GLOBAL OPERATIONAL RISKS

We may review and pursue strategic transactions that could pose risks to our business and global operations.

As part of our global business strategy, we regularly consider, and have discussions with respect to, potential strategic transactions, including acquisitions, dispositions, consolidations, joint ventures or similar transactions, some of which may be deemed material. There can be no assurance that we will find suitable candidates for strategic transactions at acceptable prices, have sufficient capital resources to accomplish our strategy, or be successful in entering into agreements for desired transactions. In addition, such transactions typically involve a number of risks and present financial, managerial and operational challenges. Acquisitions and related transactions pose the risk that any business we acquire may result in the loss of clients, customers or personnel or could underperform relative to expectations. We also may not realize the anticipated benefits of an acquisition, including with respect to revenue, tax benefits, financial benefits or returns, and expense and other synergies. We could also experience financial or other setbacks if transactions encounter unanticipated problems, including problems related to execution or integration. Entries into material transactions typically are announced publicly even though they may remain subject to numerous closing conditions, contingencies and approvals, and there is no assurance that any announced transaction will actually be consummated. Future transactions also may further increase our leverage or, if we issue equity securities to pay for acquisitions, dilute the holdings of our existing stockholders.

In addition, from time to time, we enter into joint ventures or take minority stakes in companies in which we typically do not have control. These investments may involve risks, including the risk that the controlling stakeholder or joint venture partner may have business interests, strategies or goals that are inconsistent with ours. The business decisions or other actions or omissions of the controlling stakeholder, joint venture partner or the entity itself may result in liability to us or harm to our reputation, or adversely affect the value of our investment in the entity.

Our business operations are complex and a failure to perform operational tasks properly or ~~the misrepresentation of our services and products, or the termination of investment management agreements representing a significant portion of our AUM,~~comply with applicable regulatory requirements could have an adverse effect on our revenues and income.

Through our subsidiaries, we provide investment management and related services to investors globally. Further, we outsource various administration, technology, transfer agency and other services for our funds to third-party providers who may serve as a sub-agent or delegate. In order to be competitive and comply with our agreements, we must properly perform our fund and portfolio administration and related responsibilities, including portfolio recordkeeping and accounting, security pricing, corporate actions, investment restrictions compliance, daily net asset value computations, account reconciliations, and required distributions to fund shareholders. Many of our operations are complex and dependent on our ability, and the ability of our third-party providers, to process and monitor a large number of transactions effectively, which may occur across numerous markets and currencies at high volumes and frequencies. Although we expend considerable resources on internal controls, supervision, technology and training in an effort to ensure that such transactions do not violate applicable guidelines, rules and regulations or adversely affect our clients, counterparties or us, our operations are ultimately dependent on our ~~employees,~~personnel, as well as others involved in our business, such as third-party vendors, providers and other intermediaries, and subject to potential human errors. Our ~~employees~~personnel and others involved in our business may, from time to time, make mistakes that are not always immediately detected, which may disrupt our operations, cause losses, lead to regulatory fines or sanctions, litigation, or otherwise damage our reputation. In addition, any misrepresentation of our services and products in advertising materials, public relations information, social media or other external communications could also adversely affect our reputation and business prospects. Our investment management fees, which represent ~~the majority~~a significant portion of our revenues, are dependent on fees earned under investment management agreements that we have with our products and clients. Our revenues could be adversely affected if such agreements representing a significant portion of our AUM are terminated. Further, certain of our subsidiaries may act as general partner for various investment partnerships, which may subject them to liability for the partnerships’ liabilities. If we fail to perform and monitor our operations properly, our business could suffer and our revenues and income could be adversely affected.

Failure to establish adequate controls and risk management policies, or the circumvention of controls and policies, could have an adverse effect on our global operations, reputation and financial position.

Although we have adopted risk management, operational and financial controls and compliance policies, procedures and programs that are subject to regular review and update, we cannot ensure that these measures will enable us effectively to identify and manage internal and external risks including those related to fraudulent activity and dishonesty. We are subject to the risk that our personnel, contractors, vendors and other third parties may deliberately or recklessly circumvent or violate our controls to commit fraud against our business, products and/or client accounts, pay or solicit bribes, or

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otherwise act in ways inconsistent with our controls, policies, workplace culture and business principles. Continued attempts to circumvent our policies and controls or repeated incidents involving violation of controls and policies, fraud or conflicts of interests could negatively impact our business and reputation and result in adverse publicity, regulatory investigations and actions, legal proceedings and losses and adversely affect our operations, reputation, AUM and financial results.

We face risks, and corresponding potential costs and expenses, associated with conducting operations and growing our business in numerous countries.

We sell our products ~~such as our funds and strategies,~~ and offer our strategies and investment management and related services in many different regulatory jurisdictions around the world, and intend to continue to expand our operations internationally. As we do so, we will continue to face challenges to the adequacy of our resources, procedures and controls to operate our business consistently and effectively. In order to remain competitive, we must be proactive and prepared to implement necessary resources when growth opportunities present themselves, whether as a result of a business acquisition or rapidly increasing business activities in particular markets or regions. Local regulatory environments may vary widely in terms of scope, adequacy and sophistication. Similarly, local distributors, and their policies and practices as well as financial viability, may vary widely and they may be inconsistent or less developed or mature than other more internationally focused distributors. ~~Notwithstanding potential long-term cost savings, growth~~Growth of our international operations has involved and may continue to involve near-term increases in expenses, as well as additional capital costs, such as information systems and technology costs, and costs related to compliance with particular regulatory or other local requirements or needs. Local requirements or needs also may ~~also~~ place additional demands on sales and compliance personnel and resources, such as meeting local language requirements, while also integrating personnel into an organization with a single operating language. Finding, hiring and retaining additional, well-qualified personnel and crafting and adopting policies, procedures and controls to address local or regional requirements remain challenges as we expand our operations internationally.

Moreover, regulators in non-U.S. jurisdictions could also change their policies or laws in a manner that might restrict or otherwise impede our ability to distribute or authorize products or maintain their authorizations in their respective markets. Any of these local requirements, activities or needs could increase the costs and expenses we incur in a specific jurisdiction without any corresponding increase in revenues and income from operating in the jurisdiction. Certain laws and regulations both inside and outside the U.S. have extraterritorial application. This may lead to duplicative or conflicting legal or regulatory burdens and additional costs and risks. For example, although negotiations between the U.K. and EU regarding Brexit began in June 2017, it is still unclear what terms, if any, may be agreed to in the final outcome and for any transitional period, and the ultimate impact on us.

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Our ~~increasing~~ focus on international markets as a source of investments and sales of our products subjects us to increased exchange rate and market-specific political, economic or other risks that may adversely impact our revenues and income generated overseas.

While we maintain a significant portion of our operations in the U.S., we also provide services and earn revenues in Asia-Pacific; Europe, ~~the~~ Middle East and ~~Africa, Asia-Pacific, Canada, The Bahamas~~Africa; Latin America; and ~~Latin America.~~Canada. As a result, we are subject to foreign currency exchange risk through our non-U.S. operations. Fluctuations in the exchange rates to the U.S. dollar have affected, and may in the future affect, our financial results from one period to the next. While we have taken steps to reduce our exposure to foreign exchange risk, for example, by denominating a significant amount of our transactions in U.S. dollars, our situation may change in the future. Appreciation of the U.S. dollar could in the future moderate revenues from managing our products internationally, or could affect relative investment performance of certain of our products invested in non-U.S. securities. In addition, we have risk associated with the foreign exchange revaluation of U.S. dollar balances held by certain non-U.S. subsidiaries for which the local currency is the functional currency. Separately, management fees that we earn tend to be higher in connection with non-U.S. AUM than with U.S. AUM. Consequently, downturns in international markets have in the past had, and could in the future have, a significant effect on our revenues and income. Moreover, our emerging market portfolios and revenues derived from managing these portfolios are subject to significant risks of loss from financial, economic, political and diplomatic developments, currency fluctuations, social instability, changes in governmental policies, expropriation, nationalization, asset confiscation and changes in legislation related to non-U.S. ownership. International trading markets, particularly in some emerging market countries, are often smaller, less liquid, less regulated and significantly more volatile than those in the U.S. ~~As our business continues to grow in non-U.S. markets, any~~Any ongoing and future business, economic, political or social unrest affecting these markets, in addition to any direct consequences such unrest may have on our personnel and facilities located in the affected area, also may ~~also~~ have a ~~more~~ lasting impact on the long-term investment climate in these and other areas and, as a result, our AUM and the corresponding revenues and income that we generate from them may be negatively affected.

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~~We may review and pursue strategic transactions that could pose risks to our business.~~
As part of our business strategy, we regularly consider, and have discussions with respect to, potential strategic transactions, including acquisitions, dispositions, consolidations, joint ventures or similar transactions, some of which may be deemed material. There can be no assurance that we will find suitable candidates for strategic transactions at acceptable prices, have sufficient capital resources to accomplish our strategy, or be successful in entering into agreements for desired transactions. In addition, such transactions typically involve a number of risks and present financial, managerial and operational challenges. Acquisitions and related transactions pose the risk that any business we acquire may lose customers or employees or could underperform relative to expectations. We could also experience financial or other setbacks if transactions encounter unanticipated problems, including problems related to execution or integration. Strategic transactions typically are announced publicly even though they may remain subject to numerous closing conditions, contingencies and approvals, and there is no assurance that any announced transaction will actually be consummated. Future transactions may also further increase our leverage or, if we issue equity securities to pay for acquisitions, dilute the holdings of our existing stockholders.

COMPETITION AND DISTRIBUTION RISKS

Failure to properly address the increased transformative pressures affecting the asset management industry could negatively impact our business.

The asset management industry is facing transformative pressures and trends from a variety of different sources includingincreased fee pressure; a continued shift away from actively managed core equities and fixed income strategies towards alternative, passive and smart beta strategies; increased demands from clients and distributors for client engagement and services; a trend towards institutions developing fewer relationships and partners and reducing the number of investment managers they work with;increased regulatory activity and scrutiny of many aspects of the asset management industry, including ESG practices and related matters, transparency/unbundling of fees, inducements, conflicts of interest, capital, liquidity, solvency, leverage, operational risk management, controls and compensation;addressing the key emerging markets in the world, such as China and India, which often have populations with different needs, preferences and horizons than the more developed U.S. and European markets; andadvances in technology and digital wealth and distribution tools and increasing client interest in interacting digitally with their investment portfolios.As a result of the trends and pressures discussed above, the asset management industry is facing an increased level of disruption. If we are unable to adapt our strategy and business to address adequately these trends and pressures, we may be unable to meet client needs satisfactorily, our competitive position may weaken, and our business results and operations may be adversely affected.

Strong competition from numerous and sometimes larger companies with competing offerings and products could limit or reduce sales of our products, potentially resulting in a decline in our market share, revenues and income.

We compete with numerous investment management companies, securities brokerage and investment banking firms, insurance companies, banks and other financial institutions. Our products also compete with products offered by these competitors, as well as with real estate investment trusts, hedge funds and other products. The periodic establishment of new investment management companies and other competitors increases the competition that we face. At the same time, consolidation in the financial services industry has created stronger competitors with greater financial resources and broader distribution channels than our own. Competition is based on various factors, including, among others, business reputation, investment performance, product mix and offerings, ESG strategies and considerations, service quality and innovation, distribution relationships, and fees charged. Further, although we may offer certain types of ~~exchange-traded funds,~~ETFs, to the extent that there is a trend among existing or potential clients in favor of ~~lower fee~~lower-fee index and other ~~exchange-traded funds,~~ETFs, it may favor our competitors who may offer such products that are more established or on a larger scale than we do. Additionally, competing securities broker-dealers and banks, upon which we rely to distribute and sell certain of our funds and other products, also may ~~also~~ sell their own proprietary funds and products, which could limit the distribution of our products. To the extent that existing or potential clients, including securities broker-dealers, decide to invest in or distribute the products of our competitors, the sales of our products as well as our market share, revenues and income could decline. Our ability to attract and retain AUM is also dependent on the relative investment performance of our products, offering a mix of products and strategies that meets investor demands, and our ability to maintain our investment management fees and pricing structure at competitive levels.

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Increasing competition and other changes in the third-party distribution and sales channels on which we depend could reduce our revenues and income and hinder our growth.

We primarily derive ~~nearly all of~~ our fund sales through third-party broker-dealers, banks, investment advisers and other financial intermediaries. Because we rely on third-party distribution and sales channels to sell our products, we do not control the ultimate investment recommendations given by them to clients. Such financial intermediaries may recommend competing products. Increasing competition for these distribution and sales channels, and regulatory changes and initiatives, have caused our distribution costs to rise and could cause further cost increases in the future, or could otherwise negatively impact the distribution of our products. Higher distribution costs lower our revenues and income, and consolidations in the broker-dealer or banking industries could also adversely impact our revenues and income. A failure to maintain our third-party distribution and sales channels, or a failure to maintain strong business relationships with our distributors and other intermediaries, may impair our distribution and sales operations. Any inability to access and successfully sell our products to clients through such third-party channels could have a negative effect on our level of AUM and adversely impact our business.

