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)		2024		2023
Operating Revenues
Investment management fees		$	1,799.3	$	1,652.2
Sales and distribution fees		375.5		296.4
Shareholder servicing fees		63.5		32.5
Other		13.3		10.0
Total operating revenues		2,251.6		1,991.1
Operating Expenses
Compensation and benefits		991.4		968.3
Sales, distribution and marketing		512.3		400.8
Information systems and technology		156.0		131.0
Occupancy		75.1		66.7
Amortization of intangible assets		112.6		85.8
General, administrative and other		185.2		132.0
Total operating expenses		2,032.6		1,784.6
Operating Income		219.0		206.5
Other Income (Expenses)
Investment and other income, net		10.5		173.2
Interest expense		(23.1)		(18.8)
Investment and other income (losses) of consolidated investment products, net		114.1		(23.8)
Expenses of consolidated investment products		(7.3)		(5.9)
Other income, net		94.2		124.7
Income before taxes		313.2		331.2
Taxes on income		81.1		74.9
Net income		232.1		256.3
Less: net income (loss) attributable to
Redeemable noncontrolling interests		49.6		9.5
Nonredeemable noncontrolling interests		18.9		(4.5)
Net Income Attributable to Franklin Resources, Inc.		$	163.6	$	251.3

Earnings per Share
Basic		$	0.29	$	0.50
Diluted		0.29		0.50

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited


(in millions)	Three Months Ended December 31,
		2024			2023
Net Income			$	232.1		$	256.3
Other Comprehensive Income (Loss)
Currency translation adjustments, net of tax			(105.1)			59.1
Net unrealized gains (losses) on defined benefit plans, net of tax			0.3			(0.1)

Total other comprehensive income (loss)			(104.8)			59.0
Total comprehensive income			127.3			315.3
Less: comprehensive income (loss) attributable to
Redeemable noncontrolling interests			49.6			9.5
Nonredeemable noncontrolling interests			18.9			(4.5)
Comprehensive Income Attributable to Franklin Resources, Inc.			$	58.8		$	310.3

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

Unaudited


(in millions, except share and per share data)	December 31, 2024		September 30, 2024
Assets
Cash and cash equivalents	$	2,808.0	$	3,309.5
Receivables	1,393.8		1,479.1
Investments (including $806.9 and $838.0 at fair value at December 31, 2024 and September 30, 2024)	2,392.5		2,338.4
Assets of consolidated investment products
Cash and cash equivalents	837.1		1,099.4
Investments, at fair value	11,897.4		11,034.9
Property and equipment, net	977.7		946.4
Goodwill	6,193.9		6,211.4
Intangible assets, net	4,677.3		4,802.1
Operating lease right-of-use assets	795.1		823.3
Other	417.2		420.0
Total Assets	$	32,390.0	$	32,464.5

Liabilities
Compensation and benefits	$	1,131.8	$	1,801.3
Accounts payable and accrued expenses	585.0		551.5

Income taxes	461.4		406.4
Debt	2,775.8		2,780.3
Liabilities of consolidated investment products
Accounts payable and accrued expenses	861.2		861.3
Debt	9,055.3		9,341.5
Deferred tax liabilities	279.8		284.9
Operating lease liabilities	946.2		965.1
Other	953.8		907.4
Total liabilities	17,050.3		17,899.7
Commitments and Contingencies (Note 10)
Redeemable Noncontrolling Interests	2,106.0		1,321.8
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; 523,967,899 and 523,596,548 shares issued and outstanding at December 31, 2024 and September 30, 2024	52.4		52.4
Capital in excess of par	1,014.9		947.6
Retained earnings	11,919.1		11,927.6
Accumulated other comprehensive loss	(524.3)		(419.5)
Total Franklin Resources, Inc. stockholders’ equity	12,462.1		12,508.1
Nonredeemable noncontrolling interests	771.6		734.9
Total stockholders’ equity	13,233.7		13,243.0
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	32,390.0	$	32,464.5

