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)		2025		2024
Operating Revenues
Investment management fees		$	1,847.9	$	1,799.3
Sales and distribution fees		388.7		375.5
Shareholder servicing fees		70.9		63.5
Other		19.6		13.3
Total operating revenues		2,327.1		2,251.6
Operating Expenses
Compensation and benefits		1,030.7		991.4
Sales, distribution and marketing		540.9		512.3
Information systems and technology		157.0		156.0
Occupancy		66.8		75.1
Amortization of intangible assets		55.1		112.6

General, administrative and other		195.6		185.2
Total operating expenses		2,046.1		2,032.6
Operating Income		281.0		219.0
Other Income (Expenses)
Investment and other income, net		80.3		10.5
Interest expense		(20.4)		(23.1)
Investment and other income of consolidated investment products, net		124.9		114.1
Expenses of consolidated investment products		(14.0)		(7.3)
Other income, net		170.8		94.2
Income before taxes		451.8		313.2
Taxes on income		105.0		81.1
Net income		346.8		232.1
Less: net income attributable to
Redeemable noncontrolling interests		39.7		49.6
Nonredeemable noncontrolling interests		51.6		18.9
Net Income Attributable to Franklin Resources, Inc.		$	255.5	$	163.6

Earnings per Share
Basic		$	0.46	$	0.29
Diluted		0.46		0.29

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited


(in millions)	Three Months Ended December 31,
		2025			2024
Net Income			$	346.8		$	232.1
Other Comprehensive Loss
Currency translation adjustments, net of tax			(1.1)			(105.1)
Net unrealized gains on defined benefit plans, net of tax			—			0.3

Total other comprehensive loss			(1.1)			(104.8)
Total comprehensive income			345.7			127.3
Less: comprehensive income attributable to
Redeemable noncontrolling interests			39.7			49.6
Nonredeemable noncontrolling interests			51.6			18.9
Comprehensive Income Attributable to Franklin Resources, Inc.			$	254.4		$	58.8

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

Unaudited


(in millions, except share and per share data)	December 31, 2025		September 30, 2025
Assets
Cash and cash equivalents	$	2,672.1	$	3,088.1
Receivables	1,445.6		1,541.7
Investments (including $1,063.0 and $1,179.5 at fair value at December 31, 2025 and September 30, 2025)	2,439.0		2,374.0
Assets of consolidated investment products
Cash and cash equivalents	812.7		485.8
Investments, at fair value	12,472.5		12,278.8
Property and equipment, net	929.8		949.1
Goodwill	6,291.3		6,206.0
Intangible assets, net	4,154.7		4,166.0
Operating lease right-of-use assets	751.2		764.3
Other	580.2		514.5
Total Assets	$	32,549.1	$	32,368.3

Liabilities
Compensation and benefits	$	1,205.2	$	1,760.3
Accounts payable and accrued expenses	597.6		615.4

Income taxes	228.0		207.5
Debt	2,357.3		2,362.0
Liabilities of consolidated investment products
Accounts payable and accrued expenses	618.1		1,063.0
Debt	10,862.7		9,937.3
Deferred tax liabilities	318.2		261.6
Operating lease liabilities	985.3		1,000.6
Other	984.3		971.8
Total liabilities	18,156.7		18,179.5
Commitments and Contingencies (Note 10)
Redeemable Noncontrolling Interests	1,291.9		1,182.0
Stockholders’ Equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none issued	—		—
Common stock, $0.10 par value, 1,000,000,000 shares authorized; 519,974,911 and 520,951,796 shares issued and outstanding at December 31, 2025 and September 30, 2025	52.0		52.1
Capital in excess of par	991.0		956.8
Retained earnings	11,540.1		11,516.0
Accumulated other comprehensive loss	(448.2)		(447.1)
Total Franklin Resources, Inc. stockholders’ equity	12,134.9		12,077.8
Nonredeemable noncontrolling interests	965.6		929.0
Total stockholders’ equity	13,100.5		13,006.8
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	32,549.1	$	32,368.3