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Moreover, ~~there is~~we can provide no assurance that we will continue to have access to the third-party financial intermediaries that currently distribute our products, or that we will continue to have the opportunity to offer all or some of our existing products through them. If several of the major financial advisers that distribute our products were to cease operations or limit or otherwise end the distribution of our products, it could have a significant adverse impact on our revenues and income.

Further, the standards of conduct and disclosure and reporting requirements, with respect to fees, products, services and possible conflicts of interest, applicable to broker-dealers and other financial intermediaries in the U.S., remain subject to change and enhancement pursuant to business and regulatory developments and requirements, including with respect to investor suitability obligations, enhanced investor protections for retail customers, and increased compliance requirements.

In addition, Canada, the U.K., the Netherlands and the EU, through MiFID II, have adopted regimes that ban, or may limit, the payment of commissions and other inducements to intermediaries in relation to certain sales to retail customers in those jurisdictions, and similar regimes are under consideration in several other jurisdictions. Depending on their exact terms, such regimes may result in existing flows of business moving to less profitable channels or even to competitors providing substitutable products outside the regime. Arrangements with non-independent advisers will also be affected as narrower rules related to the requirement that commissions reflect an enhancement of the service to customers come into effect, along with a prescriptive list of permissible non-monetary benefits. The interpretation of the inducements rules has also resulted in major changes to how fund managers, including us, finance investment research with many firms, by opting to pay for third-party investment research for client accounts covered by MiFID II.

THIRD-PARTY RISKS

Any failure of our third-party providers to fulfill their obligations, or our failure to maintain good relationships with our providers, could adversely impact our business.

We currently, and may in the future, depend on a number of third-party providers to support various operational, administrative, technology, transfer agency, market data, distribution, and other business needs of our company. Further, we outsource various administration, technology, transfer agency and other services for our funds to third-party providers. In addition, we may, from time to time, transfer vendor contracts and services from one provider to another. If our third-party providers fail to deliver required services on a timely basis, or if we experience other negative service quality or relationship issues with our providers, we may be exposed to significant costs and/or operational difficulties, and our ability to conduct and grow our business may be impaired. ~~In addition, we are in the process of outsourcing certain of our fund administration services for our funds to a third-party provider.~~ Such administrative and functional changes are costly and complex, and may expose us to heightened operational risks. Any failure to mitigate such risks could result in reputational harm to us, as well as financial losses to us and our clients. The failure of any key provider or vendor to fulfill its obligations to us could result in outcomes inconsistent with our or our clients’ objectives and requirements, result in legal liability and regulatory issues for us, and otherwise adversely impact us.

We may be adversely affected if any of our third-party providers is subject to a successful cyber or security attack.

Due to our interconnectivity with third-party vendors, advisors, central agents, exchanges, clearing organizations and other financial institutions, we may be adversely affected if any of them is subject to a successful cyber attack or other privacy or information security event, including those arising due to the use of mobile technology or a third-party cloud environment. Most of the software applications that we use in our business are licensed from, and supported, upgraded and maintained by, third-party vendors. Our third-party applications include enterprise cloud storage and cloud computing application services provided and maintained by third-party vendors. Any breach, suspension or termination of certain of these licenses or the related support, upgrades and maintenance could cause temporary system delays or interruption that could adversely impact our business. Our third-party applications may include confidential and proprietary data provided by vendors and by ~~us.~~

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us, including personal employee and/or client data.

TECHNOLOGY AND SECURITY RISKS

Our ability to manage and grow our business successfully can be impeded by systems and other technological limitations.

Our continued success in effectively managing and growing our business depends on our ability to integrate our varied accounting, financial, information, and operational systems on a global basis. Moreover, adapting or developing the existing technology systems we use to meet our internal needs, as well as client needs, industry demands and new regulatory requirements, is also critical for our business. The introduction of new technologies presents new challenges to

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us. ~~We have~~On an ongoing basis, we need to upgrade and improve our technology, ~~continually,~~ including our data processing, financial, accounting, shareholder servicing and trading systems. Further, we also must be proactive and prepared to implement new technology when growth opportunities present themselves, whether as a result of a business acquisition or rapidly increasing business activities in particular markets or regions. These needs could present operational issues or require significant capital spending, and may require us to reevaluate the current value and/or expected useful lives of the technology we use, which could negatively impact our results of operations. In addition, technology is subject to rapid advancements and changes and our competitors may, from time to time, implement newer technologies or more advanced platforms for their services and products, including digital advisers, digital wealth and distribution tools and other advanced electronic systems, which could adversely affect our business if we are unable to remain competitive.

Any significant limitation, failure or security breach of our information and cyber security infrastructure, software applications, technology or other systems that are critical to our operations could disrupt our business and harm our operations and reputation.

We are highly dependent upon the use of various proprietary and third-party information and security technology, software applications and other technology systems to operate our business. We are also dependent on the continuity and effectiveness of our information and cyber security infrastructure, management oversight and reporting framework, policies, procedures and capabilities to protect our computer and telecommunications systems and the data that reside on or are transmitted through them and contracted third-party systems. We use technology on a daily basis in our business to, among other things, support our business continuity and operations, process and transmit confidential communications, store and maintain data, obtain securities pricing information, process client transactions, and provide reports and other ~~customer~~ services to our clients. Any disruptions, inaccuracies, delays, theft, systems failures, data security or privacy breaches, cyber attacks or ~~cyber~~cyber-related fraud, or other security breaches in these and other processes could subject us to significant client dissatisfaction and losses and damage our reputation. We have been, and expect to continue to be, the subject of these types of risks, breaches and/or attacks, ~~from time~~as well as attempts to ~~time.~~co-opt our brand. Although we take protective measures, including measures to secure and protect information through system security technology and our internal security procedures, ~~there~~we can beprovide no assurance that any of these measures will prove ~~effective.~~effective or comply with evolving information security standards. The technology systems we use remain vulnerable to denial of service attacks, unauthorized access, computer viruses, potential human errors and other events and circumstances that may have a security impact, such as an external or internal hacker attack by one or more cyber criminals (including through the use of phishing attacks, malware, ransomware and other methods and activities maliciously designed to obtain and exploit confidential information and to cause system and service disruption and other damage) or ~~an authorized employee~~our personnel or ~~vendor~~vendors inadvertently or recklessly causing us to release confidential information, which could materially harm our operations and reputation.

Potential system disruptions, failures or breaches of the technology we use or the security infrastructure we rely upon, ~~and~~including the ~~costs necessary to address them,~~third-party applications we use, could result in: (i) ~~significant~~ material financial loss or costs, (ii) delays in clients’ ability to access account information or in our ability to process transactions, (iii) the unauthorized disclosure or modification of sensitive or confidential client and business information, ~~(iii)~~(iv) loss of valuable information, ~~(iv)~~(v) breach of client and vendor contracts, ~~(v)~~(vi) liability for stolen assets, information or identity, ~~(vi)~~(vii) remediation costs to repair damage caused by the failure or breach, ~~(vii)~~(viii) additional security and organizational costs to mitigate against future incidents, ~~(viii)~~(ix) reputational harm, ~~(ix)~~(x) loss of confidence in our business and products, ~~(x)~~(xi) liability for failure to review and disclose applicable incidents or provide relevant updated disclosure properly and timely, ~~(xi)~~(xii) regulatory investigations or actions, and/or ~~(xii)~~(xiii) legal claims, litigation, and liability ~~costs.~~costs, any one or more of which may be material. Moreover, loss or unauthorized disclosure or transfer of confidential and proprietary data or confidential customer identification information could further harm our reputation and subject us to liability under laws that protect confidential data and personal information, resulting in increased costs or a decline in our revenues or common stock price. Further, although we take precautions to password protect and encrypt our laptops and sensitive information on our other mobile electronic devices, if such devices are stolen, misplaced or left unattended, they may become vulnerable to hacking or other unauthorized use, creating a possible security risk, which may require us to incur additional administrative costs and/or take remedial actions. In addition, ~~the~~ failure to manage and operate properly the data centers and third-party cloud storage and computing application services we use could have an adverse impact on our business. Although we have in place certain disaster recovery plans, we may experience system delays and interruptions as a result of natural disasters, power failures, acts of war, and third-party failures.

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Our inability to recover successfully, should we experience a disaster or other business continuity problem, could cause material financial loss, regulatory actions, legal liability, and/or reputational harm.

Should we experience a local or regional disaster or other business continuity problem, such as an earthquake, hurricane, tsunami, terrorist attack, public health crisis, pandemic or other natural or man-made disaster, our continued success will depend, in part, on the safety and availability of our personnel, our office facilities and infrastructure, and the proper functioning of our technology, computer, telecommunication and other systems and operations that are critical to our business. While our operational size, the diversity of locations from which we operate, and our various back-up systems provide us with an advantage, should we experience a local or regional disaster or other business continuity event, we could still experience operational challenges, in particular depending upon how such a local or regional event may affect our personnel across our operations or with regard to particular aspects of our operations, such as key executives or personnel in our technology groups. Moreover, as we grow our operations in new geographic regions, the potential for particular types of natural or man-made disasters, political, economic or infrastructure instabilities, information, technology or security limitations or breaches, or other country- or region-specific business continuity risks increases. Past disaster recovery efforts have demonstrated that even seemingly localized events may require broader disaster recovery efforts throughout our operations and, consequently, we regularly assess and take steps to improve upon our existing business continuity plans. However, a disaster on a significant scale or affecting certain of our key operating areas within or across regions, or our inability to recover successfully following a disaster or other business continuity problem, could adversely impact our business and operations.

HUMAN CAPITAL RISKS

We depend on key personnel and our financial performance could be negatively affected by the loss of their services.

The success of our business will continue to depend upon our key personnel, including our portfolio ~~and fund~~ managers, investment analysts, investment advisers, sales and management personnel and other professionals as well as our executive officers and business unit heads. Competition for qualified, motivated, and highly-skilled executives, professionals and other key personnel in the investment management industry remains significant. Our success depends to a substantial degree upon our ability to find, attract, retain and motivate qualified individuals, including through competitive compensation packages, and upon the continued contributions of these people. Global and/or local laws and regulations could impose restrictions on compensation paid by financial institutions, which could restrict our ability to compete effectively for qualified professionals. As our business develops, we may need to increase the number of individuals that we employ. Moreover, in order to retain certain key personnel, we may be required to increase compensation to such individuals and increase our key management succession planning, resulting in additional expense without a corresponding increase in potential revenues. There is no assurance that we will be successful in finding, attracting and retaining qualified individuals, and the departure of key investment personnel, in particular, ~~if not replaced,~~ could cause us to lose clients, which could have a material adverse effect on our financial condition, results of operations and business prospects. In addition, due to the global nature of our business, our key personnel may, from time to time, have reasons to travel to regions susceptible to higher risk of civil unrest, organized crime or terrorism, and we may be unable to ensure the safety of our personnel traveling to such regions.

~~EXPENSE AND~~ CASH MANAGEMENT RISKS

~~Our future results are dependent upon maintaining an appropriate expense level.~~The level of our expenses is subject to fluctuation and may increase for the following or other reasons: (i) changes in the level and scope of our operating expenses in response to market conditions or regulations, (ii) variations in the level of total compensation expense due to, among other things, bonuses, merit increases and severance costs, (iii) changes in our employee count and mix, and competitive factors, (iv) changes in expenses and capital costs, including costs incurred to maintain and enhance our administrative and operating services infrastructure or to cover uninsured losses, and (v) increases in insurance expenses, including through the assumption of higher deductibles and/or co-insurance liability.

Our ability to meet cash needs depends upon certain factors, including the market value of our assets, our operating cash flows and our perceived creditworthiness.

If we are unable to obtain cash, financing or access to the capital markets in a timely manner, we may be forced to incur unanticipated costs or revise our business plans, and our business could be adversely impacted. Further, our access to the capital markets depends significantly on our credit ratings. A reduction in our long- or short-term credit ratings could increase our borrowing costs and limit our access to the capital markets. Volatility in the global financing markets also may ~~also~~ impact our ability to access the capital markets should we seek to do so, and may have an adverse effect on investors’ willingness to purchase our securities, interest rates, credit spreads and/or the valuation levels of equity markets.

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We are dependent on the earnings of our subsidiaries.

Substantially all of our operations are conducted through our subsidiaries. As a result, our cash flow and our ability to fund operations are dependent upon the earnings of our subsidiaries and the distribution of earnings, loans or other payments by our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation to fund our payment obligations, whether by dividends, distributions, loans or other payments. Any payments to us by our subsidiaries could be subject to statutory or contractual restrictions and are contingent upon our subsidiaries’ earnings and business considerations. Certain of our subsidiaries are subject to regulatory restrictions that may limit their ability to transfer assets to their parent companies. Our financial condition could be adversely affected if certain of our subsidiaries are unable to distribute assets to us.