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, 2024	Shares		Amount
Balance at October 1, 2024		523.6		$	52.4		$	947.6		$	11,927.6		$	(419.5)		$	12,508.1	$	734.9	$	13,243.0
Net income										163.6						163.6		18.9		182.5
Other comprehensive loss													(104.8)			(104.8)				(104.8)
Dividends declared on common stock ($0.32 per share)										(173.6)						(173.6)				(173.6)
Repurchase of common stock		(0.3)		—			(5.8)			—						(5.8)				(5.8)
Issuance of common stock		0.7		—			21.5									21.5				21.5
Stock-based compensation							51.6									51.6				51.6
Net subscriptions and other																		13.1		13.1
Net consolidation of investment products																		4.7		4.7
Adjustment to fair value of redeemable noncontrolling interests										1.5						1.5				1.5
Balance at December 31, 2024		524.0		$	52.4		$	1,014.9		$	11,919.1		$	(524.3)		$	12,462.1	$	771.6	$	13,233.7


		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

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited


	Three Months Ended December 31,
(in millions)	2024		2023

Net Income	$	232.1	$	256.3
Adjustments to reconcile net income to net cash used in operating activities:
Stock-based compensation	73.2		66.8
Amortization of deferred sales commissions	20.2		13.4
Depreciation and other amortization	30.2		25.7
Amortization of intangible assets	112.6		85.8
Net losses (gains) on investments	57.1		(60.1)
Losses (income) from investments in equity method investees	7.6		(56.9)
Net (gains) losses on investments of consolidated investment products	(87.2)		66.0
Net purchase of investments by consolidated investment products	(83.9)		(147.5)
Deferred income taxes	1.6		(57.7)
Other	31.6		31.6
Changes in operating assets and liabilities:
Decrease (increase) in receivables and other assets	10.2		(36.7)
Decrease in investments, net	1.1		0.2
Decrease in accrued compensation and benefits	(654.3)		(508.0)
Increase in income taxes payable	55.0		107.9
Increase (decrease) in accounts payable, accrued expenses and other liabilities	95.0		(39.7)
Increase (decrease) in accounts payable and accrued expenses of consolidated investment products	(47.3)		1.0
Net cash used in operating activities	(145.2)		(251.9)
Purchase of investments	(458.0)		(267.4)
Liquidation of investments	168.4		317.6
Purchase of investments by consolidated collateralized loan obligations	(1,291.1)		(794.0)
Liquidation of investments by consolidated collateralized loan obligations	1,001.1		697.0
Additions of property and equipment, net	(71.8)		(19.5)


Payments of deferred consideration liability	—		(60.8)
Net deconsolidation of investment products	(5.1)		(10.5)
Net cash used in investing activities	(656.5)		(137.6)

[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)	2024		2023

Dividends paid on common stock	$	(166.2)	$	(155.7)
Repurchase of common stock	(5.8)		(58.8)



Proceeds from repurchase agreement	38.9		—
Payments on repurchase agreement	(29.6)		—
Proceeds from debt of consolidated investment products	794.4		39.8
Payments on debt of consolidated investment products	(714.9)		(22.0)
Payments on contingent consideration liabilities	(0.7)		—
Noncontrolling interests	171.8		37.7
Net cash provided by (used in) financing activities	87.9		(159.0)
Effect of exchange rate changes on cash and cash equivalents	(50.0)		25.7
Decrease in cash and cash equivalents	(763.8)		(522.8)
Cash and cash equivalents, beginning of period	4,408.9		4,402.4
Cash and Cash Equivalents, End of Period	$	3,645.1	$	3,879.6

Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	$	27.9	$	26.8
Cash paid for interest	9.9		10.6
Cash paid for interest by consolidated investment products	202.0		161.6

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

(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 (“SEC”). 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, 2024 (“fiscal year 2024”).