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, 2025	Shares		Amount
Balance at October 1, 2025		521.0		$	52.1		$	956.8		$	11,516.0		$	(447.1)		$	12,077.8	$	929.0	$	13,006.8
Adoption of new accounting guidance										25.3						25.3				25.3
Net income										255.5						255.5		51.6		307.1
Other comprehensive loss													(1.1)			(1.1)				(1.1)
Dividends declared on common stock ($0.33 per share)										(177.6)						(177.6)				(177.6)
Repurchase of common stock		(1.8)		(0.2)			(41.7)			—						(41.9)				(41.9)
Issuance of common stock		0.8		0.1			28.8									28.9				28.9
Stock-based compensation							47.1									47.1				47.1
Net subscriptions and other																		17.2		17.2
Net deconsolidation of investment products																		(32.2)		(32.2)
Adjustment to fair value of redeemable noncontrolling interests										(79.1)						(79.1)				(79.1)
Balance at December 31, 2025		520.0		$	52.0		$	991.0		$	11,540.1		$	(448.2)		$	12,134.9	$	965.6	$	13,100.5


		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

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited


	Three Months Ended December 31,
(in millions)	2025		2024

Net Income	$	346.8	$	232.1
Adjustments to reconcile net income to net cash used in operating activities:
Stock-based compensation	75.6		73.2
Amortization of deferred sales commissions	22.8		20.2
Depreciation and other amortization	28.8		30.2
Amortization of intangible assets	55.1		112.6

Net losses on investments	8.6		57.1
Losses (income) from investments in equity method investees	(11.5)		7.6
Net gains on investments of consolidated investment products	(67.4)		(87.2)
Net purchase of investments by consolidated investment products	(97.7)		(83.9)
Deferred income taxes	63.1		1.6
Other	18.9		31.6
Changes in operating assets and liabilities:
Decrease (increase) in receivables and other assets	(121.9)		10.2
Decrease (increase) in investments, net	(12.4)		1.1
Decrease in accrued compensation and benefits	(562.3)		(654.3)
Increase in income taxes payable	20.3		55.0
Increase (decrease) in accounts payable, accrued expenses and other liabilities	(24.8)		95.0
Increase (decrease) in accounts payable and accrued expenses of consolidated investment products	2.9		(47.3)
Net cash used in operating activities	(255.1)		(145.2)
Purchase of investments	(264.6)		(458.0)
Liquidation of investments	218.7		168.4
Purchase of investments by consolidated collateralized loan obligations	(1,705.6)		(1,291.1)
Liquidation of investments by consolidated collateralized loan obligations	1,492.7		1,001.1
Proceeds from sale (additions) of property and equipment, net	9.3		(71.8)
Acquisition, net of cash acquired	(69.7)		—


Net consolidation (deconsolidation) of investment products	2.0		(5.1)
Net cash used in investing activities	(317.2)		(656.5)

[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)	2025		2024

Dividends paid on common stock	$	(170.2)	$	(166.2)
Repurchase of common stock	(41.9)		(5.8)



Proceeds from repurchase agreement	—		38.9
Payments on repurchase agreement	(4.9)		(29.6)
Proceeds from debt of consolidated investment products	2,540.8		794.4
Payments on debt of consolidated investment products	(1,961.3)		(714.9)
Payments on contingent consideration liabilities	—		(0.7)
Noncontrolling interests	124.9		171.8
Net cash provided by financing activities	487.4		87.9
Effect of exchange rate changes on cash and cash equivalents	(4.2)		(50.0)
Decrease in cash and cash equivalents	(89.1)		(763.8)
Cash and cash equivalents, beginning of period	3,573.9		4,408.9
Cash and Cash Equivalents, End of Period	$	3,484.8	$	3,645.1

Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	$	19.5	$	27.9
Cash paid for interest	10.8		9.9
Cash paid for interest by consolidated investment products	177.4		202.0
Non-cash purchase of investments	20.0		—

See Notes to Consolidated Financial Statements.

FRANKLIN RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025

(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, 2025 (“fiscal year 2025”).

Note 2 – New Accounting Guidance

Recently Adopted Accounting Guidance

On October 1, 2025, the Company adopted an amendment to the existing intangible assets guidance issued by the Financial Accounting Standards Board. The amendment requires eligible crypto assets to be measured at fair value, with changes recognized in net income, along with expanded disclosures. The Company adopted the amendment using the modified-retrospective transition approach and recognized a cumulative effective adjustment resulting in an increase of $25.3 million in retained earnings as of October 1, 2025. The crypto assets are presented within intangible assets, net on the consolidated balance sheets.

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 2025.

