration liabilities	(7.6)		(4.1)
Noncontrolling interests	482.5		194.9
Net cash provided by financing activities	2,425.0		1,489.2
Effect of exchange rate changes on cash and cash equivalents	66.0		(68.1)
Decrease in cash and cash equivalents	(394.9)		(168.5)
Cash and cash equivalents, beginning of period	4,782.5		4,647.2
Cash and Cash Equivalents, End of Period	$	4,387.6	$	4,478.7

Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	$	225.4	$	456.7
Cash paid for interest	55.5		61.8
Cash paid for interest by consolidated investment products	232.2		107.0

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(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, 2022 (“fiscal year 2022”).

Note 2 – Acquisition

BNY Alcentra Group Holdings, Inc.

On November 1, 2022, the Company acquired all of the outstanding ownership interests in BNY Alcentra Group Holdings, Inc. (together with its subsidiaries “Alcentra”) from The Bank of New York Mellon Corporation. Total purchase price consisted of cash consideration of $594.1 million, which includes $188.3 million for certain securities held in Alcentra’s collateralized loan obligations (“CLOs”); deferred consideration of $62.0 million due November 1, 2023; and contingent consideration to be paid upon the achievement of certain performance thresholds over the next four years of up to $350.0 million that has an acquisition-date fair value of $24.6 million. The consideration paid was funded from existing cash. During the quarter ended March 31, 2023, cash consideration increased by $6.8 million due to a net working capital adjustment and deferred consideration increased by $1.6 million.

The following table summarizes the initial and revised estimated fair value amounts recognized for the assets acquired and liabilities assumed and resulting goodwill as of the acquisition date:


(in millions)	Initial Estimated Fair Value		Adjustments		Revised Estimated Fair Value
as of November 1, 2022
Cash and cash equivalents	$	93.6	$	—	$	93.6
Receivables	57.2		(8.8)		48.4
Investments	285.3		1.6		286.9
Goodwill	152.6		52.7		205.3
Indefinite-lived intangible assets	89.9		—		89.9
Definite-lived intangible assets	55.7		—		55.7
Other assets	9.0		3.1		12.1
Deferred tax liabilities	—		(36.7)		(36.7)
Compensation and benefits and other liabilities	(71.0)		(3.5)		(74.5)
Total Identifiable Net Assets	$	672.3	$	8.4	$	680.7

The adjustments to the initial estimated fair values are a result of new information obtained about the facts that existed as of the acquisition date. The purchase price allocation is preliminary and subject to change during the measurement period, which is not to exceed one year from the acquisition date. At this time, the Company does not expect material changes to the assets acquired or liabilities assumed.

The goodwill is primarily attributable to expected growth opportunities from the combined operations and is not 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 3.0 years to 10.0 years. Amortization expense related to the definite-lived intangible assets was $3.5 million and $9.3 million for the three and nine months ended June 30, 2023. These assets had a weighted-average remaining useful life of 4.8 years at June 30, 2023, with estimated remaining amortization expense as follows:


(in millions)
for the fiscal years ending September 30,	Amount
2023 (remainder of year)		$	3.5
2024		14.0
2025		14.0
2026		3.9
2027		2.9
Thereafter		8.1
Total		$	46.4

Costs incurred in connection with the acquisition were $14.1 million for the nine months ended June 30, 2023.

Alcentra contributed $116.7 million of operating revenue and did not have a material impact to net income attributable to Franklin Resources, Inc. for the nine months ended June 30, 2023. Consequently, the Company has not presented pro forma combined results of operations for this acquisition.

In connection with the acquisition, the Company on December 15, 2022 entered into repurchase agreements with a third-party financing company for certain securities held by the Company in Alcentra’s CLOs. As of June 30, 2023, other liabilities includes repurchase agreements of $172.9 million with maturity values of €132.3 million and $42.4 million in local currency. The Company has pledged Alcentra investments with a carrying value of $179.3 million as collateral as of June 30, 2023. The repurchase agreements have contractual maturity dates ranging between 2029 to 2034.

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,
	2023			2022			2023			2022
Net income attributable to Franklin Resources, Inc.		$	227.5		$	256.4		$	587.3		$	1,059.2
Less: allocation of earnings to participating nonvested stock and stock unit awards		10.2			11.2			26.7			45.6
Net Income Available to Common Stockholders		$	217.3		$	245.2		$	560.6		$	1,013.6

Weighted-average shares outstanding – basic		490.7			487.5			490.3			489.1
Dilutive effect of nonparticipating nonvested stock unit awards		0.7			0.4			0.7			0.6
Weighted-Average Shares Outstanding – Diluted		491.4			487.9			491.0			489.7

Earnings per Share
Basic		$	0.44		$	0.50		$	1.14		$	2.07
Diluted		0.44			0.50			1.14			2.07

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, 2023 and 2022.