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 Company will adopt the annual disclosures in its Annual Report on Form 10-K for the fiscal year ending September 30, 2025 and interim disclosure in its Quarterly report on Form 10-Q for the quarter ending December 31, 2025.

There were no other significant updates to the new accounting guidance that the Company has not yet adopted as disclosed in its Form 10-K for fiscal year 2024.

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,
		2024			2023
Net income attributable to Franklin Resources, Inc.			$	163.6		$	251.3
Less: allocation of earnings to participating nonvested stock and stock unit awards			15.4			9.7
Net Income Available to Common Stockholders			$	148.2		$	241.6

Weighted-average shares outstanding – basic			517.4			487.0
Dilutive effect of nonparticipating nonvested stock unit awards			0.8			0.9
Weighted-Average Shares Outstanding – Diluted			518.2			487.9

Earnings per Share
Basic			$	0.29		$	0.50
Diluted			0.29			0.50

There were no nonparticipating nonvested stock unit awards excluded from the calculation of diluted earnings per share because their effect would have been antidilutive for the three months ended December 31, 2024 and such awards were insignificant for the three months ended December 31, 2023.

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, 2024
Investment management fees	$	1,361.4	$	223.9	$	75.8	$	53.6	$	84.6	$	1,799.3
Sales and distribution fees	267.1		93.4		4.9		10.0		0.1		375.5
Shareholder servicing fees	55.1		8.0		0.4		—		—		63.5
Other	13.1		—		0.2		—		—		13.3
Total	$	1,696.7	$	325.3	$	81.3	$	63.6	$	84.7	$	2,251.6


(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

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, 2024 and 2023.

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, 2024		September 30, 2024
Investments, at fair value
Sponsored funds and separate accounts	$	469.1	$	509.1
Investments related to long-term incentive plans	266.3		271.6
Other equity and debt investments	71.5		57.3
Total investments, at fair value	806.9		838.0
Investments in equity method investees	1,175.5		1,219.7
Other investments	410.1		280.7
Total	$	2,392.5	$	2,338.4

The Company has entered into repurchase agreements with a third-party financing company for certain investments held by the Company. As of December 31, 2024 and September 30, 2024, other liabilities includes repurchase agreements of $116.5 million and $111.4 million with investments of $122.5 million and $121.7 million in carrying value pledged as collateral. The repurchase agreements have contractual maturity dates ranging between 2030 to 2038.

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, 2024
Assets
Investments, at fair value
Sponsored funds and separate accounts	$	257.6	$	171.3	$	4.7	$	35.5	$	469.1
Investments related to long-term incentive plans	237.1		—		—		29.2		266.3
Other equity and debt investments	17.5		14.0		1.6		38.4		71.5

Total Assets Measured at Fair Value	$	512.2	$	185.3	$	6.3	$	103.1	$	806.9

Liabilities
Securities sold short	$	244.9	$	—	$	—	$	—	$	244.9
Contingent consideration liabilities	—		—		27.5		—		27.5
Total Liabilities Measured at Fair Value	$	244.9	$	—	$	27.5	$	—	$	272.4


(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
as of September 30, 2024
Assets
Investments, at fair value
Sponsored funds and separate accounts	$	306.3	$	157.4	$	5.2	$	40.2	$	509.1
Investments related to long-term incentive plans	242.5		—		—		29.1		271.6
Other equity and debt investments	4.1		11.1		2.6		39.5		57.3

Total Assets Measured at Fair Value	$	552.9	$	168.5	$	7.8	$	108.8	$	838.0

Liabilities
Securities sold short	$	178.1	$	—	$	—	$	—	$	178.1
Contingent consideration liabilities	—		—		28.2		—		28.2
Total Liabilities Measured at Fair Value	$	178.1	$	—	$	28.2	$	—	$	206.3

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, private real estate funds and alternatives. These investments were as follows:


(in millions)	December 31, 2024		September 30, 2024
Nonredeemable investments1
Investments with known liquidation periods	$	29.7	$	32.4
Investments with unknown liquidation periods	15.7		16.1

Redeemable investments2	57.7		60.3

Unfunded commitments	15.6		14.0

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 1.9 years at December 31, 2024 and September 30, 2024.