LEGAL AND REGULATORY RISKS

For a more extensive discussion of certain laws, regulations (including certain pending regulatory reforms) and regulators to which we are subject, as well as certain defined terms referenced below, see “Item 1 – Business – Regulation” in Part I of this Annual Report.

We are subject to extensive, complex, overlapping and frequently changing rules, regulations, policies, and legal interpretations.

There is uncertainty associated with the regulatory and compliance environments in which we operate. Our business is subject to extensive and complex, overlapping and/or conflicting, and frequently changing and increasing rules, regulations, policies and legal interpretations, around the world. Political and electoral changes, developments and conflicts have in the past introduced, and may in the future introduce, additional uncertainty. Our regulatory and compliance obligations impose significant operational and cost burdens on us and cover a broad range of requirements related to financial reporting and other disclosure matters, securities and other financial instruments, investment and advisory matters, accounting, tax, compensation, ethics, intellectual property, data protection, privacy, sanctions programs, and escheatment requirements. We may be adversely affected by a failure to comply with applicable laws, regulations and changes in the countries in which we operate. ~~For a more extensive discussion of the laws, regulations and regulators to which we are subject, see “Item 1~~ –~~- Business~~ –~~- Regulation” included in Part I of this Annual Report on Form 10‑K.~~

We may be adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation of existing laws and ~~regulations.~~regulations, in the U.S. and other jurisdictions.

The laws and regulations applicable to our business generally involve restrictions and requirements in connection with a variety of technical, specialized, and expanding matters and concerns. Over the years, the U.S. federal corporate governance and securities laws, and laws in other jurisdictions, have been augmented substantially and made significantly more complex by various legislation. As we continue to address our legal and regulatory requirements or focus on meeting new or expanded requirements, we may need to continue to expend a substantial amount of additional time, costs and resources. Regulatory reforms may add further complexity to our business and operations and could require us to alter our investment management services and related activities, which could be costly, impede our growth and adversely impact our AUM, revenues and income. Regulatory reforms also may impact our clients, which could cause them to change their investment strategies or allocations in a manner adverse to our business. Certain key regulatory reforms in the U.S. and other jurisdictions that may impact or relate to our business, and may cause us to incur additional obligations, ~~include:~~


•	~~Dodd-Frank.~~ In July 2010, Dodd-Frank was adopted in the U.S. Dodd-Frank is expansive in scope and has required the adoption of extensive regulations and the issuance of numerous regulatory decisions, while certain proposed rules remain subject to final adoption.

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~~Systemically Important Financial Institutions.~~ Dodd-Frank authorized the establishment of the FSOC, the mandate of which is to identify and respond to threats to U.S. financial stability. Similarly, the U.S. and other members of the G-20 group of nations have empowered the FSB to identify and respond, in a coordinated manner, to threats to global financial stability. To the extent that we or any of our funds are designated as SIFIs by the FSOC or as global SIFIs by the FSB, such designations add additional supervision and/or regulation, which could include requirements related to risk-based capital, leverage, liquidity, credit exposure, stress testing, resolution plans, early remediation, and certain risk management requirements, that could impact our business.

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~~Derivatives and Other Financial Products~~. Dodd-Frank, as well as other legislation and regulations, impose restrictions and limitations on us related to our financial services and products, resulting in increased scrutiny and oversight. Under Dodd-Frank’s regulations governing derivative transactions, certain categories of swaps are required to be submitted for clearing by a regulated clearing organization and reported on a swap execution facility. The EU and other countries have implemented, or are in the process of implementing, similarinclude regulatory matters related to systemically important financial institutions, derivatives and other financial products, privacy and data protection, retail and other investor protections, ESG topics and disclosure, and other asset management disclosure and compliance requirements. There is some risk that full mutual recognition may not be achieved between the various regulators, which may cause us to incur duplicate regulation and transaction costs. The SEC has also proposed a rule that would impose restrictions on the use of derivatives by registered funds. In addition, SEC rules have changed the structure and operation for certain types of money market funds, and certain U.S.-registered funds are required to adopt liquidity management programs.

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~~Privacy and Data Protection.~~ There also has been increased regulation with respect to the protection of customer privacy and data, and the need to secure sensitive customer, employee and others’ information. As the regulatory focus on privacy continues to intensify and laws and regulations concerning the management of personal data expand, risks related to privacy and data collection within our business will increase. In addition to the EU’s GDPR data protection rules, we may also be or become subject to or affected by additional country, federal and state laws, regulations and guidance impacting consumer privacy, such as the recently enacted CCPA effective January 2020, which provides for enhanced consumer protections for California residents and statutory fines for data security breaches or other CCPA violations. Noncompliance with our legal obligations relating to privacy and data protection could result in penalties, legal proceedings by governmental entities or affected individuals, and significant legal and financial exposure.


•	~~Rule 12b-1 Plans~~. In 2010, the SEC proposed changes to Rule 12b-1 promulgated under the Investment Company Act that, if adopted, could limit our ability to recover expenses relating to the distribution of our U.S.-registered funds, which could decrease our revenues.

•

~~SEC Regulation Best Interest.~~ In June 2019, the SEC adopted a package of new rules, amendments and interpretations, including Regulation Best Interest and a new form of relationship summary, designed to enhance investor protections for all retail customers, that will, subject to a transition period until June 30, 2020, among other things: (i) require broker-dealers to act in the best interest of their retail customers when recommending securities and account types, (ii) raise the broker-dealer standard of conduct beyond existing suitability obligations, and (iii) require a new relationship summary disclosure document to inform retail clients of the nature of the broker-dealers’ relationships with investment professionals and registered investment advisers, including a description of services offered, the legal standards of conduct that apply to each, the fees a client might pay, and conflicts of interest that may exist.

•

~~Other Compliance Requirements~~. Compliance with the U.S. Bank Secrecy Act of 1970, the U.S. Patriot Act of 2001, and anti-money laundering and economic sanctions, both domestically and internationally, has taken on heightened importance as a result of efforts to, among other things, combat terrorist financing and actions that undermine the stability, sovereignty and territorial integrity of countries. In addition, global regulatory, federal and/or state anti-takeover or business combination laws may impose various disclosure and procedural requirements on a person seeking to acquire control of us, which may discourage potential merger and acquisition proposals and may delay, deter or prevent a change of control, including through transactions that some stockholders may consider desirable.

The impacts of these and other regulatory reforms on us, now and in the future, could be significant. We expect that the regulatory requirements and developments applicable to us will cause us to continue to incur additional compliance and administrative burdens and costs. Any inability to meet applicable requirements within the required timeframes may subject us to sanctions or other restrictions by governments and/or regulators that could adversely impact our broader business objectives.

Global regulatory and legislative actions and reforms have made compliance in the regulatory environment in which we operate more costly and future actions and reforms could adversely impact our financial condition and results of operations.

As in the U.S., regulatory and legislative actions outside the U.S. have been augmented substantially and made more complex by measures such as the EU’s Alternative Investment Fund Managers Directive and MiFID II. Further, ongoing changes in the EU’s regulatory framework applicable to our business, including changes related to Brexit and any other changes in the composition of the EU’s member states, may add further complexity to our global risks and operations.

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Moreover, the adoption of new laws, regulations or standards and changes in the interpretation or enforcement of existing laws, regulations or standards have directly affected, and will continue to affect, our business. With new laws and changes in interpretation of existing requirements, the associated time we must dedicate to and related costs we must incur in meeting the regulatory complexities of our business have increased. We may be required to continue to invest significant additional management time and resources to address new and changing regulations ~~being adopted~~ pursuant to MiFID II and other laws. For example, MiFID II requires the ~~“unbundling”~~unbundling of research and execution charges for trading. ~~The industry’s response to the unbundling rules is still evolving and could lead to increased research costs.~~ Outlays associated with meeting regulatory complexities have also increased as we expand our business into new jurisdictions.

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~~As of May 2018, the~~The EU’s GDPR strengthened and unified data protection rules for individuals within the ~~EU. GDPR also~~EU and addresses export of personal data outside the EU. The primary objectives of GDPR are to give citizens control of their personal data and to simplify the regulatory environment for international business by unifying data protection regulation within the EU. Compliance with the stringent data protection rules under GDPR requires an extensive review of all of our global data processing systems. The failure to comply properly with GDPR rules on a timely basis and to maintain ongoing compliance with such rules may subject us to enforcement proceedings and significant fines and costs. For example, a failure to comply with GDPR could result in fines up to ~~20 million Euros or~~ 4% of our annual global ~~revenues, whichever is higher.~~revenues.

Compliance activities to address these and other new legal requirements have required, and will continue to require, us to expend additional time and resources, and, consequently, we are incurring increased costs of doing business, which potentially negatively impacts our profitability and future financial results. Finally, any further regulatory and legislative actions and reforms affecting the investment management industry, including compliance initiatives, may negatively impact revenues by increasing our costs of accessing or operating in financial markets or by making certain investment offerings less favorable to our clients.

Failure to comply with the laws, rules or regulations in any of the jurisdictions in which we operate could result in substantial harm to our reputation and results of operations.

As with all investment management companies, our activities are highly regulated in almost all countries in which we conduct business. Failure to comply with the applicable laws, rules, regulations, codes, directives, notices or guidelines in any of our jurisdictions could result in regulatory enforcement, civil liability, criminal liability and/or the imposition of a range of sanctions or orders against us, including, as applicable, monetary damages, injunctions, disgorgements, fines, penalties, cease and desist orders, censures, ~~injunctive relief,~~reprimands, and the revocation, cancellation, suspension or ~~expulsion from~~restriction of licenses, registration status or approvals held by us or our business in a ~~particular~~ jurisdiction or market, ~~or the revocation of licenses or charters,~~ any of which could adversely affect our reputation and operations. Moreover, any potential accounting or reporting ~~error,~~errors, whether financial or otherwise, if material, could damage our reputation and adversely affect our business. While management has focused attention and resources on our compliance policies, procedures and practices, the regulatory environments of the jurisdictions where we conduct our business, or where our products are organized or sold, are complex, uncertain and subject to change. Local regulatory environments may vary widely and place additional demands on our sales, investment, legal and compliance personnel. In recent years, the regulatory environments in which we operate have seen significant increased and evolving regulations, which have imposed and may continue to impose additional compliance and operational requirements and costs on us in the applicable jurisdictions. Regulators could also change their policies or laws in a manner that might restrict or otherwise impede our ability to offer our services and products in their respective markets, or we may be unable to keep up with, or adapt to, the ever changing, complex regulatory requirements in such jurisdictions or markets, which could further negatively impact our business.

Changes in tax laws or exposure to additional income tax liabilities could have a material impact on our financial condition, results of operations and liquidity.

We are subject to complex tax regimes, changing tax laws, income taxes, ~~as well as non-income based~~non-income-based taxes, and ~~are subject to~~ ongoing tax audits, in the various jurisdictions in which we operate. Tax authorities may disagree with certain positions we have taken and assess additional taxes. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcomes of these audits and the actual outcomes could have a material impact on our ~~net income or~~ financial condition. Changes in tax laws or rulings, including corporate tax ~~rulings~~rate increases, capital gains rate increases for fund investors and other tax rate increases impacting our clients and their willingness to invest in our products, may at times materially impact our ~~effective tax rate.~~financial condition.

Regulatory and governmental examinations and/or investigations, litigation and the legal risks associated with our business, could adversely impact our AUM, increase costs and negatively impact our profitability and/or our future financial results.

We operate in a highly regulated industry and routinely receive and respond to regulatory and governmental requests for documents or other information, subpoenas, examinations and, in some instances, investigations in connection with our

~~The U.S. Tax Cuts~~25

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business activities. Further, regulatory or governmental examinations or investigations that have been inactive could become active. In addition, we are named as a party in litigation in the ordinary course of business. Even if claims made against us are without merit, they can result in reputational harm and ~~Jobs Act includes various changes~~responding to such matters typically is an expensive process. Risks associated with legal liability often are difficult to assess or quantify and their existence and magnitude can remain unknown for significant periods of time. Regulatory enforcement and civil litigation matters can result in the imposition of a range of sanctions or orders against us, including, as applicable, monetary damages, injunctions, disgorgements, fines, penalties, cease and desist orders, censures, reprimands, and the revocation, cancellations, suspension or restriction of licenses, registration status or approvals held by us or our business. In addition, we may be obligated, and under our certificate of incorporation, bylaws and standard form of director indemnification agreement are obligated under certain conditions, or may choose, to indemnify directors, officers or personnel against liabilities and expenses they may incur in connection with such matters to the ~~tax law, including~~extent permitted under applicable law. Eventual financial exposures from and expenses incurred relating to any examinations, investigations, enforcement actions, litigation, and/or settlements could adversely impact our AUM, increase costs, and negatively impact our reputation, profitability, and revenue any of which could have a ~~permanent reduction~~material negative impact on our financial results. For a discussion of certain legal proceedings and regulatory matters in which we are involved, see the “Legal Proceedings” section in Note 15 - Commitments and Contingencies in the ~~corporate income tax rate and one-time transition tax on certain non-U.S. earnings. Further, pursuant~~notes to ~~ongoing efforts to encourage global tax compliance, the OECD has adopted CRS, aimed at ensuring that persons with~~consolidated financial ~~assets located outside~~statements in Item 8 of ~~their tax residence country pay required taxes. In many cases, intergovernmental agreements between the participating countries will govern implementation~~Part II of the new CRS rules. CRS is being implemented over a multi-year period and we will continue to monitor the implementing regulations and corresponding intergovernmental agreements to determine our requirements. CRS may subject us to additional reporting, compliance and administrative costs, and burdens in jurisdictions where we operate as a qualifying financial institution.this Annual Report.

