Item 1. Financial Statements.

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Item 1. Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited


	Three Months Ended December 31,
(in millions, except per share data)		2023		2022
Operating Revenues
Investment management fees		$	1,652.2	$	1,631.8
Sales and distribution fees		296.4		291.9
Shareholder servicing fees		32.5		33.4
Other		10.0		10.0
Total operating revenues		1,991.1		1,967.1
Operating Expenses
Compensation and benefits		968.3		979.2
Sales, distribution and marketing		400.8		388.6
Information systems and technology		131.0		121.4
Occupancy		66.7		54.5
Amortization of intangible assets		85.8		83.2
General, administrative and other		132.0		146.2
Total operating expenses		1,784.6		1,773.1
Operating Income		206.5		194.0
Other Income (Expenses)
Investment and other income, net		173.2		91.1
Interest expense		(18.8)		(30.9)
Investment and other losses of consolidated investment products, net		(23.8)		(13.6)
Expenses of consolidated investment products		(5.9)		(11.5)
Other income, net		124.7		35.1
Income before taxes		331.2		229.1
Taxes on income		74.9		60.3
Net income		256.3		168.8
Less: net income (loss) attributable to
Redeemable noncontrolling interests		9.5		(1.5)
Nonredeemable noncontrolling interests		(4.5)		4.7
Net Income Attributable to Franklin Resources, Inc.		$	251.3	$	165.6

Earnings per Share
Basic		$	0.50	$	0.32
Diluted		0.50		0.32

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited


(in millions)	Three Months Ended December 31,
		2023			2022
Net Income			$	256.3		$	168.8
Other Comprehensive Income
Currency translation adjustments, net of tax			59.1			127.3
Net unrealized losses on defined benefit plans, net of tax			(0.1)			(2.6)

Total other comprehensive income			59.0			124.7
Total comprehensive income			315.3			293.5
Less: comprehensive income (loss) attributable to
Redeemable noncontrolling interests			9.5			(1.5)
Nonredeemable noncontrolling interests			(4.5)			4.7
Comprehensive Income Attributable to Franklin Resources, Inc.			$	310.3		$	290.3

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

Unaudited


(in millions, except share and per share data)	December 31, 2023		September 30, 2023
Assets
Cash and cash equivalents	$	3,327.4	$	3,686.4
Receivables	1,469.6		1,348.4
Investments (including $894.2 and $872.8 at fair value at December 31, 2023 and September 30, 2023)	2,317.3		2,222.0
Assets of consolidated investment products
Cash and cash equivalents	552.2		716.0
Investments, at fair value	9,363.1		9,637.2
Property and equipment, net	807.0		800.1
Goodwill	6,012.9		6,003.8
Intangible assets, net	4,823.4		4,902.2
Operating lease right-of-use assets	793.7		406.3
Other	399.2		398.8
Total Assets	$	29,865.8	$	30,121.2

Liabilities
Compensation and benefits	$	1,163.9	$	1,665.1
Accounts payable and accrued expenses	533.9		530.0

Income taxes	620.0		513.5
Debt	3,046.9		3,052.8
Liabilities of consolidated investment products
Accounts payable and accrued expenses	467.2		349.7
Debt	7,839.6		8,231.8
Deferred tax liabilities	393.1		450.4
Operating lease liabilities	865.4		467.8
Other	1,219.7		1,286.2
Total liabilities	16,149.7		16,547.3
Commitments and Contingencies (Note 10)
Redeemable Noncontrolling Interests	1,078.5		1,026.1
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; 494,734,214 and 495,937,891 shares issued and outstanding at December 31, 2023 and September 30, 2023	49.5		49.6
Retained earnings	12,402.4		12,376.6
Accumulated other comprehensive loss	(450.3)		(509.3)
Total Franklin Resources, Inc. stockholders’ equity	12,001.6		11,916.9
Nonredeemable noncontrolling interests	636.0		630.9
Total stockholders’ equity	12,637.6		12,547.8
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	29,865.8	$	30,121.2