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, 2023
Investment management fees	$	1,232.3	$	192.3	$	64.3	$	53.9	$	70.6	$	1,613.4
Sales and distribution fees	213.5		75.4		5.1		10.0		—		304.0
Shareholder servicing fees	30.3		8.0		0.5		—		—		38.8
Other	11.9		0.5		0.4		—		—		12.8
Total	$	1,488.0	$	276.2	$	70.3	$	63.9	$	70.6	$	1,969.0


(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, 2023
Investment management fees	$	3,672.9	$	570.7	$	214.4	$	162.0	$	198.5	$	4,818.5
Sales and distribution fees	634.1		217.4		15.1		30.7		—		897.3
Shareholder servicing fees	90.2		23.5		1.6		0.2		—		115.5
Other	30.1		0.8		0.8		—		0.3		32.0
Total	$	4,427.3	$	812.4	$	231.9	$	192.9	$	198.8	$	5,863.3


(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, 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

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

Revenues earned from sponsored funds were 83% of the Company’s total operating revenues for the three and nine months ended June 30, 2023 and 83% and 81% for the three and nine months ended June 30, 2022.

Note 5 – Investments

The disclosures below include details of the Company’s investments, excluding those of consolidated investment products (“CIPs”). See Note 7 – Consolidated Investment Products for information related to the investments held by these entities.

Investments consisted of the following:


(in millions)	June 30, 2023		September 30, 2022
Investments, at fair value
Sponsored funds and separate accounts	$	616.6	$	413.0
Investments related to long-term incentive plans	202.3		143.3
Other equity and debt investments	48.4		57.2
Total investments, at fair value	867.3		613.5
Investments in equity method investees	1,118.5		771.5
Other investments	263.3		266.3
Total	$	2,249.1	$	1,651.3

Note 6 – Fair Value Measurements

The disclosures below include details of the Company’s fair value measurements, excluding those of CIPs. See Note 7 – Consolidated Investment Products for information related to fair value measurements of the assets and liabilities of these entities.

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


(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
as of June 30, 2023
Assets
Investments, at fair value
Sponsored funds and separate accounts	$	333.3	$	220.7	$	17.9	$	44.7	$	616.6
Investments related to long-term incentive plans	179.9		—		—		22.4		202.3
Other equity and debt investments	3.4		7.5		4.3		33.2		48.4
Contingent consideration asset	—		—		4.4		—		4.4
Total Assets Measured at Fair Value	$	516.6	$	228.2	$	26.6	$	100.3	$	871.7

Liabilities
Securities sold short	$	142.4	$	—	$	—	$	—	$	142.4
Contingent consideration liabilities	—		—		55.1		—		55.1
Total Liabilities Measured at Fair Value	$	142.4	$	—	$	55.1	$	—	$	197.5


(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
as of September 30, 2022
Assets
Investments, at fair value
Sponsored funds and separate accounts	$	289.5	$	55.4	$	14.1	$	54.0	$	413.0
Investments related to long-term incentive plans	143.3		—		—		—		143.3
Other equity and debt investments	3.1		19.4		2.7		32.0		57.2
Contingent consideration asset	—		—		9.8		—		9.8
Total Assets Measured at Fair Value	$	435.9	$	74.8	$	26.6	$	86.0	$	623.3

Liabilities
Contingent consideration liabilities	$	—	$	—	$	31.6	$	—	$	31.6

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, 2023		September 30, 2022
Nonredeemable investments1
Investments with known liquidation periods	$	33.2	$	32.8
Investments with unknown liquidation periods	17.4		29.4

Redeemable investments2	49.7		23.8

Unfunded commitments	43.2		51.4

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 3.2 years and 3.4 years at June 30, 2023 and September 30, 2022.

2Investments are redeemable on a semi-monthly, monthly and quarterly basis.

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


(in millions)	Fair Value Level	June 30, 2023				September 30, 2022
	Carrying Value	Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets
Cash and cash equivalents	1	$	3,728.6	$	3,728.6	$	4,134.9	$	4,134.9
Other investments
Time deposits	2	10.1		10.1		9.4		9.4
Equity securities	3	253.2		253.2		256.9		256.9

Financial Liability
Debt	2	$	3,358.7	$	2,804.9	$	3,376.4	$	2,750.1

Note 7 – Consolidated Investment Products

CIPs consist of mutual and other investment funds, limited partnerships and similar structures and CLOs, all of which are sponsored by the Company, and include both voting interest entities and variable interest entities (“VIEs”). The Company had 69 CIPs, including 19 CLOs, as of June 30, 2023 and 59 CIPs, including 15 CLOs, as of September 30, 2022.