The OECD has also undertaken a new project focused on “Addressing the Tax Challenges of the Digitalization of the Economy.” This project may impact all multinational businesses by allocating a greater share of taxing rights to countries where consumers are located regardless of the current physical presence of a business, and by implementing a global minimum tax. There is significant uncertainty regarding such proposal and any unfavorable resolution could have an adverse effect on our effective tax rate.

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Our contractual obligations may subject us to indemnification costs and liability to third parties.

In the ordinary course of business, we ~~and our subsidiaries~~ enter into contracts with third parties, including, without limitation, clients, vendors, and other service providers, that contain a variety of representations and warranties and that provide for indemnifications by us in certain circumstances. Pursuant to such contractual arrangements, we may be subject to indemnification costs and liability to third parties if, for example, we breach any material obligations under the agreements or agreed standards of care, or in the event such third parties have certain legal claims asserted against them. The terms of these indemnities vary from contract to contract, and future indemnification claims against us could negatively impact our financial condition.

~~Regulatory and governmental examinations and/or investigations, litigation and the legal risks associated with~~Failure to protect our ~~business, could adversely impact our AUM, increase costs and~~intellectual property may negatively impact our ~~profitability and/or~~business.

Although we take steps to safeguard and protect our ~~future financial results.~~ ~~From time~~intellectual property, including but not limited to ~~time,~~our trademarks, patents, copyrights and trade secrets, there can be no assurance that we ~~receive~~will be able effectively to protect our rights. If our intellectual property rights were violated, we could be subject to economic and respond to regulatory and governmental requests for documents or other information, subpoenas, examinations and investigations in connection with our business activities. In addition, regulatory or governmental examinations or investigationsreputational harm that ~~have been inactive~~ could become active. In addition, from time to time, we are named as a party in litigation. We may be obligated, and under our certificate of incorporation, by-laws and standard form of director indemnification agreement we are obligated under certain conditions, or we may choose, to indemnify directors, officers or employees against liabilities and expenses they may incur in connection with such matters to the extent permitted under applicable law. Even if claims made against us are without merit, litigation typically is an expensive process. Risks associated with legal liability often are difficult to assess or quantify and their existence and magnitude can remain unknown for significant periods of time. Eventual exposures from and expenses incurred relating to any examinations, investigations, litigation, and/or settlements could adversely impact our AUM, increase costs and/or negatively impact our ~~profitability~~business and ~~financial results. Allegations, findings or judgments~~competitiveness in the marketplace. Conversely, while we take efforts to avoid infringement of ~~wrongdoing by regulatory or governmental authorities or in~~the intellectual property of third parties, if we are deemed to infringe on a third party’s intellectual property rights it could expose us to litigation against us, or settlements with respect thereto, could affect our reputation, increase our costs of doing business and/or negatively impact our revenues, any of which could have a material negative impact on our financial results.risks, license fees, liability and reputational harm.


~~Item 1B.~~	~~Unresolved Staff Comments.~~

Item 1B.Unresolved Staff Comments.

None.

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~~Item 2.~~	~~Properties.~~

Item 2.Properties.

We conduct our worldwide operations using a combination of owned and leased facilities. While we believe our facilities are suitable and adequate to conduct our business at present, we will continue to acquire, lease and dispose of facilities throughout the world as necessary.

We own our San Mateo, California corporate headquarters and various other office buildings in the U.S. and internationally. We lease excess owned space to third parties under leases with terms through ~~2029.~~2033. Our owned properties consist of the following:


Location	Owned Square Footage	Owned Square Footage Leased to Third Parties
San Mateo, California	743,793	477,757
St. Petersburg, Florida	560,948	363,187
Rancho Cordova, California	445,023	47,676
Hyderabad, India	379,052	23,088
Poznan, Poland	284,436	43,890
Ft. Lauderdale, Florida	102,246	20,264
Edinburgh, Scotland	87,016	26,210
Other	78,391	9,724
Total	2,680,905	1,011,796

Location
Owned Square
Footage

Owned Square
Footage Leased
to Third Parties
San Mateo, California 743,793
315,590
St. Petersburg, Florida 560,948
301,716
Rancho Cordova, California 445,023
62,660
Hyderabad, India 379,052
—
Poznan, Poland 284,436
—
Ft. Lauderdale, Florida 102,246
20,264
Other 108,383
13,641
Total 2,623,881
713,871

We lease office space in ~~nine~~16 states in the U.S. and Washington, D.C., and internationally, including ~~without limitation, in~~ Australia, Brazil, Canada, the People’s Republic of China (including Hong Kong), Germany, India, Japan, Luxembourg, Mexico, ~~Poland,~~ Singapore, South Korea, United Arab Emirates and the U.K. As of September 30, ~~2019~~,2022, we leased and occupied approximately ~~1,133,000~~1,971,000 square feet of office space worldwide, and subleased to third parties approximately ~~13,000~~420,000 square feet of excess leased space. In addition, we entered into a lease agreement for office space in New York City with occupancy expected to begin in early fiscal year 2024.

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~~Item 3.~~	~~Legal Proceedings.~~

~~The~~Item 3.Legal Proceedings.

Incorporated herein by reference is information regarding certain legal proceedings and regulatory matters in which we are involved as set forth ~~in response to this Item 3 of Regulation S-K~~ under “Legal Proceedings” ~~is incorporated by reference from the “Legal Proceedings” section~~contained in Note 1415 – Commitments and Contingencies in the notes to consolidated financial statements in Item 8 of Part II of this ~~Form 10‑K, which is incorporated herein by reference.~~Annual Report.


~~Item 4.~~	~~Mine Safety Disclosures.~~

Item 4.Mine Safety Disclosures.

Not applicable.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The following description of our executive officers is included as an unnumbered item in this Part I of this ~~report~~Annual Report in lieu of being included in our definitive proxy statement for our annual meeting of stockholders. Set forth below are the name, age, present title, and certain other information for each of our executive officers as of ~~November 12, 2019. Each~~the filing date of this Annual Report. Generally, each executive officer is appointed by ~~Franklin’s Board~~our board of ~~Directors~~directors and holds ~~his/~~his or her office until the earlier of ~~his/~~his or her death, resignation, retirement, disqualification or removal.

~~Gregory E. Johnson~~

~~Age 58~~

Chairman of the Board of Franklin since June 2013 and Chief Executive Officer of Franklin since January 2004; formerly, President of Franklin from December 1999 to September 2015; officer and/or director of certain subsidiaries of Franklin; director or trustee of 42 funds registered as investment companies managed or advised by subsidiaries of Franklin.

~~Rupert H. Johnson, Jr.~~

~~Age 79~~

Vice Chairman of Franklin since December 1999 and director of Franklin since 1969; officer and/or director of certain subsidiaries of Franklin; director or trustee of 40 funds registered as investment companies managed or advised by subsidiaries of Franklin.

Jennifer M. Johnson

Age 5558

President of Franklin since December 2016, and Chief Executive Officer and director of Franklin since February 2020; formerly, Chief Operating Officer ~~since~~of Franklin from February ~~2017; formerly,~~2017 to February 2020, Co-President of Franklin from October 2015 to December 2016, Executive Vice President and Chief Operating Officer of Franklin from March 2010 to September 2015, Executive Vice ~~President–~~President – Operations and Technology of Franklin from December 2005 to March 2010, and Senior Vice President and Chief Information Officer of Franklin from May 2003 to December 2005; officer and/or director of certain subsidiaries of Franklin; officer, director and/or trustee of certain funds registered as investment companies managed or advised by subsidiaries of Franklin.

Gregory E. Johnson

Age 61

Executive Chairman of Franklin since February 2020, Chairman of the Board of Franklin since June 2013 and director of Franklin since January 2007; Chairman of the San Francisco Giants, a professional baseball organization, since November 2019; formerly, Chief Executive Officer of Franklin from July 2005 to February 2020, Co-Chief Executive Officer of Franklin from January 2004 to July 2005, and President of Franklin from December 1999 to September 2015; officer and/or director of certain subsidiaries of Franklin; officer, director and/or trustee of certain funds registered as investment companies managed or advised by subsidiaries of Franklin.

Rupert H. Johnson, Jr.

Age 82

Vice Chairman of Franklin since December 1999 and director of Franklin since 1971; officer and/or director of certain subsidiaries of Franklin; officer, director and/or trustee of certain funds registered as investment companies managed or advised by subsidiaries of Franklin.

Thomas C. Merchant

Age 54

Executive Vice President and General Counsel of Franklin since May 2022 and Corporate Secretary since July 2021, and oversaw global regulatory compliance of Franklin as Deputy General Counsel from August 2020 to May 2022; officer and/or director of certain subsidiaries of Franklin. Formerly, General Counsel and Executive Vice President of Legg Mason, Inc. from 2013 and Secretary from 2008, until its acquisition by Franklin Templeton in July 2020; joined Legg Mason as Associate General Counsel in 1998, serving as Corporate General Counsel and Deputy General Counsel. Formerly, served as a Corporate Associate at Shearman & Sterling, a law firm, in New York from 1993 to 1998.

Terrence J. Murphy

Age 55

Executive officer of Franklin since October 2022; Chairman since 2014 and Chief Executive Officer and President since 2012 of ClearBridge Investments, LLC, a subsidiary of Franklin; officer and/or director of certain other subsidiaries of Franklin. Formerly, Chief Operating Officer and Chief Financial Officer of ClearBridge from 2006 to 2011, Chief Financial Officer of Citigroup Asset Management (a financial services firm) from 2005 to 2006 and Director of Planning from 2000 to 2005; and business Controller for various product lines at Citigroup’s Corporate and Investment Bank from 1997 to 2000.

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Matthew Nicholls

Age 4750

Executive Vice President and Chief Financial Officer of Franklin since May ~~2019; formerly,~~2019 and Chief Operating Officer since April 2022; officer and/or director of certain subsidiaries of Franklin. Formerly, with Citigroup, Inc. (a financial services firm) from 1995 to May 2019, as Managing Director, Global Head of Financial Institutions, Corporate Banking, and Global Head of Asset Management, Corporate and Investment Banking, from 2017 to May 2019, as Managing Director, Co-Head, Financial Institutions Corporate and Investment Banking, North America, and Global Head of Asset Management, Corporate and Investment Banking, from 2014 to 2017, as Managing Director, Co-Head, North America, Financial Institutions Corporate and Investment Banking from 2011 to 2014, as Managing Director and Co-Head, ofNorth America, Financial Institutions Corporate Banking from 2007 to 2011, and as Managing Director and Co-Head of Asset Management Banking from 2006 to ~~2007; officer of certain subsidiaries of Franklin since June 2019.~~

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~~Craig S. Tyle~~

~~Age 59~~

Executive Vice President and General Counsel of Franklin since August 2005; formerly, a partner at Shearman & Sterling LLP (a law firm) from March 2004 to July 2005 and General Counsel for the Investment Company Institute (a trade group for the U.S. fund industry) from September 1997 through March 2004; officer and/or director of certain subsidiaries of Franklin; officer of certain funds registered as investment companies managed or advised by subsidiaries of Franklin.

~~Jed A. Plafker~~

~~Age 48~~

Executive Vice President of Franklin since April 2019, formerly, Senior Vice President from June 2018 to April 2019; officer and/or director of various subsidiaries of Franklin for more than the past five years, including, for example, as Executive Vice President of Franklin Templeton Institutional, LLC since April 2009, President and director of Templeton Institutional, Inc. since September 2009, and President since February 2017 and director since December 2016 of Templeton Worldwide, Inc.

~~Gwen L. Shaneyfelt~~

~~Age 57~~

Chief Accounting Officer of Franklin since April 2019; officer and/or director of various subsidiaries of Franklin for more than the past five years, including, for example, as Director of Franklin Templeton Fund Management Limited since May 2019, Manager of Franklin Templeton International Services S.à r.l. since November 2013, and Senior Vice President of Franklin Templeton Companies, LLC since March 2011.2007.