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, 2023	Shares		Amount
Balance at October 1, 2023		495.9		$	49.6		$	—		$	12,376.6		$	(509.3)		$	11,916.9	$	630.9	$	12,547.8
Net income (loss)										251.3						251.3		(4.5)		246.8
Other comprehensive income													59.0			59.0				59.0
Dividends declared on common stock ($0.31 per share)										(167.6)						(167.6)				(167.6)
Repurchase of common stock		(2.4)		(0.2)			(66.6)			8.0						(58.8)				(58.8)
Issuance of common stock		1.2		0.1			26.7									26.8				26.8
Stock-based compensation							39.9									39.9				39.9
Net subscriptions and other																		9.6		9.6
Adjustment to fair value of redeemable noncontrolling interests										(65.9)						(65.9)				(65.9)
Balance at December 31, 2023		494.7		$	49.5		$	—		$	12,402.4		$	(450.3)		$	12,001.6	$	636.0	$	12,637.6


		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, 2022	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

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited


	Three Months Ended December 31,
(in millions)	2023		2022

Net Income	$	256.3	$	168.8
Adjustments to reconcile net income to net cash used in operating activities:
Stock-based compensation	66.8		69.5
Amortization of deferred sales commissions	13.4		12.4
Depreciation and other amortization	25.7		25.1
Amortization of intangible assets	85.8		83.2
Net gains on investments	(60.1)		(45.5)
Income from investments in equity method investees	(56.9)		(33.2)
Net losses on investments of consolidated investment products	66.0		72.3
Net purchase of investments by consolidated investment products	(147.5)		(259.2)
Deferred income taxes	(57.7)		(122.5)
Other	31.6		17.8
Changes in operating assets and liabilities:
Decrease (increase) in receivables and other assets	(36.7)		14.6
Decrease (increase) in investments, net	0.2		(13.6)
Decrease in accrued compensation and benefits	(508.0)		(481.6)
Increase in income taxes payable	107.9		158.8
Increase (decrease) in accounts payable, accrued expenses and other liabilities	(39.7)		59.8
Increase in accounts payable and accrued expenses of consolidated investment products	1.0		17.0
Net cash used in operating activities	(251.9)		(256.3)
Purchase of investments	(267.4)		(234.4)
Liquidation of investments	317.6		217.6
Purchase of investments by consolidated collateralized loan obligations	(794.0)		(822.5)
Liquidation of investments by consolidated collateralized loan obligations	697.0		328.7
Additions of property and equipment, net	(19.5)		(27.4)
Acquisitions, net of cash acquired	—		(493.7)
Payments of contingent consideration asset	—		2.9
Payments of deferred consideration liability	(60.8)		—
Net deconsolidation of investment products	(10.5)		(13.8)
Net cash used in investing activities	(137.6)		(1,042.6)

[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)	2023		2022

Dividends paid on common stock	$	(155.7)	$	(148.4)
Repurchase of common stock	(58.8)		(14.2)



Proceeds from repurchase agreement	—		174.8
Proceeds from debt of consolidated investment products	39.8		955.3
Payments on debt of consolidated investment products	(22.0)		(277.9)
Payments on contingent consideration liabilities	—		(2.0)
Noncontrolling interests	37.7		271.3
Net cash (used in) provided by financing activities	(159.0)		958.9
Effect of exchange rate changes on cash and cash equivalents	25.7		59.7
Decrease in cash and cash equivalents	(522.8)		(280.3)
Cash and cash equivalents, beginning of period	4,402.4		4,782.5
Cash and Cash Equivalents, End of Period	$	3,879.6	$	4,502.2

Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	26.8		$	13.2
Cash paid for interest	10.6		4.3
Cash paid for interest by consolidated investment products	161.6		50.5

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 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, 2023 (“fiscal year 2023”).