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, 2024				September 30, 2024
	Carrying Value	Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets
Cash and cash equivalents	1	$	2,808.0	$	2,808.0	$	3,309.5	$	3,309.5
Other investments
Time deposits	2	8.7		8.7		9.8		9.8
Equity securities	3	401.4		401.4		270.9		270.9

Financial Liability
Debt	2	$	2,775.8	$	2,315.0	$	2,780.3	$	2,387.0

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 75 CIPs, including 22 CLOs, as of December 31, 2024 and 77 CIPs, including 22 CLOs, as of September 30, 2024.

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


(in millions)	December 31, 2024		September 30, 2024
Assets
Cash and cash equivalents	$	837.1	$	1,099.4
Receivables	141.5		217.5
Investments, at fair value	11,897.4		11,034.9
Total Assets	$	12,876.0	$	12,351.8

Liabilities
Accounts payable and accrued expenses	$	861.2	$	861.3
Debt	9,055.3		9,341.5
Other liabilities	11.2		39.9
Total liabilities	9,927.7		10,242.7
Redeemable Noncontrolling Interests	1,466.5		687.8
Stockholders’ Equity
Franklin Resources, Inc.’s interests	1,098.0		1,080.9
Nonredeemable noncontrolling interests	383.8		340.4
Total stockholders’ equity	1,481.8		1,421.3
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	12,876.0	$	12,351.8

The CIPs did not have a significant impact on net income attributable to the Company during the three months ended December 31, 2024 and 2023.

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, 2024
Assets
Cash and cash equivalents of CLOs	$	519.3	$	—	$	—	$	—	$	519.3
Receivables of CLOs	—		80.8		—		—		80.8
Investments
Equity and debt securities	485.5		1,501.9		573.5		124.0		2,684.9
Loans	—		9,212.3		0.2		—		9,212.5

Total Assets Measured at Fair Value	$	1,004.8	$	10,795.0	$	573.7	$	124.0	$	12,497.5


(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
as of September 30, 2024
Assets
Cash and cash equivalents of CLOs	$	764.3	$	—	$	—	$	—	$	764.3
Receivables of CLOs	—		149.6		—		—		149.6
Investments
Equity and debt securities	229.7		889.4		550.1		187.1		1,856.3
Loans	—		9,178.1		0.5		—		9,178.6

Total Assets Measured at Fair Value	$	994.0	$	10,217.1	$	550.6	$	187.1	$	11,948.8

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


(in millions)	December 31, 2024		September 30, 2024
Nonredeemable investments1

Investments with unknown liquidation periods	$	53.8	$	49.0

Redeemable investments2	70.2		138.1

Unfunded commitments3	42.8		42.8

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.

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

3Of the total unfunded commitments, the Company was contractually obligated to fund $9.9 million based on its ownership percentage in the CIPs, at December 31, 2024 and September 30, 2024.

Changes in Level 3 assets were as follows:


(in millions)	Equity and Debt Securities
for the three months ended December 31, 2024
Balance at October 1, 2024	$	550.1

Gains included in investment and other income (losses) of consolidated investment products, net	22.0
Purchases	9.2
Sales	(11.6)
Net consolidations	3.8


Balance at December 31, 2024	$	573.5
Change in unrealized gains included in net income relating to assets held at December 31, 2024	$	22.3


(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 income (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)

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


(in millions)
as of December 31, 2024		Fair Value			Valuation Technique		Significant Unobservable Inputs		Range (Weighted Average1)
Equity and debt securities		$	302.2		Market comparable companies		Enterprise value/ Revenue multiple		1.4–28.7 (11.0)
							Discount for lack of marketability		5.8%–11.8% (8.0%)
		219.1			Market pricing		Private sale pricing		$0.01–$1,120.00 ($82.93) per share
						Discount for lack of marketability		9.7%–13.3% (10.4%)
	52.2			Discounted cash flow		Discount rate		6.3%–6.4% (6.3%)