Alok Sethi

Age 5861

~~Officer~~Executive Vice President, Technology and Operations, of Franklin since October 2021; officer and/or director of various investment adviser, operations, and technology related subsidiaries of Franklin for more than the past five years, including ~~for example,~~ as Senior Vice President of Franklin Advisers, Inc., Franklin Templeton Institutional, LLC and Templeton Investment Counsel, LLC since July 2014, Vice President of FASA, LLC since June 2014, and Vice President of Franklin Templeton Companies, LLC since June 2010.

Gwen L. Shaneyfelt

Age 60

Chief Accounting Officer of Franklin since April 2019; officer and/or director of certain subsidiaries of Franklin, including as Vice President and Chief Financial Officer of Legg Mason, Inc., Director of ClearBridge Investments, LLC and Manager of Royce & Associates GP, LLC since August 2020; as well as Director of Franklin Templeton Fund Management Limited since May 2019, Manager of Franklin Templeton International Services S.à r.l. since November 2013, and Senior Vice President of Franklin Templeton Companies, LLC since March 2011.

Adam B. Spector

Age 54

Executive Vice President, Global Advisory Services, of Franklin since October 2020, and Head of Global Distribution, responsible for global retail and institutional distribution, including marketing and product strategy, and Managing Partner of Brandywine Global Investment Management, LLC since November 2014, responsible for the overall management of Brandywine including infrastructure, legal and compliance, business strategy, and sales and client service; formerly, Managing Director of Brandywine from 2012 to 2014, Head of Marketing, Sales and Client Service of Brandywine from 2003 to 2014, and Senior Vice President of Client Service of Brandywine from 1997 to 2003; officer and/or director of certain other subsidiaries of Franklin.

Family Relationships

Jennifer M. Johnson and Gregory E. Johnson are siblings, and their uncle is ~~the nephew of~~ Rupert H. Johnson, Jr. Each serves as both a director and ~~the brother~~an executive officer of Charles E. Johnson (a director of Franklin) and Jennifer M. Johnson. Charles E. Johnson is the nephew of Rupert H. Johnson, Jr. and the brother of Gregory E. Johnson and Jennifer M. Johnson. Jennifer M. Johnson is the niece of Rupert H. Johnson, Jr. and the sister of Gregory E. Johnson and Charles E. Johnson.

Franklin.

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PART II


~~Item 5.~~	Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is traded on the NYSE under the ticker symbol “BEN.” At October 31, ~~2019,~~2022, there were ~~2,805~~2,588 stockholders of record of our common stock.

The following table provides information with respect to the shares of our common stock that we repurchased during the three months ended September 30, ~~2019~~.2022.

Month
Total Number of
Shares Purchased

Average Price
Paid per Share

Total Number of
Shares Purchased
As Part of Publicly
Announced Plans
or Programs

Maximum
Number of Shares
that May Yet Be
Purchased Under
the Plans or
Programs
July 2019 971,064
$ 34.52
971,064
51,792,521
August 2019 3,157,049
27.97
3,157,049
48,635,472
September 2019 1,459,653
28.48
1,459,653
47,175,819
Total 5,587,766
5,587,766


Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 2022	93,803	$	27.33	93,803	25,335,850
August 2022	948,637	26.07		948,637	24,387,213
September 2022	1,362	21.57		1,362	24,385,851
Total	1,043,802			1,043,802

Under our stock repurchase program, which is not subject to an expiration date, we can repurchase shares of our common stock from time to time in the open market and in private transactions in accordance with applicable laws and regulations, including without limitation applicable federal securities laws. In order to pay taxes due in connection with the vesting of employee and executive officer stock and stock unit awards, we may repurchase shares under our program using a net stock issuance method. In April 2018, we announced that our Board of Directors authorized the repurchase of up to 80.0 million additional shares of our common stock under the stock repurchase program.

Item 6. [Reserved]

~~Table of Contents~~Item 7.


~~Item 6.~~	~~Selected Financial Data.~~

~~FINANCIAL HIGHLIGHTS~~

as of and for the fiscal years ended September 30,
2019 2018 2017 2016 2015
Summary of Operations (in millions)

Operating revenues $ 5,774.5
$ 6,319.1
$ 6,392.2
$ 6,618.0
$ 7,948.7
Operating income 1,557.4
2,118.6
2,264.3
2,365.7
3,027.6
Operating margin 27.0 % 33.5 % 35.4 % 35.7 % 38.1 %
Net income attributable to Franklin Resources, Inc. 1,195.7
¹
764.4
²
1,696.7
1,726.7
2,035.3
Financial Data (in millions)

Total assets $ 14,532.2
$ 14,383.5
$ 17,534.0
$ 16,098.8
$ 16,335.7
Debt 696.9
695.9
1,044.2
1,401.2
1,348.0
Debt of consolidated investment products 50.8
32.6
53.4
682.2
807.3
Franklin Resources, Inc. stockholders’ equity 9,906.5
9,899.2
12,620.0
11,935.8
11,841.0
Operating cash flows 201.6
2,229.7
1,135.4
1,727.7
2,252.0
Investing cash flows (1,077.1 ) (290.4 ) 52.0
192.2
248.9
Financing cash flows (40.5 ) (3,761.7 ) (956.0 ) (1,800.7 ) (1,612.2 )
Assets Under Management (in billions)

Ending $ 692.6
$ 717.1
$ 753.2
$ 733.3
$ 770.9
Average ³
697.0
740.5
736.9
749.3
869.5
Per Common Share
Earnings
Basic $ 2.35
$ 1.39
$ 3.01
$ 2.94
$ 3.29
Diluted 2.35
1.39
3.01
2.94
3.29
Cash dividends declared 1.04
3.92
0.80
0.72
1.10
Book value 19.84
19.07
22.74
20.93
19.62
Employee Headcount 9,597
9,748
9,386
9,059
9,489

^{__________________}Management’s Discussion and Analysis of Financial Condition and Results of Operations.


¹	Includes an income tax charge of $86.0 million due to a revision to the estimated income tax charge that was recognized in fiscal year 2018 resulting from enactment of the Tax Cuts and Jobs Act of 2017 (“the Tax Act”).


²	~~Includes an estimated income tax charge of $968.8 million resulting from enactment of the Tax Act.~~


³	~~Represents simple monthly average AUM.~~

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~~Item 7.~~	~~Management~~’~~s Discussion and Analysis of Financial Condition and Results of Operations.~~

FORWARD-LOOKING STATEMENTS

The following discussion and analysis of the results of operations and financial condition of Franklin Resources, Inc. (“Franklin”) and its subsidiaries (collectively, the “Company”) should be read in conjunction with the “Forward-looking Statements” disclosure set forth in Part I and the “Risk Factors” set forth in Item 1A of Part I of this Annual Report on Form 10‑K (this “Annual Report”) and in any more recent filings with the U.S. Securities and Exchange Commission (the “SEC”), each of which describe ~~these~~our risks, uncertainties and other important factors in more detail.

OVERVIEW

Franklin is a holding company with subsidiaries operating under our Franklin Templeton® and/or subsidiary brand names. We are a global investment management organization ~~and derive our~~that derives operating revenues and net income from providing investment management and related services to investors in jurisdictions ~~worldwide for investors in~~worldwide. We deliver our investment capabilities through a variety of investment products, which include our sponsored funds, as well as institutional and high-net-worth separate ~~accounts. In addition to~~accounts, retail separately managed account programs, sub-advised products, and other investment ~~management, our~~vehicles. Related services include fund administration, sales and distribution, and shareholder servicing. We may perform services directly or through third parties. We offer our services and products under our various distinct brand names, including, but not limited to, Franklin^®, Templeton^®, ~~Balanced Equity Management~~Legg Mason^®, Alcentra®, Benefit Street Partners^®, ~~Darby~~Brandywine Global Investment Management^®, ~~Edinburgh Partners™~~Clarion Partners®, ClearBridge Investments®, Fiduciary ~~Trust™~~Trust International™, Franklin Bissett^®, Franklin Mutual Series^®, K2^®, Lexington Partners®, Martin Currie®, O’Shaughnessy® Asset Management, Royce® Investment Partners and ~~LibertyShares~~Western Asset Management Company^®. We offer a broad product mix of ~~equity, multi-asset/balanced,~~ fixed income, equity, alternative, multi-asset, and cash management ~~investment objectives~~asset classes and solutions ~~which~~that meet a wide variety of specific investment goals and needs for individual and institutional investors. We also provide sub-advisory services to certain investment products sponsored by other companies which may be sold to investors under the brand names of those other companies or on a co-branded basis.

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The level of our revenues depends largely on the level and relative mix of assets under management (“AUM”). As noted in the “Risk Factors” section set forth above in Item 1A of Part I of this Annual Report, ~~on Form 10‑K,~~ the amount and mix of our AUM are subject to significant fluctuations ~~and~~that can negatively impact our revenues and income. The level of our revenues also depends on ~~mutual fund sales, the number of shareholder transactions and accounts, and~~ the fees charged for our services, which are based on contracts with our funds and ~~our clients.~~customers, fund sales, and the number of shareholder transactions and accounts. These arrangements could change in the future.

During the fiscal year ended September 30, ~~2019~~2022 (“fiscal year ~~2019~~”2022”), ~~the~~ global equity markets experienced ~~volatility but provided overall positive returns, reflecting, among~~significant declines driven by the economic impacts of inflationary pressures, interest rate increases by the Federal Reserve and other ~~things, ongoing growth concerns, expectations for~~developed market central banks in an effort to ~~continue their accommodative~~combat inflation, central banks’ tightened monetary policies, the Russian invasion of Ukraine, and ~~hopes for progress in global trade tensions, as~~concerns about the risk of recession. The S&P 500 Index and MSCI World Index ~~increased~~ ~~4.3%~~decreased 15.5% and ~~2.4%~~.19.3% for the fiscal year. The global bond markets ~~were positively impacted by lower interest rates and~~also declined as the Bloomberg Barclays Global Aggregate Index ~~increased~~ ~~7.6%~~decreased 20.4% for the fiscal ~~year.~~year driven by the interest rate increases.

Our total AUM was ~~$692.6~~$1,297.4 billion at September 30, ~~2019,~~ 3%2022, which was 15% lower than at September 30, ~~2018~~ ~~as $31.8 billion~~2021 driven by the negative impact of ~~net outflows and $19.1~~$269.0 billion of net market change, distributions and other, ~~were~~$27.8 billion of long-term net outflows and $0.8 billion of cash management net outflows, partially offset by ~~$26.4~~$64.9 billion from ~~an acquisition.~~acquisitions. Simple monthly average AUM (“average AUM”) decreased 6%2% during fiscal year ~~2019~~.2022.

On April 1, 2022, we acquired all of the outstanding ownership interests in Lexington Partners L.P. (“Lexington”), a leading global manager of secondary private equity and co-investment funds, for cash consideration of $1.0 billion and additional payments totaling $750.0 million to be paid in cash over the next three years. In connection with the acquisition, we granted a 25% ownership stake in Lexington and performance-based cash retention awards to certain employees that vest over approximately five years. On December 31, 2021, we acquired all of the outstanding ownership interest in O’Shaughnessy Asset Management, LLC (“OSAM”), a leading quantitative asset management firm, for cash consideration paid of approximately $300 million, excluding future payments to be made subject to the attainment of certain performance measures.

The business and regulatory environments in which we operate globally remain complex, uncertain and subject to change. We are subject to various laws, rules and regulations globally that impose restrictions, limitations, registration, reporting and disclosure requirements on our business, and add complexity to our global compliance operations.

Uncertainties regarding the global economy remain for the foreseeable future. As we continue to confront the challenges of the current economic and regulatory environments, we remain focused on the investment performance of our products and on providing high quality service to our clients. We continuously perform reviews of our business model. While we remain focused on expense management, we will also seek to attract, retain and develop ~~employees~~personnel and invest strategically in systems and technology that will provide a secure and stable environment. We will continue to seek to protect and further our brand recognition while developing and maintaining broker-dealer and client relationships. The success of these and other strategies may be influenced by the factors discussed in the “Risk Factors” ~~section in Part I of this Annual Report on Form 10‑K.~~section.