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


(in millions)	June 30, 2023		September 30, 2022
Assets
Cash and cash equivalents	$	659.0	$	647.6
Receivables	118.3		134.0
Investments, at fair value	9,639.0		7,898.1
Total Assets	$	10,416.3	$	8,679.7

Liabilities
Accounts payable and accrued expenses	$	565.4	$	646.9
Debt	7,988.7		5,457.7
Other liabilities	26.6		175.0
Total liabilities	8,580.7		6,279.6
Redeemable Noncontrolling Interests	590.9		942.2
Stockholders’ Equity
Franklin Resources, Inc.’s interests	967.9		960.8
Nonredeemable noncontrolling interests	276.8		497.1
Total stockholders’ equity	1,244.7		1,457.9
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	10,416.3	$	8,679.7

The CIPs did not have a significant impact on net income attributable to the Company during the three and nine months ended June 30, 2023 and 2022.

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, 2023
Assets
Cash and cash equivalents of CLOs	$	457.5	$	—	$	—	$	—	$	457.5
Receivables of CLOs	—		60.3		—		—		60.3
Investments
Equity and debt securities	201.8		771.4		568.2		150.3		1,691.7
Loans	—		7,943.6		3.7		—		7,947.3

Total Assets Measured at Fair Value	$	659.3	$	8,775.3	$	571.9	$	150.3	$	10,156.8


(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
as of September 30, 2022
Assets
Cash and cash equivalents of CLOs	$	269.1	$	—	$	—	$	—	$	269.1
Receivables of CLOs	—		67.4		—		—		67.4
Investments
Equity and debt securities	75.4		881.0		555.8		173.5		1,685.7
Loans	—		5,704.4		239.4		—		5,943.8
Real estate	—		—		268.6		—		268.6
Total Assets Measured at Fair Value	$	344.5	$	6,652.8	$	1,063.8	$	173.5	$	8,234.6

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


(in millions)	June 30, 2023		September 30, 2022
Nonredeemable investments1
Investments with known liquidation periods	$	—	$	19.5
Investments with unknown liquidation periods	21.9		12.0

Redeemable investments2	128.4		142.0

Unfunded commitments3	—		0.2

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. As of June 30, 2023, there were no investments with known liquidation periods. Investments with known liquidation periods have an expected weighted-average life of 0.3 years at September 30, 2022.

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

3As of June 30, 2023, there were no investments with unfunded commitments. Of the total unfunded commitments, the Company was contractually obligated to fund $0.1 million based on its ownership percentage in the CIPs, at September 30, 2022.

Changes in Level 3 assets were as follows:


(in millions)	Equity and Debt Securities		Loans		Total Level 3 Assets
for the three months ended June 30, 2023
Balance at April 1, 2023	$	539.0	$	3.1	$	542.1
Gains (losses) included in investment and other income (losses) of consolidated investment products, net	(31.6)		0.1		(31.5)
Purchases	61.2		(0.2)		61.0
Sales and settlements	(0.1)		0.2		0.1
Transfers into Level 3	—		0.5		0.5
Transfers out of Level 3	(0.3)		—		(0.3)
Balance at June 30, 2023	$	568.2	$	3.7	$	571.9
Change in unrealized gains (losses) included in net income relating to assets held at June 30, 2023	$	(32.0)	$	0.1	$	(31.9)


(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
for the nine months ended June 30, 2023
Balance at October 1, 2022	$	555.8	$	268.6	$	239.4	$	1,063.8
Gains (losses) included in investment and other income (losses) of consolidated investment products, net	(56.3)		(9.0)		0.2		(65.1)
Purchases	83.7		86.1		58.4		228.2
Sales and settlements	(25.1)		—		—		(25.1)
Net (deconsolidations) consolidations	10.4		(345.7)		(292.6)		(627.9)
Transfers into Level 3	—		—		3.6		3.6
Transfers out of Level 3	(0.3)		—		(5.3)		(5.6)
Balance at June 30, 2023	$	568.2	$	—	$	3.7	$	571.9
Change in unrealized gains (losses) included in net income relating to assets held at June 30, 2023	$	(55.0)	$	—	$	0.1	$	(54.9)