(in millions)
as of September 30, 2024		Fair Value			Valuation Technique		Significant Unobservable Inputs	Range (Weighted Average1)
Equity and debt securities		$	291.6		Market comparable companies		Enterprise value/ Revenue multiple	1.2–22.8 (10.9)
					Discount for lack of marketability		0.1%–10.4% (8.1%)
	214.5	Market pricing			Private sale pricing		$0.01–$1,000.00 ($73.04) per share
				Discount for lack of marketability		9.8%–17.5% (11.5%)
	44.0	Discounted cash flow		Discount rate		6.8%

1Based on the relative fair value of the instruments.

If the relevant significant inputs used in the market-based valuations, other than discount for lack of marketability, were independently higher (lower) as of December 31, 2024, the resulting fair value of the assets would be higher (lower). If the relevant significant inputs used in the discounted cash flow, as well as the discount for lack of marketability used in the market-based valuations, were independently higher (lower) as of December 31, 2024, 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, 2024				September 30, 2024
	Carrying Value	Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Asset
Cash and cash equivalents	1	$	317.8	$	317.8	$	335.1	$	335.1

Financial Liabilities
Debt of CLOs1	2 or 3	$	9,055.3	$	8,858.1	$	9,341.5	$	9,167.3

1Substantially all was Level 2.

Debt

Debt of CLOs totaled $9,055.3 million and $9,341.5 million at December 31, 2024 and September 30, 2024. The debt had fixed and floating interest rates ranging from 2.39% to 13.68% with a weighted-average effective interest rate of 7.30% at December 31, 2024, and from 2.39% to 13.73% with a weighted-average effective interest rate of 7.36% at September 30, 2024. The floating rates were based on the Secured Overnight Financing Rate.

The contractual maturities for the debt of CLOs at December 31, 2024 were as follows:


(in millions)
for the fiscal years ending September 30,	Amount
2025 (remainder of year)		$	120.1
2026		—
2027		—
2028		—
2029		—
Thereafter		8,935.2
Total		$	9,055.3

Collateralized Loan Obligations

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


(in millions)	December 31, 2024		September 30, 2024
Unpaid principal balance	$	9,420.8	$	9,371.9
Difference between unpaid principal balance and fair value	(24.1)		(19.8)
Fair Value	$	9,396.7	$	9,352.1

Investments 90 days or more past due were immaterial at December 31, 2024 and September 30, 2024.

The Company recognized $11.7 million and $20.8 million of net gains during the three months ended December 31, 2024 and 2023, related to its own economic interests in the CLOs. The aggregate principal amount due of the debt of CLOs was $9,015.0 million and $9,282.8 million at December 31, 2024 and September 30, 2024.

Note 8 – Redeemable Noncontrolling Interests

Changes in redeemable noncontrolling interests were as follows:


(in millions)		2024									2023
	CIPs			Minority Interests			Total			CIPs			Minority Interests			Total
for the three months ended December 31,
Balance at beginning of period		$	687.8		$	634.0		$	1,321.8		$	580.1		$	446.0		$	1,026.1
Net income (loss)		38.9			10.7			49.6			(2.9)			12.4			9.5
Net subscriptions (distributions) and other		175.6			(3.7)			171.9			38.1			(1.1)			37.0
Net consolidations (deconsolidations)		564.2			—			564.2			(60.0)			—			(60.0)

Adjustment to fair value		—			(1.5)			(1.5)			—			65.9			65.9
Balance at End of Period		$	1,466.5		$	639.5		$	2,106.0		$	555.3		$	523.2		$	1,078.5

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, 2024		September 30, 2024
Investments	$	1,106.8	$	1,074.4
Receivables	219.8		226.0
Total	$	1,326.6	$	1,300.4

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 three months ended December 31, 2024 or fiscal year 2024.