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RESULTS OF OPERATIONS


(in millions, except per share data)										2022 vs. 2021		2021 vs. 2020
for the fiscal years ended September 30,	2022			2021			2020
Operating revenues	$	8,275.3		$	8,425.5		$	5,566.5		(2	%)	51	%
Operating income	1,773.9			1,875.0			1,048.9			(5	%)	79	%
Operating margin1	21.4		%	22.3		%	18.8		%

Net income attributable to Franklin Resources, Inc.	$	1,291.9		$	1,831.2		$	798.9		(29	%)	129	%
Diluted earnings per share	$	2.53		$	3.57		$	1.59		(29	%)	125	%

As adjusted (non-GAAP):2
Adjusted operating income	$	2,323.5		$	2,379.3		$	1,491.1		(2	%)	60	%
Adjusted operating margin	35.9		%	37.7		%	38.5		%

Adjusted net income	$	1,855.6		$	1,915.2		$	1,311.0		(3	%)	46	%
Adjusted diluted earnings per share	$	3.63		$	3.74		$	2.61		(3	%)	43	%

__________________

(in millions, except per share data) 2019 vs. 2018 2018 vs. 2017
for the fiscal years ended September 30, 2019 2018 2017
Operating revenues $ 5,774.5
$ 6,319.1
$ 6,392.2
(9 %) (1 %)
Operating income 1,557.4
2,118.6
2,264.3
(26 %) (6 %)
Net income attributable to Franklin Resources, Inc. 1,195.7
764.4
1,696.7
56 % (55 %)
Diluted earnings per share $ 2.35
$ 1.39
$ 3.01
69 % (54 %)
Operating margin ¹
27.0 % 33.5 % 35.4 %

1^{___________________}


¹	Defined ~~as operating income divided by total operating revenues.~~

~~Operating income decreased $561.2 million in fiscal year~~ ~~2019~~ as operating ~~revenues decreased 9% while~~income divided by total operating expenses were unchanged. Net income attributable to Franklin Resources, Inc. increased $431.3 million primarily due to a prior-year estimated income tax charge of $968.8 million resulting from enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), partially offset by the decrease in operating income.revenues.

~~Operating~~2“Adjusted operating income, ~~decreased $145.7 million in the fiscal year ended September 30, 2018 (“fiscal year 2018”) due to a 1% decrease in~~” “adjusted operating ~~revenues~~margin,” “adjusted net income” and a 2% increase in operating expenses. Net income attributable to Franklin Resources, Inc. decreased $932.3 million primarily due to the estimated income tax charge of $968.8 million resulting from enactment of the Tax Act.

~~Diluted~~“adjusted diluted earnings per ~~share increased in fiscal year~~ ~~2019~~share” are based on methodologies other than generally accepted accounting principles. See “Supplemental Non-GAAP Financial Measures” for definitions and ~~decreased in fiscal year 2018, consistent with the changes in net income and the impacts~~reconciliations of ~~6% and 4% decreases in diluted average common shares outstanding primarily resulting from repurchases of shares of our common stock.~~these measures.

ASSETS UNDER MANAGEMENT

AUM by ~~investment objective~~asset class was as follows:


(in billions)							2022 vs. 2021		2021 vs. 2020
as of September 30,	2022		2021		2020
Fixed Income	$	490.9	$	650.3	$	656.9	(25	%)	(1	%)
Equity	392.3		523.6		438.1		(25	%)	20	%
Alternative	225.1		145.2		122.1		55	%	19	%
Multi-Asset	131.5		152.4		129.4		(14	%)	18	%
Cash Management	57.6		58.6		72.4		(2	%)	(19	%)
Total	$	1,297.4	$	1,530.1	$	1,418.9	(15	%)	8	%

(in billions) 2019 vs. 2018 2018 vs. 2017
as of September 30, 2019 2018 2017
Equity
Global/international $ 158.4
$ 194.4
$ 209.8
(19 %) (7 %)
United States 112.1
115.2
107.2
(3 %) 7 %
Total equity 270.5
309.6
317.0
(13 %) (2 %)
Multi-Asset/Balanced 134.3
138.9
143.3
(3 %) (3 %)
Fixed Income

Tax-free 66.3
63.9
71.0
4 % (10 %)
Taxable

Global/international 144.6
150.6
165.0
(4 %) (9 %)
United States 67.4
44.8
50.6
50 % (11 %)
Total fixed income 278.3
259.3
286.6
7 % (10 %)
Cash Management 9.5
9.3
6.3
2 % 48 %
Total $ 692.6
$ 717.1
$ 753.2
(3 %) (5 %)
Average for the Year $ 697.0
$ 740.5
$ 736.9
(6 %) 0 %

AUM at September 30, 2019 decreased 3% from September 30, 2018 as $31.8 billion of net outflows and $19.1 billion of net market change, distributions and other were partially offset by $26.4 billion from an acquisition. Average AUM decreased 6% during fiscal year ~~2019~~.

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Changes in average AUM at September 30, 2018 decreased 5% from September 30, 2017 as $38.0 billion of net outflows and $7.9 billion of net market change, distributions and other were partially offset by $9.8 billion from an acquisition. Average AUM increased slightly during fiscal year 2018.

~~Average AUM is~~are generally more indicative of trends in revenue for providing investment management services than the year-over-year change in ending AUM.

Average AUM and the mix of average AUM by ~~investment objective~~asset class are shown below.


(in billions)	Average AUM						2022 vs. 2021		2021 vs. 2020
for the fiscal years ended September 30,	2022		2021		2020
Fixed Income	$	586.5	$	657.5	$	330.5	(11	%)	99	%
Equity	491.3		502.9		290.8		(2	%)	73	%
Alternative	185.1		132.6		63.7		40	%	108	%
Multi-Asset	146.1		146.4		122.7		0	%	19	%
Cash Management	60.2		64.7		25.2		(7	%)	157	%
Total	$	1,469.2	$	1,504.1	$	832.9	(2	%)	81	%

(in billions) Average AUM 2019 vs. 2018 2018 vs. 2017
for the fiscal years ended September 30, 2019 2018 2017
Equity

Global/international $ 171.7
$ 205.8
$ 203.7
(17 %) 1 %
United States 109.0
110.2
104.4
(1 %) 6 %
Total equity 280.7
316.0
308.1
(11 %) 3 %
Multi-Asset/Balanced 133.4
140.6
140.2
(5 %) 0 %
Fixed Income

Tax-free 63.9
67.3
72.3
(5 %) (7 %)
Taxable

Global/international 151.1
160.6
157.8
(6 %) 2 %
United States 58.4
48.0
52.3
22 % (8 %)
Total fixed income 273.4
275.9
282.4
(1 %) (2 %)
Cash Management 9.5
8.0
6.2
19 % 29 %
Total $ 697.0
$ 740.5
$ 736.9
(6 %) 0 %

Mix of Average AUM
for the fiscal years ended September 30, 2019 2018 2017
Equity
Global/international 25 % 28 % 28 %
United States 16 % 15 % 14 %
Total equity 41 % 43 % 42 %
Multi-Asset/Balanced 19 % 19 % 19 %
Fixed Income
Tax-free 9 % 9 % 10 %
Taxable
Global/international 22 % 22 % 21 %
United States 8 % 6 % 7 %
Total fixed income 39 % 37 % 38 %
Cash Management 1 % 1 % 1 %
Total 100 % 100 % 100 %

~~Table of Contents~~


	Mix of Average AUM
for the fiscal years ended September 30,	2022		2021		2020
Fixed Income	40	%	44	%	39	%
Equity	33	%	33	%	35	%
Alternative	13	%	9	%	8	%
Multi-Asset	10	%	10	%	15	%
Cash Management	4	%	4	%	3	%
Total	100	%	100	%	100	%

Components of the change in AUM are shown below. Net market change, distributions and other includes appreciation (depreciation), distributions to investors that represent return on investments and return of capital, and foreign exchange ~~revaluation and net cash management.~~revaluation.


(in billions)							2022 vs. 2021		2021 vs. 2020
for the fiscal years ended September 30,	2022		2021		2020
Beginning AUM	$	1,530.1	$	1,418.9	$	692.6	8	%	105	%
Long-term inflows	320.4		364.7		182.4		(12	%)	100	%
Long-term outflows	(348.2)		(389.9)		(244.0)		(11	%)	60	%
Long-term net flows	(27.8)		(25.2)		(61.6)		10	%	(59	%)
Cash management net flows	(0.8)		(15.1)		(9.9)		(95	%)	53%
Total net flows	(28.6)		(40.3)		(71.5)		(29	%)	(44	%)
Acquisitions	64.9		3.5		806.5		NM		(100	%)
Net market change, distributions and other	(269.0)		148.0		(8.7)		NM		NM
Ending AUM	$	1,297.4	$	1,530.1	$	1,418.9	(15	%)	8	%

(in billions) 2019 vs. 2018 2018 vs. 2017
for the fiscal years ended September 30, 2019 2018 2017
Beginning AUM $ 717.1
$ 753.2
$ 733.3
(5 %) 3 %
Long-term sales 100.6
105.0
112.3
(4 %) (7 %)
Long-term redemptions (155.9 ) (162.1 ) (169.7 ) (4 %) (4 %)
Long-term net exchanges (0.7 ) (0.4 ) (0.1 ) 75 % 300 %
Long-term reinvested distributions 24.2
19.5
18.9
24 % 3 %
Net flows (31.8 ) (38.0 ) (38.6 ) (16 %) (2 %)
Acquisitions 26.4
9.8
0.4
169 % NM
Net market change, distributions and other (19.1 ) (7.9 ) 58.1
142 % NM
Ending AUM $ 692.6
$ 717.1
$ 753.2
(3 %) (5 %)

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Components of the change in AUM by ~~investment objective~~asset class were as follows:

(in billions) Equity Fixed Income
for the fiscal year ended
September 30, 2019 Global/International United States Multi-Asset/Balanced Tax-Free
Taxable
Global/International

Taxable
United States

Cash
Management
Total
AUM at October 1, 2018 $ 194.4
$ 115.2
$ 138.9
$ 63.9
$ 150.6
$ 44.8
$ 9.3
$ 717.1
Long-term sales 17.7
17.0
12.1
7.5
38.8
7.5
—
100.6
Long-term redemptions (43.4 ) (23.0 ) (21.3 ) (9.9 ) (44.8 ) (13.5 ) —
(155.9 )
Long-term net exchanges (1.8 ) (0.5 ) 1.3
0.2
(0.1 ) 0.2
—
(0.7 )
Long-term reinvested distributions 5.0
5.7
5.7
1.7
5.1
1.0
—
24.2
Net flows (22.5 ) (0.8 ) (2.2 ) (0.5 ) (1.0 ) (4.8 ) —
(31.8 )
Acquisition —
—
—
—
—
26.4
—
26.4
Net market change, distributions and other (13.5 ) (2.3 ) (2.4 ) 2.9
(5.0 ) 1.0
0.2
(19.1 )
AUM at September 30, 2019 $ 158.4
$ 112.1
$ 134.3
$ 66.3
$ 144.6
$ 67.4
$ 9.5
$ 692.6

(in billions) Equity Fixed Income
for the fiscal year ended
September 30, 2018 Global/International United States Multi-Asset/Balanced Tax-Free
Taxable
Global/International

Taxable
United States

Cash
Management
Total
AUM at October 1, 2017 $ 209.8
$ 107.2
$ 143.3
$ 71.0
$ 165.0
$ 50.6
$ 6.3
$ 753.2
Long-term sales 22.8
16.6
15.3
5.6
36.9
7.8
—
105.0
Long-term redemptions (48.0 ) (23.6 ) (23.2 ) (11.9 ) (42.2 ) (13.2 ) —
(162.1 )
Long-term net exchanges (0.3 ) 0.9
0.2
(0.6 ) (0.8 ) 0.2
—
(0.4 )
Long-term reinvested distributions 2.8
4.0
5.5
2.0
4.1
1.1
—
19.5
Net flows (22.7 ) (2.1 ) (2.2 ) (4.9 ) (2.0 ) (4.1 ) —
(38.0 )
Acquisition 9.8
—
—
—
—
—
—
9.8
Net market change, distributions and other (2.5 ) 10.1
(2.2 ) (2.2 ) (12.4 ) (1.7 ) 3.0
(7.9 )
AUM at September 30, 2018 $ 194.4
$ 115.2
$ 138.9
$ 63.9
$ 150.6
$ 44.8
$ 9.3
$ 717.1

~~Table of Contents~~

(in billions) Equity Fixed Income
for the fiscal year ended
September 30, 2017 Global/International United States Multi-Asset/Balanced Tax-Free
Taxable
Global/International

Taxable
United States

Cash
Management
Total
AUM at October 1, 2016 $ 200.4
$ 103.3
$ 137.4
$ 76.5
$ 156.2
$ 53.4
$ 6.1
$ 733.3
Long-term sales 24.7
14.7
16.8
7.4
38.2
10.5
—
112.3
Long-term redemptions (48.4 ) (25.4 ) (25.7 ) (11.6 ) (44.3 ) (14.3 ) —
(169.7 )
Long-term net exchanges (0.1 ) 0.3
0.4
(0.5 ) (0.4 ) 0.2
—
(0.1 )
Long-term reinvested distributions 3.0
4.3
5.1
2.0
3.4
1.1
—
18.9
Net flows (20.8 ) (6.1 ) (3.4 ) (2.7 ) (3.1 ) (2.5 ) —
(38.6 )
Acquisition —
—
0.4
—
—
—
—
0.4
Net market change, distributions and other 30.2
10.0
8.9
(2.8 ) 11.9
(0.3 ) 0.2
58.1
AUM at September 30, 2017 $ 209.8
$ 107.2
$ 143.3
$ 71.0
$ 165.0
$ 50.6
$ 6.3
$ 753.2