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,
		2025			2024
Net income attributable to Franklin Resources, Inc.			$	255.5		$	163.6
Less: allocation of earnings to participating nonvested stock and stock unit awards			16.2			15.4
Net Income Available to Common Stockholders			$	239.3		$	148.2

Weighted-average shares outstanding – basic			517.5			517.4
Dilutive effect of nonparticipating nonvested stock unit awards			0.8			0.8
Weighted-Average Shares Outstanding – Diluted			518.3			518.2

Earnings per Share
Basic			$	0.46		$	0.29
Diluted			0.46			0.29

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, 2025 and 2024.

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, 2025
Investment management fees	$	1,363.8	$	245.9	$	81.9	$	64.3	$	92.0	$	1,847.9
Sales and distribution fees	268.7		103.3		6.0		10.2		0.5		388.7
Shareholder servicing fees	62.2		8.2		0.5		—		—		70.9
Other	19.0		—		0.5		—		0.1		19.6
Total	$	1,713.7	$	357.4	$	88.9	$	74.5	$	92.6	$	2,327.1


(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, 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

Operating revenues are attributed to geographic areas based on the jurisdiction of the subsidiaries that provide the services, which may differ from the regions in which the related investment products are sold and domicile of the fund vehicle or client.

Revenues earned from sponsored funds were 84% and 83% of the Company’s total operating revenues for the three months ended December 31, 2025 and 2024.

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, 2025		September 30, 2025
Investments, at fair value
Sponsored funds and separate accounts	$	686.3	$	809.6
Investments related to long-term incentive plans	305.8		288.1
Other equity and debt investments	70.9		81.8
Total investments, at fair value	1,063.0		1,179.5
Investments in equity method investees	1,005.0		893.9
Other investments	371.0		300.6
Total	$	2,439.0	$	2,374.0

The Company has entered into repurchase agreements with a third-party financing company for certain investments held by the Company. As of December 31, 2025 and September 30, 2025, other liabilities includes repurchase agreements of $196.0 million and $200.5 million with investments of $200.6 million and $206.4 million in carrying value pledged as collateral. The repurchase agreements have contractual maturity dates ranging between 2030 to 2039.

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, 2025
Assets
Investments, at fair value
Sponsored funds and separate accounts	$	390.9	$	253.9	$	4.3	$	37.2	$	686.3
Investments related to long-term incentive plans	271.2		3.3		—		31.3		305.8
Other equity and debt investments	23.0		10.0		0.2		29.6		62.8
Crypto assets	4.3		16.2		—		—		20.5

Total Assets Measured at Fair Value	$	689.4	$	283.4	$	4.5	$	98.1	$	1,075.4

Liabilities
Securities sold short	$	156.1	$	—	$	—	$	—	$	156.1
Contingent consideration liabilities	—		—		20.4		—		20.4
Total Liabilities Measured at Fair Value	$	156.1	$	—	$	20.4	$	—	$	176.5


(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
as of September 30, 2025
Assets
Investments, at fair value
Sponsored funds and separate accounts	$	463.9	$	305.2	$	2.2	$	38.3	$	809.6
Investments related to long-term incentive plans	253.4		3.3		—		31.4		288.1
Other equity and debt investments	12.4		9.4		1.8		29.2		52.8

Total Assets Measured at Fair Value	$	729.7	$	317.9	$	4.0	$	98.9	$	1,150.5

Liabilities
Securities sold short	$	193.7	$	—	$	—	$	—	$	193.7
Contingent consideration liabilities	—		—		20.4		—		20.4
Total Liabilities Measured at Fair Value	$	193.7	$	—	$	20.4	$	—	$	214.1

As of December 31, 2025 and September 30, 2025, there were $8.1 million and $29.0 million of other investments which were adjusted to fair value on a nonrecurring basis and excluded from the tables above.

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, 2025		September 30, 2025
Nonredeemable investments1
Investments with known liquidation periods	$	18.0	$	19.7
Investments with unknown liquidation periods	15.2		15.2

Redeemable investments2	64.9		64.0

Unfunded commitments	13.3		13.3

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 2.3 years and 2.2 years at December 31, 2025 and September 30, 2025.

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, 2025				September 30, 2025
	Carrying Value	Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets
Cash and cash equivalents	1	$	2,672.1	$	2,672.1	$	3,088.1	$	3,088.1
Other investments
Time deposits	2	8.5		8.5		9.2		9.2
Equity securities	3	362.5		362.5		291.4		291.4

Financial Liability
Debt	2	$	2,357.3	$	1,978.1	$	2,362.0	$	1,970.9

Note 7 – Consolidated Investment Products

CIPs consist of mutual and other investment funds, limited partnerships and similar structures and collateralized loan obligations (“CLOs”), all of which are sponsored by the Company, and include both voting interest entities and variable interest entities (“VIEs”).