Note 2 – New Accounting Guidance

Accounting Guidance Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued an amendment to the existing segment reporting guidance. The amendment requires annual and interim disclosures of significant segment expenses that are regularly provided to the chief operating decision maker by reportable segment and clarifies that single reportable segment entities are required to apply all existing segment disclosures in the guidance. The amendment is effective for the Company on October 1, 2024, and is retrospectively applicable to all prior periods presented in its consolidated financial statements. The Company is currently evaluating the impact that the adoption will have on its consolidated financial statements.

In December 2023, the FASB issued an amendment to the existing income taxes guidance. The amendment requires the disclosure of additional information with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes and requires greater detail about significant reconciling items in the reconciliation. Additionally, the amendment requires disaggregated information pertaining to taxes paid, net of refunds received, for federal, state, and foreign income taxes. The amendment allows for either a prospective or retrospective approach on adoption and is effective for the Company on October 1, 2025. The Company is currently evaluating the impact that the adoption will have on its consolidated financial statements and has not yet determined its transition approach.

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 December 31,
		2023			2022
Net income attributable to Franklin Resources, Inc.			$	251.3		$	165.6
Less: allocation of earnings to participating nonvested stock and stock unit awards			9.7			7.7
Net Income Available to Common Stockholders			$	241.6		$	157.9

Weighted-average shares outstanding – basic			487.0			489.6
Dilutive effect of nonparticipating nonvested stock unit awards			0.9			0.6
Weighted-Average Shares Outstanding – Diluted			487.9			490.2

Earnings per Share
Basic			$	0.50		$	0.32
Diluted			0.50			0.32

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 months ended December 31, 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 December 31, 2023
Investment management fees	$	1,260.6	$	191.7	$	68.5	$	51.5	$	79.9	$	1,652.2
Sales and distribution fees	205.7		76.5		4.6		9.6		—		296.4
Shareholder servicing fees	24.2		7.6		0.6		0.1		—		32.5
Other	9.0		0.5		0.2		—		0.3		10.0
Total	$	1,499.5	$	276.3	$	73.9	$	61.2	$	80.2	$	1,991.1


(in millions)	United States		Luxembourg		Asia-Pacific		Americas Excluding United States		Europe, Middle East and Africa, Excluding Luxembourg		Total
for the three months ended December 31, 2022
Investment management fees	$	1,274.8	$	181.8	$	67.6	$	51.8	$	55.8	$	1,631.8
Sales and distribution fees	208.2		68.4		5.0		10.3		—		291.9
Shareholder servicing fees	25.3		7.7		0.4		—		—		33.4
Other	9.7		—		0.3		—		—		10.0
Total	$	1,518.0	$	257.9	$	73.3	$	62.1	$	55.8	$	1,967.1

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 83% of the Company’s total operating revenues for the three months ended December 31, 2023 and 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)	December 31, 2023		September 30, 2023
Investments, at fair value
Sponsored funds and separate accounts	$	621.1	$	630.5
Investments related to long-term incentive plans	223.2		191.6
Other equity and debt investments	49.9		50.7
Total investments, at fair value	894.2		872.8
Investments in equity method investees	1,156.2		1,089.2
Other investments	266.9		260.0
Total	$	2,317.3	$	2,222.0

The Company has entered into repurchase agreements with a third-party financing company for certain investments held by the Company. As of December 31, 2023, other liabilities includes repurchase agreements of $167.9 million with investments of $176.0 million in carrying value pledged as collateral. The repurchase agreements have contractual maturity dates ranging between 2029 to 2035.