(in billions)
for the fiscal year ended September 30, 2022	Fixed Income		Equity		Alternative		Multi-Asset		Cash Management		Total
AUM at October 1, 2021	$	650.3	$	523.6	$	145.2	$	152.4	$	58.6	$	1,530.1
Long-term inflows	138.4		123.0		22.4		36.6		—		320.4
Long-term outflows	(168.6)		(131.6)		(16.1)		(31.9)		—		(348.2)
Long-term net flows	(30.2)		(8.6)		6.3		4.7		—		(27.8)
Cash management net flows	—		—		—		—		(0.8)		(0.8)
Total net flows	(30.2)		(8.6)		6.3		4.7		(0.8)		(28.6)
Acquisitions	—		4.6		58.0		2.3		—		64.9
Net market change, distributions and other	(129.2)		(127.3)		15.6		(27.9)		(0.2)		(269.0)
AUM at September 30, 2022	$	490.9	$	392.3	$	225.1	$	131.5	$	57.6	$	1,297.4

AUM decreased ~~$24.5~~$232.7 billion or 3%15% during fiscal year ~~2019~~2022 due to ~~$31.8 billion~~the negative impact of ~~net outflows and $19.1~~$269.0 billion of net market change, distributions and other, $27.8 billion of long-term net outflows and $0.8 billion of cash management net outflows, partially offset by ~~$26.4 billion from an acquisition. The net outflows included outflows~~acquisitions of $7.0 billion from six institutional clients, of which $2.9 billion was from Canadian mandates and $2.1 billion was due to two clients’ mandatory redemption policies following portfolio manager departures; $4.3 billion from two global/international equity funds; $2.7 billion from a global/international fixed income fund; $1.4 billion from an institutional U.S. fixed income product; $1.3 billion from a multi-asset/balanced fund; $1.2 billion from two sub-advised institutional products and $1.0 billion from a sub-advised variable annuity client. The outflows were partially offset by inflows of $1.9 billion in a global/international fixed income fund and $1.8 billion in a U.S. equity fund. Long-term sales decreased 4% to $100.6 billion from the prior year due to lower sales in global/international equity and multi-asset/balanced products, partially offset by higher sales in tax-free and global/international fixed income products. Long-term redemptions decreased 4% to $155.9 billion due to lower redemptions in global/international equity, tax-free fixed income and multi-asset/balanced products, partially offset by higher redemptions of global/international fixed income products.$64.9 billion. Net market change, distributions and other primarily consists of ~~$30.5~~$199.2 billion of market depreciation, $48.7 billion of long-term distributions and a ~~$2.9~~$21.1 billion decrease from foreign exchange ~~revaluation, partially offset by $14.1 billion~~revaluation. The market depreciation occurred in all asset classes with the exception of ~~market appreciation. The foreign~~the alternative asset class. Foreign exchange revaluation ~~resulted~~ from AUM in products that are not U.S. dollar denominated ~~which represented 14% of total AUM as of September 30, 2019, and~~ was primarily due to ~~strengthening of the~~a stronger U.S. dollar ~~against~~compared to the Japanese Yen, Euro, ~~Canadian dollar,~~Pound Sterling and Australian ~~dollar~~dollar.

Long-term inflows decreased 12% to $320.4 billion, as compared to the prior year, driven by lower inflows in fixed income institutional separate accounts, open-end funds, and ~~Pound Sterling. The market appreciation occurred~~retail separately managed accounts, as well as equity open-end funds, partially offset by higher alternative inflows for private funds. Long-term outflows decreased 11% to $348.2 billion due to lower outflows in ~~all long-term investment objectives except global/international~~fixed income institutional separate accounts, equity and ~~reflected positive returns~~multi-asset open-end funds, and equity sub-advised mutual funds, partially offset by higher equity outflows in ~~global fixed income markets as evidenced by a 7.6% increase in the Bloomberg Barclays Global Aggregate Index~~retail separately managed accounts and ~~in the U.S. equity market as evidenced by a 4.3% increase in the S&P 500 Index.~~multi-asset sub-advised mutual funds.


(in billions)
for the fiscal year ended September 30, 2021	Fixed Income		Equity		Alternative		Multi-Asset		Cash Management		Total
AUM at October 1, 2020	$	656.9	$	438.1	$	122.1	$	129.4	$	72.4	$	1,418.9
Long-term inflows	176.5		132.1		19.8		36.3		—		364.7
Long-term outflows	(188.2)		(154.2)		(11.8)		(35.7)		—		(389.9)
Long-term net flows	(11.7)		(22.1)		8.0		0.6		—		(25.2)
Cash management net flows	—		—		—		—		(15.1)		(15.1)
Total net flows	(11.7)		(22.1)		8.0		0.6		(15.1)		(40.3)
Acquisitions	3.5		—		—		—		—		3.5
Net market change, distributions and other	1.6		107.6		15.1		22.4		1.3		148.0
AUM at September 30, 2021	$	650.3	$	523.6	$	145.2	$	152.4	$	58.6	$	1,530.1

AUM ~~decreased $36.1~~increased $111.2 billion or 5%8% during fiscal year ~~2018~~2021 due to ~~$38.0 billion~~the positive impact of ~~net outflows and $7.9~~$148.0 billion of net market change, distributions and other, and $3.5 billion from an acquisition, partially offset by ~~$9.8~~$25.2 billion ~~from an acquisition. The~~of long-term net outflows ~~included outflows~~and $15.1 billion of $7.6 billion from seven institutional products, $6.0 billion from three global/international fixed income funds, $4.5 billion from two global/international equity funds, $4.1 billion from a multi-asset/balanced fund and $0.9 billion from a fixed income tax-free fund, and were partially offset by inflows of $3.3 billion in a global/international fixed income fund, $3.0 billion in two institutional products and $1.2 billion in a multi-asset/balanced fund. Long-term sales decreased 7% to $105.0 billion from the prior year due to lower sales in all long-term investment objectives with the exception of U.S. equity. Long-term redemptions decreased 4% to $162.1 billion due to lower redemptions in all long-term investment objectives with the exception of tax-free fixed income.cash management net outflows. Net market change, distributions and other primarily consists of ~~$25.3~~$176.3 billion of market appreciation, partially offset by $29.1 billion of long-term distributions and a $4.7 billion decrease from foreign exchange revaluation, partially offset by $19.1 billion of market appreciation. The foreign exchange revaluation resulted from AUM in products that are not U.S. dollar denominated, which represented 15% of total AUM as of September 30, 2018, and was primarily due to strengthening of the U.S. dollar against the Indian Rupee, Canadian dollar and Australian dollar.distributions. The market appreciation occurred ~~primarily~~ in all asset classes, most significantly in the equity and ~~multi-asset/balanced products, partially offset by depreciation in global/international fixed income products,~~multi-asset classes and reflected positive returns in global equity ~~markets~~markets.

Long-term inflows increased 100% to $364.7 billion, as ~~evidenced by increases~~compared to the prior year, and long-term outflows increased 60% to $389.9 billion due to higher inflows and outflows in all long-term asset classes primarily due to the acquisition of ~~11.8%~~Legg Mason. Long-term net outflows included outflows of $35.7 billion from sixteen institutional products, including two fixed income redemptions of $5.9 billion and ~~17.9%~~$2.0 billion and two equity redemptions of $3.7 billion and

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$2.2 billion, $12.5 billion from seven fixed income funds, including $3.3 billion from five India credit funds that were non-management fee earning which are in the ~~MSCI World Index~~process of winding up, $5.4 billion from a 529 plan redemption, $3.9 billion from two equity funds and ~~S&P 500 Index and negative returns~~$3.1 billion from a multi-asset fund, partially offset by inflows of $12.3 billion in ~~global~~three fixed income ~~markets as evidenced by~~funds, $6.7 billion in three institutional products, $3.7 billion in an equity fund, $3.1 billion in a ~~1.3% decrease~~multi-asset fund and $3.0 billion in ~~the Bloomberg Barclays Global Aggregate Index.~~two alternative funds.


(in billions)
for the fiscal year ended September 30, 2020	Fixed Income		Equity		Alternative		Multi-Asset		Cash Management		Total
AUM at October 1, 2019	$	250.6	$	263.9	$	45.0	$	123.6	$	9.5	$	692.6
Long-term inflows	79.7		64.6		10.6		27.5		—		182.4
Long-term outflows	(112.9)		(90.6)		(7.3)		(33.2)		—		(244.0)
Long-term net flows	(33.2)		(26.0)		3.3		(5.7)		—		(61.6)
Cash management net flows	—		—		—		—		(9.9)		(9.9)
Total net flows	(33.2)		(26.0)		3.3		(5.7)		(9.9)		(71.5)
Acquisition	449.6		189.2		73.9		18.2		75.6		806.5
Net market change, distributions and other	(10.1)		11.0		(0.1)		(6.7)		(2.8)		(8.7)
AUM at September 30, 2020	$	656.9	$	438.1	$	122.1	$	129.4	$	72.4	$	1,418.9

~~Table of Contents~~

~~Average~~ AUM by sales region was as follows:

(in billions) 2019 vs. 2018 2018 vs. 2017
for the fiscal years ended September 30, 2019 2018 2017
United States $ 473.3
$ 491.1
$ 497.1
(4 %) (1 %)
International

Europe, Middle East and Africa 91.5
105.8
104.1
(14 %) 2 %
Asia-Pacific 90.4
95.2
87.0
(5 %) 9 %
Canada 27.2
31.1
31.1
(13 %) 0%
Latin America ¹
14.6
17.3
17.6
(16 %) (2 %)
Total international $ 223.7
$ 249.4
$ 239.8
(10 %) 4 %
Total $ 697.0
$ 740.5
$ 736.9
(6 %) 0 %

^{______________}


¹	~~Includes North America-based advisers serving non-resident clients.~~

~~The percentage of average AUM in the United States sales region was 68%, 66% and 67% for fiscal years 2019, 2018 and 2017.~~


(in billions)							2022 vs. 2021		2021 vs. 2020
as of September 30,	2022		2021		2020
United States	$	971.3	$	1,140.2	$	1,024.0	(15	%)	11	%
International
Asia-Pacific	118.4		155.6		168.6		(24	%)	(8	%)
Europe, Middle East and Africa	126.6		153.9		141.8		(18	%)	9	%
Americas, excl. U.S.	81.1		80.4		84.5		1	%	(5	%)
Total international	$	326.1	$	389.9	$	394.9	(16	%)	(1	%)
Total	$	1,297.4	$	1,530.1	$	1,418.9	(15	%)	8	%

The region in which investment products are sold may differ from the geographic area in which we provide investment management and related services to the products.

Investment Performance Overview

A key driver of our overall success is the long-term investment performance of our investment products. A ~~standard~~ measure of the performance of these products is the percentage of AUM exceeding ~~benchmarks and peer group medians. Our U.S. equity products generated notable long-term results with at least 67% of AUM exceeding the~~ peer group medians ~~during~~and benchmarks. We compare the periods presented, although they generally lagged against the benchmarks. Our global/international fixed income products had at least 74% of AUM exceed the benchmark and peer group median comparisons for the three- and ten-year periods ended September 30, 2019. Therelative performance of our ~~multi-asset/balanced products significantly exceeded the peer group medians for the one-~~mutual funds against peers, and ten-year periods, but has lagged in the other comparisons and against the benchmarks during the periods presented, reflecting the performance of a fund that represents 68% of this category. The performance of our ~~tax-free and U.S. taxable fixed income, as well as of our global/international equity products, has mostly lagged the benchmarks and peer group medians during the periods presented.~~

strategy composites against benchmarks.

3835

Table of Contents

The performance of our mutual fund products against ~~benchmarks and~~ peer group medians and of our strategy composites against benchmarks is presented in the table below.

Benchmark Comparison^{1, 2}

Peer Group Comparison^{1, 3}
% of AUM Exceeding Benchmark % of AUM in Top Two Peer Group Quartiles
as of September 30, 2019 1-Year 3-Year 5-Year 10-Year 1-Year 3-Year 5-Year 10-Year
Equity
Global/international 27 % 24 % 24 % 23 % 37 % 29 % 28 % 29 %
United States 49 % 30 % 32 % 27 % 87 % 69 % 67 % 73 %
Total equity 37 % 27 % 27 % 25 % 59 % 47 % 45 % 49 %
Multi-Asset/Balanced 7 % 8 % 7 % 1 % 87 % 25 % 17 % 74 %
Fixed Income
Tax-free 47 % 39 % 44 % 41 % 49 % 46 % 45 % 45 %
Taxable
Global/international 8 % 78 % 7 % 76 % 16 % 74 % 52 % 80 %
United States 2 % 40 % 8 % 54 % 13 % 20 % 11 % 5 %
Total fixed income 17 % 61 % 18 % 60 % 24 % 58 % 43 % 55 %


	Peer Group Comparison1								Benchmark Comparison2
	% of Mutual Fund AUM in Top Two Peer Group Quartiles								% of Strategy Composite AUM Exceeding Benchmark
as of September 30, 2022	1-Year		3-Year		5-Year		10-Year		1-Year		3-Year		5-Year		10-Year
Fixed Income	40	%	42	%	32	%	69	%	26	%	49	%	58	%	92	%
Equity	44	%	34	%	49	%	64	%	39	%	29	%	44	%	37	%
Total AUM3	52	%	47	%	51	%	57	%	41	%	48	%	58	%	70	%

^{_______________}


¹	~~AUM measured in the 1-year benchmark and peer group rankings represents 85%~~ 1Mutual fund performance is sourced from Morningstar and measures the percent of ranked AUM in the top two quartiles versus peers. Total mutual fund AUM measured for the 1-, 3-, 5- and 10-year periods represents 36%, 36%, 36% and 34% of our total AUM ~~as of September 30, 2019.~~


²	~~The benchmark comparisons are based on each fund’s return as compared to a market index that has been selected to be generally consistent with the investment objectives of the fund.~~

The peer group rankings are sourced from Lipper, a Thomson Reuters Company, Morningstar or eVestment and various international third-party providers in each fund’s market and were based on an absolute ranking of returns. © 2019 Morningstar, Inc. All rights reserved. The information herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

~~For products with multiple share classes, rankings for all share classes with applicable history in their respective time periods are included. Rankings for most institutional separate accounts are~~ as of September 30, 2022.