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


(in millions)	December 31, 2025		September 30, 2025
Assets
Cash and cash equivalents	$	812.7	$	485.8
Receivables	164.4		313.1
Investments, at fair value	12,472.5		12,278.8
Total Assets	$	13,449.6	$	13,077.7

Liabilities
Accounts payable and accrued expenses	$	618.1	$	1,063.0
Debt	10,862.7		9,937.3
Other liabilities	16.9		17.5
Total liabilities	11,497.7		11,017.8
Redeemable Noncontrolling Interests	311.8		289.6
Stockholders’ Equity
Franklin Resources, Inc.’s interests	1,086.9		1,220.6
Nonredeemable noncontrolling interests	553.2		549.7
Total stockholders’ equity	1,640.1		1,770.3
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	13,449.6	$	13,077.7

The consolidation of CIPs did not have a significant impact on net income attributable to the Company during the three months ended December 31, 2025 and 2024.

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, 2025
Assets
Cash and cash equivalents of CLOs	$	758.5	$	—	$	—	$	—	$	758.5
Receivables of CLOs	—		136.7		—		—		136.7
Investments
Equity and debt securities	498.2		599.9		595.1		193.6		1,886.8
Loans	—		10,585.7		—		—		10,585.7

Total Assets Measured at Fair Value	$	1,256.7	$	11,322.3	$	595.1	$	193.6	$	13,367.7


(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
as of September 30, 2025
Assets
Cash and cash equivalents of CLOs	$	472.1	$	—	$	—	$	—	$	472.1
Receivables of CLOs	—		113.0		—		—		113.0
Investments
Equity and debt securities	393.2		731.5		601.0		189.1		1,914.8
Loans	—		10,354.1		9.9		—		10,364.0

Total Assets Measured at Fair Value	$	865.3	$	11,198.6	$	610.9	$	189.1	$	12,863.9

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


(in millions)	December 31, 2025		September 30, 2025
Nonredeemable investments1

Investments with unknown liquidation periods	$	114.4	$	114.7

Redeemable investments2	79.2		74.4

Unfunded commitments3	15.7		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.

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

3Of the total unfunded commitments, the Company was contractually obligated to fund $6.7 million and $5.3 million based on its ownership percentage in the CIPs, at December 31, 2025 and September 30, 2025.

Changes in Level 3 assets of equity and debt securities were as follows:


	Three Months Ended December 31,
(in millions)		2025			2024
Balance at beginning of period			$	601.0		$	550.1


Gains included in investment and other income of consolidated investment products, net			28.8			22.0
Purchases			17.4			9.2
Sales			(3.2)			(11.6)
Net (deconsolidations) consolidations			(32.1)			3.8

Transfers out of Level 3			(16.8)			—
Balance at End of Period			$	595.1		$	573.5
Change in unrealized gains included in net income relating to assets held at end of period			$	34.1		$	22.3

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


(in millions)
as of December 31, 2025		Fair Value			Valuation Technique		Significant Unobservable Inputs		Range (Weighted Average1)
Equity and debt securities		$	295.9		Market pricing		Private sale pricing		$0.27–$2,120.00 ($222.11) per share
							Discount for lack of marketability		25.0%–75.0% (40.7%)
		226.4			Market comparable companies		Enterprise value/ Revenue multiple		1.6–26.2 (10.8)
						Discount for lack of marketability		4.3%–13.0% (8.5%)
	55.4			Discounted cash flow		Discount rate		6.5%–14.5% (7.0%)
	17.4			Option pricing model		Volatility		34.3%–57.9% (36.1%)
						Discount for lack of marketability		8.0%–11.3% (8.5%)


(in millions)
as of September 30, 2025		Fair Value			Valuation Technique		Significant Unobservable Inputs	Range (Weighted Average1)
Equity and debt securities		$	302.0		Market pricing		Private sale pricing	$0.27–$2,120.00 ($176.53) per share
				Discount for lack of marketability		5.0%–75.0% (23.9%)
	225.9	Market comparable companies		Enterprise value/ Revenue multiple		1.4–21.0 (9.5)
				Discount for lack of marketability		6.0%–11.0% (8.5%)
	54.4	Discounted cash flow		Discount rate		6.5%–13.0% (6.8%)
	18.7	Option pricing model		Volatility		34.0%–60.9% (38.2%)
				Discount for lack of marketability		9.1%–13.5% (9.4%)