(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
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)
Net 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
Gains 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)
Net 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

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


(in millions)
as of June 30, 2023	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range (Weighted Average1)
Equity and debt securities	$	568.2	Market pricing	Private sale pricing	$0.01–$1,000.00 ($43.23) per share
	Discount for lack of marketability		12.0%–21.8% (16.4%)


(in millions)
as of September 30, 2022		Fair Value			Valuation Technique		Significant Unobservable Inputs		Range (Weighted Average1)
Equity and debt securities		$	555.8		Market pricing		Private sale pricing		$0.01–$558.45 ($33.31) per share
				Discount for lack of marketability		23.5%–25.1% (24.9%)








Real estate		268.6			Discounted cash flow		Discount rate		4.5%–6.3% (5.1%)
	Exit capitalization rate			5.5%–6.8% (6.0%)

Loans		147.2			Market pricing		Price		$0.97–$0.98 ($0.98)
	60.4			Discounted cash flow		Discount rate		9.9%
	31.9			Yield capitalization		Credit spread		6.3%
				Loan-to-value ratio		79.1%–88.1% (83.1%)

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 liquidity, were independently higher (lower) as of June 30, 2023, 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 liquidity used in the market-based valuations, were independently higher (lower) as of June 30, 2023, 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, 2023				September 30, 2022
	Carrying Value	Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Asset
Cash and cash equivalents	1	$	201.5	$	201.5	$	378.5	$	378.5

Financial Liabilities
Debt of CLOs1	2 or 3	$	7,967.0	$	7,845.5	$	5,408.0	$	5,548.8
Other debt	3	21.7		11.5		49.7		42.4

1Substantially all was Level 2.

Debt

Debt of CIPs consisted of the following:


	June 30, 2023			September 30, 2022
(in millions)	Amount		Weighted- Average Effective Interest Rate	Amount		Weighted- Average Effective Interest Rate
Debt of CLOs	$	7,967.0	6.48%	$	5,408.0	2.78%
Other debt	21.7		6.00%	49.7		5.19%
Total	$	7,988.7		$	5,457.7

The debt of CIPs had fixed and floating interest rates ranging from 2.39% to 15.08% at June 30, 2023, and from 1.42% to 8.51% at September 30, 2022. The floating rates were based on the London Interbank Offered Rate and Secured Overnight Financing Rate.

The contractual maturities for the debt of CIPs at June 30, 2023 were as follows:


(in millions)
for the fiscal years ending September 30,	Amount
2023 (remainder of year)		$	178.0
2024		—
2025		—
2026		—
2027		—
Thereafter		7,810.7
Total		$	7,988.7

Collateralized Loan Obligations

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


(in millions)	June 30, 2023		September 30, 2022
Unpaid principal balance	$	8,300.1	$	6,118.4
Difference between unpaid principal balance and fair value	(200.3)		(356.1)
Fair Value	$	8,099.8	$	5,762.3

Investments 90 days or more past due were immaterial at June 30, 2023 and September 30, 2022.

The Company recognized $6.5 million and $9.0 million of net gains during the three and nine months ended June 30, 2023 and $4.9 million and $17.8 million of net gains during the three and nine months ended June 30, 2022, related to its own economic interests in the CLOs. The aggregate principal amount due of the debt of CLOs was $8,125.7 million and $5,781.3 million at June 30, 2023 and September 30, 2022.

Note 8 – Redeemable Noncontrolling Interests

Changes in redeemable noncontrolling interests were as follows:


(in millions)		2023									2022
	CIPs			Minority Interests			Total			CIPs			Minority Interests			Total
for the three months ended June 30,
Balance at beginning of period		$	445.6		$	514.9		$	960.5		$	625.3		$	512.8		$	1,138.1
Net income (loss)		10.5			16.3			26.8			(16.5)			16.0			(0.5)
Net subscriptions (distributions) and other		30.2			(11.2)			19.0			5.4			(29.6)			(24.2)
Net consolidations		104.6			—			104.6			380.3			—			380.3
Adjustment to fair value		—			(60.8)			(60.8)			—			—			—
Balance at End of Period		$	590.9		$	459.2		$	1,050.1		$	994.5		$	499.2		$	1,493.7