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 December 31, 2023
Assets
Investments, at fair value
Sponsored funds and separate accounts	$	353.6	$	208.2	$	14.9	$	44.4	$	621.1
Investments related to long-term incentive plans	198.1		—		—		25.1		223.2
Other equity and debt investments	3.4		12.0		1.0		33.5		49.9

Total Assets Measured at Fair Value	$	555.1	$	220.2	$	15.9	$	103.0	$	894.2

Liabilities
Securities sold short	$	155.2	$	—	$	—	$	—	$	155.2
Contingent consideration liabilities	—		—		53.5		—		53.5
Total Liabilities Measured at Fair Value	$	155.2	$	—	$	53.5	$	—	$	208.7


(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
as of September 30, 2023
Assets
Investments, at fair value
Sponsored funds and separate accounts	$	356.5	$	211.9	$	18.5	$	43.6	$	630.5
Investments related to long-term incentive plans	168.2		—		—		23.4		191.6
Other equity and debt investments	3.4		11.3		3.3		32.7		50.7

Total Assets Measured at Fair Value	$	528.1	$	223.2	$	21.8	$	99.7	$	872.8

Liabilities
Securities sold short	$	158.3	$	—	$	—	$	—	$	158.3
Contingent consideration liabilities	—		—		55.0		—		55.0
Total Liabilities Measured at Fair Value	$	158.3	$	—	$	55.0	$	—	$	213.3

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


(in millions)	December 31, 2023		September 30, 2023
Nonredeemable investments1
Investments with known liquidation periods	$	32.4	$	32.1
Investments with unknown liquidation periods	17.3		17.4

Redeemable investments2	53.3		50.2

Unfunded commitments	43.1		43.1

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 3.1 years and 2.9 years at December 31, 2023 and September 30, 2023.

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	December 31, 2023				September 30, 2023
	Carrying Value	Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets
Cash and cash equivalents	1	$	3,327.4	$	3,327.4	$	3,686.4	$	3,686.4
Other investments
Time deposits	2	10.5		10.5		9.9		9.9
Equity securities	3	256.4		256.4		250.1		250.1

Financial Liability
Debt	2	$	3,046.9	$	2,566.4	$	3,052.8	$	2,419.4

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 December 31, 2023 and 70 CIPs, including 20 CLOs, as of September 30, 2023.

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


(in millions)	December 31, 2023		September 30, 2023
Assets
Cash and cash equivalents	$	552.2	$	716.0
Receivables	294.0		166.7
Investments, at fair value	9,363.1		9,637.2
Total Assets	$	10,209.3	$	10,519.9

Liabilities
Accounts payable and accrued expenses	$	467.2	$	349.7
Debt	7,839.6		8,231.8
Other liabilities	24.3		25.1
Total liabilities	8,331.1		8,606.6
Redeemable Noncontrolling Interests	555.3		580.1
Stockholders’ Equity
Franklin Resources, Inc.’s interests	1,038.7		1,033.9
Nonredeemable noncontrolling interests	284.2		299.3
Total stockholders’ equity	1,322.9		1,333.2
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	10,209.3	$	10,519.9

The CIPs did not have a significant impact on net income attributable to the Company during the three months ended December 31, 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 December 31, 2023
Assets
Cash and cash equivalents of CLOs	$	296.2	$	—	$	—	$	—	$	296.2
Receivables of CLOs	—		207.2		—		—		207.2
Investments
Equity and debt securities	146.7		765.1		551.5		139.0		1,602.3
Loans	—		7,760.2		0.6		—		7,760.8

Total Assets Measured at Fair Value	$	442.9	$	8,732.5	$	552.1	$	139.0	$	9,866.5


(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
as of September 30, 2023
Assets
Cash and cash equivalents of CLOs	$	352.3	$	—	$	—	$	—	$	352.3
Receivables of CLOs	—		116.7		—		—		116.7
Investments
Equity and debt securities	210.9		642.6		584.9		154.0		1,592.4
Loans	—		8,044.8		—		—		8,044.8

Total Assets Measured at Fair Value	$	563.2	$	8,804.1	$	584.9	$	154.0	$	10,106.2

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)	December 31, 2023		September 30, 2023
Nonredeemable investments1

Investments with unknown liquidation periods	$	21.9	$	21.8

Redeemable investments2	117.1		132.2

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.