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), 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), 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, 2025				September 30, 2025
	Carrying Value	Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Asset
Cash and cash equivalents	1	$	54.2	$	54.2	$	13.7	$	13.7

Financial Liabilities
Debt of CLOs1	2 or 3	$	10,862.7	$	10,710.3	$	9,937.3	$	9,786.0

1Substantially all was Level 2.

Debt

Debt of CLOs totaled $10,862.7 million and $9,937.3 million at December 31, 2025 and September 30, 2025. The debt had fixed and floating interest rates based on Secured Overnight Financing Rate (“SOFR”) ranging from 2.39% to 12.32% with a weighted-average effective interest rate of 6.02% at December 31, 2025, and from 2.39% to 12.26% based on SOFR and Euro Interbank Offered Rate with a weighted-average effective interest rate of 6.00% at September 30, 2025.

The contractual maturities for the debt of CLOs at December 31, 2025 were as follows:


(in millions)
for the fiscal years ending September 30,	Amount
2026 (remainder of year)		$	28.9
2027		96.3
2028		—
2029		—
2030		—
Thereafter		10,737.5
Total		$	10,862.7

Collateralized Loan Obligations

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


(in millions)	December 31, 2025		September 30, 2025
Unpaid principal balance	$	10,894.9	$	10,641.0
Difference between unpaid principal balance and fair value	(70.2)		(43.3)
Fair Value	$	10,824.7	$	10,597.7

Investments 90 days or more past due were immaterial at December 31, 2025 and September 30, 2025.

The Company recognized $11.2 million and $11.7 million of net gains during the three months ended December 31, 2025 and 2024, related to its own economic interests in the CLOs. The aggregate principal related to the debt of CLOs was $10,906.8 million and $9,958.6 million at December 31, 2025 and September 30, 2025.

Note 8 – Redeemable Noncontrolling Interests

Changes in redeemable noncontrolling interests were as follows:


(in millions)		2025									2024
	CIPs			Minority Interests			Total			CIPs			Minority Interests			Total
for the three months ended December 31,
Balance at beginning of period		$	289.6		$	892.4		$	1,182.0		$	687.8		$	634.0		$	1,321.8
Net income		26.1			13.6			39.7			38.9			10.7			49.6
Net subscriptions (distributions) and other		160.6			(37.8)			122.8			175.6			(3.7)			171.9
Net consolidations (deconsolidations)		(164.5)			—			(164.5)			564.2			—			564.2
Acquisition		—			32.8			32.8			—			—			—
Adjustment to fair value		—			79.1			79.1			—			(1.5)			(1.5)
Balance at End of Period		$	311.8		$	980.1		$	1,291.9		$	1,466.5		$	639.5		$	2,106.0

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, 2025		September 30, 2025
Investments	$	1,273.2	$	1,274.5
Receivables	232.4		225.1
Total	$	1,505.6	$	1,499.6

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 additional financial or other support to its sponsored funds assessed as VIEs during the three months ended December 31, 2025 or fiscal year 2025.

Note 10 – Commitments and Contingencies

Legal Proceedings

India Credit Fund Closure Matters. During the three months ended December 31, 2025, there were no significant changes from the disclosure in the Form 10‑K for the fiscal year ended September 30, 2025.

Western Asset Management Investigations and Litigation. 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. The Company and WAM have fully cooperated with these investigations. As previously disclosed, the CFTC informed WAM that it closed its investigation. The Company has also previously disclosed that it was informed by the DOJ that it is prepared to resolve its investigation through a disposition that does not require the filing of any criminal charges against WAM. The DOJ further informed the Company that as it continues the ongoing resolution discussions, which, as the DOJ noted, require additional time to complete due to circumstances not attributable to WAM, it appreciates WAM’s commitment to full cooperation with the investigation. The Company continues to cooperate with the SEC investigation, which remains ongoing.

Ken Leech, the former co-Chief Investment Officer of WAM, received a “Wells Notice” from the staff of the SEC in August 2024, and was placed on administrative leave at that time. Mr. Leech retired and is no longer with the Company, as previously disclosed. 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.