Note 10 – Commitments and Contingencies

Legal Proceedings

India Credit Fund Closure Matters. During the three months ended December 31, 2024, there were no significant changes from the disclosure in the Form 10‑K for the fiscal year ended September 30, 2024.

Western Asset Management Investigations. As previously disclosed, the Company launched an internal investigation into certain trade allocations of treasury derivatives in select Western Asset Management (“WAM”) managed accounts. WAM received notification of parallel investigations by the SEC and the U.S. Department of Justice (“DOJ”). WAM also received notice of an investigation into these trading activities by the CFTC. As previously disclosed, Ken Leech, the former co-Chief Investment Officer of WAM, received a “Wells Notice” from the staff of the SEC in August 2024 and is now on administrative leave. On November 25, 2024, the SEC filed a complaint in the United States District Court for the Southern District of New York against Mr. Leech alleging violations of certain laws related to trade allocations. Concurrently, the DOJ filed an indictment with the United States District Court for the Southern District of New York against Mr. Leech for similar allegations and for false statements made to the SEC. The Company and WAM have fully cooperated, and will continue to fully cooperate with these investigations.

Blockchain Litigation. The Company, two of its subsidiaries, the Company’s CEO, and an individual employee (collectively the “Defendants”) are named as defendants in litigation pending in the United States District Court for the Northern District of California. The action was filed in November 2021 by Blockchain Innovation, LLC (the “Plaintiff”) and relates to a startup entity in which the Company subsidiary Defendant previously owned all voting shares. The Plaintiff asserts it acquired the assets of the startup entity and claims that the Defendants improperly wound down the startup and misappropriated its intellectual property. The action asserts claims for alleged breaches of fiduciary duties, aiding and abetting breaches of fiduciary duty, breach of contract, and misappropriation of trade secrets. The Plaintiff is seeking various forms of relief, including, among other things, compensatory damages, punitive and exemplary damages, and an injunction including to prevent the Defendants from using any allegedly misappropriated trade secrets and technology. The trial is scheduled to begin in March 2025.

The Defendants believe the claims are without merit and are vigorously defending against the action. The Company cannot predict the outcome of this lawsuit and is unable to estimate any reasonably possible loss or range of loss (including with respect to indemnification of the individual Defendants) that may potentially result if the Plaintiff were to prevail on any of its claims.

Other Litigation and Regulatory 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, 2024 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, 2024.

Other Commitments and Contingencies

At December 31, 2024, 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 2024.

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, 2024
Nonvested balance at October 1, 2024	16,594	3,314	19,908	$	24.03
Granted	7,812	169	7,981	20.73
Vested	(524)	(166)	(690)	26.34
Forfeited/canceled	(226)	(72)	(298)	24.95
Nonvested Balance at December 31, 2024	23,656	3,245	26,901	$	22.98

Total unrecognized compensation expense related to nonvested stock and stock unit awards was $310.4 million at December 31, 2024. This expense is expected to be recognized over a remaining weighted-average vesting period of 2.1 years.

Note 12 – Investment and Other Income, Net

Investment and other income, net consisted of the following:


	Three Months Ended December 31,
(in millions)		2024		2023
Dividend and interest income		$	43.1	$	54.8
Gains (losses) on investments, net		(57.1)		60.1
Income (losses) from investments in equity method investees		(7.6)		56.9
Gains (losses) on derivatives, net		6.6		(8.2)
Rental income		11.2		10.8
Foreign currency exchange gains (losses), net		14.5		(7.4)
Other, net		(0.2)		6.2
Investment and other income, net		$	10.5	$	173.2

Net gains (losses) recognized on equity securities measured at fair value and trading debt securities that were held by the Company were $(87.2) million for the three months ended December 31, 2024 and $68.5 million for the three months ended December 31, 2023.

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