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

Changes in Level 3 assets were as follows:


(in millions)	Equity and Debt Securities		Loans		Total Level 3 Assets
for the three months ended December 31, 2023
Balance at October 1, 2023	$	584.9	$	—	$	584.9
Losses included in investment and other losses of consolidated investment products, net	(38.1)		—		(38.1)
Purchases	3.8		—		3.8
Sales	(0.2)		—		(0.2)

Transfers into Level 3	1.1		0.6		1.7

Balance at December 31, 2023	$	551.5	$	0.6	$	552.1
Change in unrealized losses included in net income relating to assets held at December 31, 2023	$	(37.8)	$	—	$	(37.8)


(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
for the three months ended December 31, 2022
Balance at October 1, 2022	$	555.8	$	268.6	$	239.4	$	1,063.8
Gains (losses) included in investment and other losses of consolidated investment products, net	(6.3)		3.7		0.1		(2.5)
Purchases	9.0		85.7		27.5		122.2
Sales	(5.6)		—		(0.2)		(5.8)
Net (deconsolidations) and consolidations	2.9		—		(202.1)		(199.2)



Balance at December 31, 2022	$	555.8	$	358.0	$	64.7	$	978.5
Change in unrealized gains included in net income relating to assets held at December 31, 2022	$	2.0	$	3.7	$	0.1	$	5.8

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


(in millions)
as of December 31, 2023		Fair Value			Valuation Technique		Significant Unobservable Inputs		Range (Weighted Average1)
Equity and debt securities		$	290.4		Market pricing		Private sale pricing		$0.37–$1,000.00 ($27.23) per share
		Discount for lack of marketability			17.2%
	261.1			Market comparable companies		Enterprise value/ Revenue multiple		1.2–31.2 (15.5)
				Discount for lack of marketability		8.3%–12.0% (9.9%)


(in millions)
as of September 30, 2023		Fair Value			Valuation Technique		Significant Unobservable Inputs	Range (Weighted Average1)
Equity and debt securities		$	346.0		Market pricing		Private sale pricing	$0.01–$1,000.00 ($23.88) per share
				Discount for lack of marketability		21.9%
	238.9	Market comparable companies			Enterprise value/ Revenue multiple		11.4–13.5 (12.1)
Discount for lack of marketability		11.2%–13.6% (12.2%)

1Based on the relative fair value of the instruments.

If the relevant significant inputs used in the valuations, other than discount for lack of marketability, were independently higher (lower) as of December 31, 2023, the resulting fair value of the assets would be higher (lower). If the relevant significant inputs used in the discount for lack of marketability were independently higher (lower) as of December 31, 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	December 31, 2023				September 30, 2023
	Carrying Value	Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Asset
Cash and cash equivalents	1	$	256.0	$	256.0	$	363.7	$	363.7

Financial Liabilities
Debt of CLOs1	2 or 3	$	7,839.6	$	7,618.9	$	8,210.0	$	8,013.2
Other debt	3	—		—		21.8		8.6

1Substantially all was Level 2.

Debt

Debt of CIPs consisted of the following:


	December 31, 2023			September 30, 2023
(in millions)	Amount		Weighted- Average Effective Interest Rate	Amount		Weighted- Average Effective Interest Rate
Debt of CLOs	$	7,839.6	7.41%	$	8,210.0	7.12%
Other debt	—		N/A	21.8		6.00%
Total	$	7,839.6		$	8,231.8

The debt of CIPs had fixed and floating interest rates ranging from 2.39% to 15.77% at December 31, 2023, and from 2.39% to 15.49% at September 30, 2023. The floating rates were based on the Secured Overnight Financing Rate.

The contractual maturities for the debt of CIPs at December 31, 2023 were as follows:


(in millions)
for the fiscal years ending September 30,	Amount
2024 (remainder of year)		$	59.8
2025		—
2026		—
2027		—
2028		—
Thereafter		7,779.8
Total		$	7,839.6

Collateralized Loan Obligations

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


(in millions)	December 31, 2023		September 30, 2023
Unpaid principal balance	$	7,937.2	$	8,317.5
Difference between unpaid principal balance and fair value	(35.7)		(120.7)
Fair Value	$	7,901.5	$	8,196.8

Investments 90 days or more past due were immaterial at December 31, 2023 and September 30, 2023.