On July 3, 2025, Franklin, WAM and Ken Leech were named as defendants in a lawsuit filed by the Western PA Electrical Employees Insurance Trust Fund in the U.S. District Court for the Western District of Pennsylvania seeking class certification on behalf of shareholders of two funds managed by WAM for the period January 1, 2021 through October 31, 2023. On December 19, 2025, Abilene Firemen’s Relief and Retirement Fund was named the lead plaintiff in the action and effective January 9, 2026, the case was transferred to the U.S. District Court for the Central District of California. The plaintiffs are pursuing claims under the Securities Exchange Act of 1934 against all defendants in connection with trade allocations made by Mr. Leech in that period that are also the subject of the investigations reported above. The plaintiffs are seeking, among other things, damages, interest, and costs and expenses, including attorneys’ fees.

Franklin Templeton 401(k) Retirement Plan Litigation. On July 22, 2025, Franklin and the Franklin Templeton 401(k) Retirement Plan Committee were named as defendants in a lawsuit filed by certain former employees in the U.S. District Court for the Northern District of California. On November 10, 2025, the plaintiffs filed an amended complaint adding as defendants the Franklin Templeton 401(k) Retirement Plan Investment Committee and Gallagher Fiduciary Advisors, LLC. The plaintiffs seek to represent a class of participants and beneficiaries of the Franklin Templeton 401(k) Retirement Plan (the “Plan”) who were invested in funds managed by the Company at any time on or after July 22, 2019. The plaintiffs are pursuing claims under the Employee Retirement Income Security Act of 1974 for alleged breaches of fiduciary duties and failure to monitor the Plan fiduciaries in connection with the Plan’s inclusion of certain proprietary funds as investment options. The plaintiffs are seeking, among other things, damages, disgorgement, removal of certain investments from the Plan, removal and replacement of the Plan’s fiduciaries, attorneys’ fees and costs, and pre-judgment interest.

The lawsuits reported above against the Company are in their preliminary stages. Management believes the claims made in the lawsuits are without merit and the Company intends to defend against them vigorously. The Company cannot predict the outcome of these lawsuits or estimate any reasonably possible loss or range of loss that may arise from any negative outcome.

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, 2025 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, 2025.

Other Commitments and Contingencies

At December 31, 2025, 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 2025.

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, 2025
Nonvested balance at October 1, 2025	14,959	353	15,312	$	22.81
Granted	8,596	176	8,772	22.62
Vested	(596)	(180)	(776)	23.39
Forfeited/canceled	(221)	—	(221)	16.67
Nonvested Balance at December 31, 2025	22,738	349	23,087	$	22.78

Total unrecognized compensation expense related to nonvested stock unit awards was $299.3 million at December 31, 2025. This expense is expected to be recognized over a remaining weighted-average vesting period of 2.0 years.

Note 12 – Investment and Other Income, Net

Investment and other income, net consisted of the following:


	Three Months Ended December 31,
(in millions)	2025		2024
Dividend and interest income	$	54.6	$	43.1
Losses on investments, net	(8.6)		(57.1)
Income (losses) from investments in equity method investees	11.5		(7.6)
Losses on crypto assets, net	(6.4)		—
Rental income	11.3		11.2
Foreign currency exchange (losses) gains, net	(4.0)		14.5
Other, net	21.9		6.4
Investment and other income, net	$	80.3	$	10.5

Net losses recognized on equity securities measured at fair value and trading debt securities that were held by the Company were $12.5 million for the three months ended December 31, 2025 and $87.2 million for the three months ended December 31, 2024.

Note 13 – Segment and Geographic Information

The Company has one operating segment, which provides investment management and related services.

The chief operating decision maker (“CODM”), identified as the Company’s Chief Executive Officer, assesses the performance of the business and allocates resources primarily based on consolidated net income attributable to Franklin Resources, Inc. This measure is used to support decision making activities and assess the performance of the operating segment.

The CODM regularly reviews the significant segment expenses categories that are presented on the Company’s consolidated statements of income. Total assets on the consolidated balance sheets is the measure of segment assets.

Note 14 - Subsequent Event

On January 8, 2026, the Company borrowed $150.0 million under the Amended and Restated Revolving Credit Agreement, with aggregate commitments of up to $1.5 billion. The borrowing remains outstanding at the time of this filing and the proceeds were used for general corporate purposes.

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