(in millions)		2023									2022
	CIPs			Minority Interests			Total			CIPs			Minority Interests			Total
for the nine months ended June 30,
Balance at beginning of period		$	942.2		$	583.6		$	1,525.8		$	622.5		$	310.5		$	933.0
Net income (loss)		68.5			40.0			108.5			(90.9)			40.7			(50.2)
Net subscriptions (distributions) and other		498.2			(58.9)			439.3			320.0			(40.5)			279.5
Net consolidations (deconsolidations)		(918.0)			—			(918.0)			142.9			—			142.9
Adjustment to fair value		—			(105.5)			(105.5)			—			188.5			188.5
Balance at End of Period		$	590.9		$	459.2		$	1,050.1		$	994.5		$	499.2		$	1,493.7

Note 9 – Nonconsolidated Variable Interest Entities

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


(in millions)	June 30, 2023		September 30, 2022
Investments	$	949.6	$	718.0
Receivables	216.7		165.4
Total	$	1,166.3	$	883.4

While the Company has no legal or contractual obligation to do so, it routinely makes cash investments in the course of launching sponsored funds. As it has done in the past, the Company also may voluntarily elect to provide its sponsored funds with additional direct or indirect financial support based on its business objectives. The Company did not provide financial or other support to its sponsored funds assessed as VIEs during the nine months ended June 30, 2023 or fiscal year 2022.

Note 10 – Commitments and Contingencies

Legal Proceedings

India Credit Fund Closure Matters. During the nine months ended June 30, 2023, there were no significant changes from the disclosure in the Form 10‑K for the fiscal year ended September 30, 2022. As of June 30, 2023, the amount reported as distributed to fund unitholders in the aggregate is INR 27,109.3 crore (approximately $3.3 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, 2023 to provide for any probable losses that may arise from such matters for which the Company could reasonably estimate an amount.

Indemnifications and Guarantees

In the ordinary course of business or in connection with certain acquisition agreements, the Company enters into contracts that provide for indemnifications by the Company in certain circumstances. In addition, certain Company entities guarantee certain financial and performance-related obligations of various Franklin subsidiaries. The Company is also subject to certain legal requirements and agreements providing for indemnifications of directors, officers and personnel against liabilities and expenses they may incur under certain circumstances in connection with their service. The terms of these indemnities and guarantees vary pursuant to applicable facts and circumstances, and from agreement to agreement. Future payments for claims against the Company under these indemnities or guarantees could negatively impact the Company’s financial condition. In management’s opinion, no material loss was deemed probable or reasonably possible pursuant to such indemnification agreements and/or guarantees as of June 30, 2023.

Other Commitments and Contingencies

At June 30, 2023, 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 2022.

Note 11 – Stock-Based Compensation

Stock and stock unit award activity was as follows:


(shares in thousands)	Time-Based Shares	Performance- Based Shares	Total Shares	Weighted- Average Grant-Date Fair Value
for the nine months ended June 30, 2023
Nonvested balance at October 1, 2022	13,492	3,401	16,893	$	24.04
Granted	6,938	271	7,209	22.67
Vested	(1,799)	(138)	(1,937)	24.65
Forfeited/canceled	(357)	(177)	(534)	24.79
Nonvested Balance at June 30, 2023	18,274	3,357	21,631	$	23.51

Total unrecognized compensation expense related to nonvested stock and stock unit awards was $202.3 million at June 30, 2023. This expense is expected to be recognized over a remaining weighted-average vesting period of 1.6 years.

Note 12 – 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)	2023		2022		2023		2022
Dividend and interest income	$	42.7	$	6.3	$	111.5	$	17.5
Gains (losses) on investments, net	13.8		(35.6)		62.3		(32.9)
Income (losses) from investments in equity method investees	(7.7)		(0.1)		111.1		51.6
Gains (losses) on derivatives, net	(5.1)		17.5		(19.4)		15.2
Rental income	11.1		9.6		35.1		27.9
Foreign currency exchange (losses) gains, net	(6.6)		14.5		(40.2)		24.2
Other, net	3.0		0.8		7.5		(5.8)
Investment and other income, net	$	51.2	$	13.0	$	267.9	$	97.7

Net gains (losses) recognized on equity securities measured at fair value and trading debt securities that were held by the Company were $17.0 million and $95.7 million for the three and nine months ended June 30, 2023 and $(50.3) million and $(79.1) million for the three and nine months ended June 30, 2022.

Note 13 - Subsequent Event

On July 25, 2023, the Company terminated its 364-day $500.0 million revolving credit facility and its 3-year $300.0 million term loan. On the date of termination, the 364-day revolving credit facility had no amounts outstanding and all amounts outstanding under the term loan were repaid with existing cash. Concurrent with the actions above, the Company entered into a 5-year $800.0 million revolving credit facility. As of the time of this filing, there were no borrowings outstanding under the 5-year credit facility.

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