The Company recognized $20.8 million of net gains and $2.3 million of net losses during the three months ended December 31, 2023 and 2022, related to its own economic interests in the CLOs. The aggregate principal amount due of the debt of CLOs was $7,811.1 million and $8,281.5 million at December 31, 2023 and September 30, 2023.

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 December 31,
Balance at beginning of period		$	580.1		$	446.0		$	1,026.1		$	942.2		$	583.6		$	1,525.8
Net income (loss)		(2.9)			12.4			9.5			(12.2)			10.7			(1.5)
Net subscriptions (distributions) and other		38.1			(1.1)			37.0			178.4			5.2			183.6
Net consolidations (deconsolidations)		(60.0)			—			(60.0)			271.3			—			271.3
Adjustment to fair value		—			65.9			65.9			—			—			—
Balance at End of Period		$	555.3		$	523.2		$	1,078.5		$	1,379.7		$	599.5		$	1,979.2

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)	December 31, 2023		September 30, 2023
Investments	$	997.2	$	925.9
Receivables	222.8		206.1
Total	$	1,220.0	$	1,132.0

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 three months ended December 31, 2023 or fiscal year 2023.

Note 10 – Commitments and Contingencies

Legal Proceedings

India Credit Fund Closure Matters. During the three months ended December 31, 2023, there were no significant changes from the disclosure in the Form 10‑K for the fiscal year ended September 30, 2023.

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, 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 December 31, 2023.

Other Commitments and Contingencies

On November 1, 2023, the Company took possession of office space in New York City located at One Madison Avenue. At the time of possession, the Company recognized an operating lease right-of-use asset and a corresponding operating lease liability of $396.6 million. The lease agreement is over sixteen years with an aggregate expected commitment of $707.3 million and is part of a corporate initiative to consolidate existing office space in New York City.

At December 31, 2023, there were no other material changes in the other commitments and contingencies as reported in the Company’s Annual Report on Form 10-K for fiscal year 2023.

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 three months ended December 31, 2023
Nonvested balance at October 1, 2023	12,782	3,099	15,881	$	23.09
Granted	7,038	442	7,480	23.60
Vested	(965)	(162)	(1,127)	23.06
Forfeited/canceled	(192)	(148)	(340)	21.25
Nonvested Balance at December 31, 2023	18,663	3,231	21,894	$	23.29

Total unrecognized compensation expense related to nonvested stock and stock unit awards was $280.0 million at December 31, 2023. This expense is expected to be recognized over a remaining weighted-average vesting period of 2.0 years.

Note 13 - Subsequent Event

On January 1, 2024, the Company acquired Putnam Investments (“Putnam”) from Great-West Lifeco Inc. (“Great-West”) for 31.6 million shares of its common stock (excludes shares to be granted under deferred compensation program), cash consideration paid at close of approximately $220 million for investments and other purchase-related amounts, and deferred cash consideration of $100.0 million to be paid during the third quarter of fiscal year 2024.

In addition, the Company will pay up to $375.0 million between the third and seventh anniversaries of the closing date related to revenue growth targets from the strategic partnership with Great-West and its affiliates which will be recognized in operating income.

Note 12 – Investment and Other Income, Net

Investment and other income, net consisted of the following:


	Three Months Ended December 31,
(in millions)		2023		2022
Dividend and interest income		$	54.8	$	36.5
Gains on investments, net		60.1		45.5
Income from investments in equity method investees		56.9		33.2

Rental income		10.8		10.6
Foreign currency exchange losses, net		(7.4)		(27.1)
Other, net		(2.0)		(7.6)
Investment and other income, net		$	173.2	$	91.1

Net gains recognized on equity securities measured at fair value and trading debt securities that were held by the Company were $68.5 million for the three months ended December 31, 2023 and $68.3 million for the three months ended December 31, 2022.

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