2Strategy composite performance measures the ~~prior quarter-end due~~percent of composite AUM beating its benchmark. The benchmark comparisons are based on each account’s/composite’s (strategy composites may include retail separately managed accounts and mutual fund assets managed as part of the same strategy) return as compared to ~~timing~~a market index that has been selected to be generally consistent with the asset class of ~~availability~~the account/composite. Total strategy composite AUM measured for the 1-, 3-, 5- and 10-year periods represents 64%, 63%, 63% and 59% of ~~information. Private equity~~our total AUM as of September 30, 2022.

3Total mutual fund AUM includes performance of our alternative and ~~debt~~multi-asset funds, ~~certain privately-offered emerging market~~ and ~~real estate~~total strategy composite AUM includes performance of our alternative composites. Alternative and multi-asset AUM represent 17% and 10% of our total AUM at September 30, 2022.

Mutual fund performance data includes U.S. and cross-border domiciled mutual funds and exchange-traded funds, and excludes cash management ~~funds~~ and ~~certain hedge and other funds are not included. Certain other funds and products were also excluded because~~fund of ~~limited benchmark or peer group data. Had this data been available, the results may have been different.~~funds. These results assume the reinvestment of dividends, are based on data available as of October ~~16,~~ ~~2019~~7, 2022 and are subject to revision. ~~While we remain focused~~

Past performance is not indicative of future results. For AUM included in institutional and retail separately managed accounts and investment funds managed in the same strategy as separate accounts, performance comparisons are based on ~~achieving strong long-term~~gross-of-fee performance. For investment funds which are not managed in a separate account format, performance ~~our future benchmark~~comparisons are based on net-of-fee performance. These performance comparisons do not reflect the actual performance of any specific separate account or investment fund; individual separate account and ~~peer group rankings~~investment fund performance may ~~vary from our past performance.~~differ. The information in this presentation is provided solely for use in connection with this document, and is not directed toward existing or potential clients of Franklin.

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OPERATING REVENUES

The table below presents the percentage change in each operating revenue category.


(in millions)							2022 vs. 2021		2021 vs. 2020
for the fiscal years ended September 30,	2022		2021		2020
Investment management fees	$	6,616.8	$	6,541.6	$	3,981.7	1	%	64	%
Sales and distribution fees	1,415.0		1,635.5		1,362.0		(13	%)	20	%
Shareholder servicing fees	193.0		211.2		195.1		(9	%)	8	%
Other	50.5		37.2		27.7		36	%	34	%
Total Operating Revenues	$	8,275.3	$	8,425.5	$	5,566.5	(2	%)	51	%

(in millions) 2019 vs. 2018 2018 vs. 2017
for the fiscal years ended September 30, 2019 2018 2017
Investment management fees $ 3,985.2
$ 4,367.5
$ 4,359.2
(9 %) 0 %
Sales and distribution fees 1,444.6
1,599.8
1,705.6
(10 %) (6 %)
Shareholder servicing fees 216.3
221.9
225.7
(3 %) (2 %)
Other 128.4
129.9
101.7
(1 %) 28 %
Total Operating Revenues $ 5,774.5
$ 6,319.1
$ 6,392.2
(9 %) (1 %)

~~Table of Contents~~

Investment Management Fees

Investment management fees are generally calculated under contractual arrangements with our investment products and the products for which we provide sub-advisory services as a percentage of AUM. Annual fee rates vary by ~~investment objective~~asset class and type of services provided. Fee rates for products sold outside of the U.S. are generally higher than for U.S. products.

Investment management fees ~~decreased $382.3~~increased $75.2 million in fiscal year ~~2019~~2022 primarily due to higher performance fees, partially offset by a 6%2% decrease in average AUM, a $59.6 million decrease from a change in presentation of certain fees from investment management fees to distribution fees upon adoption of new revenue recognition accounting guidance on October 1, 2018, and a lower effective investment management fee rate, partially offset by higher performance fees.AUM. The decrease in average AUM occurred primarily in the ~~global/international~~fixed income and ~~multi-asset/balanced investment objectives,~~equity asset classes, partially offset by an increase in the ~~U.S. taxable fixed income investment objective, and across all sales regions, most significantly in~~alternative asset class that includes the ~~U.S. and Europe, Middle East and Africa.~~acquisition of Lexington.

Investment management fees increased ~~$8.3~~$2,559.9 million in fiscal year ~~2018~~2021 primarily due to the acquisition of Legg Mason, a ~~slight~~5% increase in average AUM ~~partially offset by lower~~and higher performance fees. ~~Average~~The increase in average AUM ~~increases~~occurred primarily in the ~~Asia-Pacific~~equity and ~~Europe, Middle East and Africa sales regions were largely~~multi-asset asset classes, partially offset by a decrease in the ~~U.S.~~fixed income asset class.

Our effective investment management fee rate excluding performance fees (investment management fees excluding performance fees divided by average AUM) was ~~56.4~~41.6, 41.8 and 47.3 basis points for fiscal ~~year~~ ~~2019~~years 2022, 2021 and ~~58.7 basis points for both fiscal years 2018 and~~ ~~2017~~.2020. The rate decrease in fiscal year ~~2019~~2022 was primarily due to ~~lower weighting of AUM~~a shift in assets from higher-fee products to lower-fee products in the ~~global/international~~fixed income and equity ~~investment objective, which~~asset classes. The rate decrease in fiscal year 2021 was primarily due to the Legg Mason acquisition, as Legg Mason generally ~~has the highest~~had a lower overall effective fee ~~rates, along with~~rate due to a higher mix of ~~AUM in lower fee products within the U.S.~~institutional and Europe, Middle East and Africa sales regions for this investment objective, and the $59.6 million decrease from the change in presentation of certain fees discussed above, partially offset by higher rates and mix of AUM in the U.S. taxable fixed income ~~investment objective.~~AUM.

Performance-based investment management fees were ~~$52.9~~$498.2 million, ~~$21.2~~$258.6 million and ~~$35.5~~$44.0 million for fiscal years ~~2019~~, ~~2018~~2022, 2021 and ~~2017~~.2020. The increase in fiscal year ~~2019~~2022 was primarily due to strong performance ~~fees earned from a private debt fund, separate accounts and a real estate fund,~~by our alternative specialist investment managers, while the ~~decrease~~increase in fiscal year ~~2018~~2021 was primarily due to ~~lower fees from separate accounts.~~

~~U.S. industry asset-weighted average management fee rates were as follows:~~

(in basis points)
Industry Average ¹
for the fiscal years ended September 30, 2019 2018 2017
Equity
Global/international ²
43 47 50
United States 30 32 35
Multi-Asset/Balanced 45 47 49
Fixed Income
Tax-free 32 32 33
Taxable
Global/international ³
34 36 39
United States 28 30 31
Cash Management 16 16 15

~~________________~~

~~U.S. industry asset-weighted average management fee rates were calculated using information available from Lipper, a Thomson Reuters Company, as of September 30,~~ ~~2019~~, ~~2018~~ ~~and~~ ~~2017~~ and include all U.S.-registered open-end funds that reported expense data to Lipper as of the funds’ most recent annual report date, and for which expenses were equal to or greater than zero. As defined by Lipper, management fees include fees from providing advisory and fund administration services. The averages combine retail and institutional funds data and include all share classes and distribution channels, without exception. Variable annuity and fund of fund products are not included.


²	~~The decreases in the average rate in fiscal years~~ ~~2019~~ ~~and~~ ~~2018~~ ~~reflect higher weightings of two large low-fee passive funds.~~


³	~~The decreases in the average rate in fiscal years~~ ~~2019~~ ~~and~~ ~~2018~~ ~~reflect higher weightings of a large low-fee passive fund and lower weightings of two large higher-fee actively managed funds.~~

~~Table of Contents~~

The declines in U.S. industry average management fee rates for long-term investment objectives generally reflect increased investor demand for lower-fee passive funds. Our actual effective investment management fee rates are generally higher than the U.S. industry average rates as we actively manage substantially all of our products and have a higher level of international AUM, both of which generate higher fees. Our fiscal year 2019 effective fee rates in the U.S. were generally comparable with the prior year, except for a higher effective fee rate for U.S. taxable fixed income products resulting from the acquisition of Benefit Street Partners L.L.C. (“BSP”), a U.S. alternative credit manager, in February 2019. Our U.S. effective fee rates decreased during fiscal year 2018 to a lesser extent than the average industry rates.Legg Mason as well as strong performance.

Our product offerings and global operations are diverse. As such, the impact of future changes in AUM on investment management fees will be affected by the relative mix of ~~investment objective,~~asset class, geographic region, distribution channel and investment vehicle of the assets.

Sales and Distribution Fees

Sales and distribution fees primarily consist of upfront sales commissions and ongoing distribution fees. Sales commissions are earned from the sale of certain classes of sponsored funds at the time of purchase (“commissionable sales”) and may be reduced or eliminated depending on the amount invested and the type of investor. Therefore, sales fees generally will change with the overall level of gross sales, the size of individual transactions, and the relative mix of sales between different share classes and types of investors.

Our sponsored mutual funds generally pay us distribution fees in return for sales, marketing and distribution efforts on their behalf. The majority of ~~U.S.-registered~~our U.S. mutual funds, with the exception of certain money market funds and certain other funds specifically designed for purchase through separately managed account programs, have adopted distribution plans under Rule 12b-1 (the “Rule 12b-1 Plans”) promulgated under the Investment Company Act of 1940. The Rule 12b-1 Plans permit the funds to pay us for marketing, marketing support, advertising, printing and sales promotion services relating to the distribution of their shares, subject to the Rule 12b-1 Plans’ limitations on amounts based on daily average AUM. ~~Similar arrangements exist for the distribution~~We

Table of ~~non-U.S. funds.~~Contents

We pay substantially all of our sales and distribution fees to the financial advisers and other intermediaries who sell our funds on our behalf. See the description of sales, distribution and marketing expenses below.

~~Sales and distribution fees by revenue driver are presented below.~~

(in millions) 2019 vs. 2018 2018 vs. 2017
for the fiscal years ended September 30, 2019 2018 2017
Asset-based fees $ 1,188.2
$ 1,314.3
$ 1,345.1
(10 %) (2 %)
Sales-based fees 244.0
270.3
350.8
(10 %) (23 %)
Contingent sales charges 12.4
15.2
9.7
(18 %) 57 %
Sales and Distribution Fees $ 1,444.6
$ 1,599.8
$ 1,705.6
(10 %) (6 %)

Asset-based distribution fees decreased $126.1 million in fiscal year 2019 primarily due to decreases of $120.5 million from a 9% decrease in the related average AUM and $67.6 million from a lower mix of U.S. Class C assets which have higher fee rates than other share classes, partially offset by a $59.6 million increase from a change in presentation of certain fees toearn distribution fees from ~~investment management fees upon adoption of new revenue recognition accounting guidance~~our non-U.S. funds based on ~~October 1, 2018. Asset-based distribution fees decreased $30.8 million in fiscal year 2018 as a $60.3 million decrease in U.S. product fees primarily due to a 5% decrease in the related~~daily average ~~U.S. AUM was partially offset by a $29.5 million increase in non-U.S. product fees primarily due to a 4% increase in the related average international~~ AUM.

~~Sales-based fees decreased $26.3 million in fiscal year~~ ~~2019~~ primarily due to decreases of $18.2 million from a 5% decrease in total commissionable sales and $5.3 million from a lower mix of U.S. product commissionable sales. Sales-based fees decreased $80.5 million in fiscal year ~~2018~~ ~~primarily due to an $84.6 million decrease from a 26% decrease in total commissionable sales. Commissionable sales represented 9% of total sales for both fiscal years~~ ~~2019~~ ~~and~~ ~~2018, and 11% for fiscal year~~ ~~2017~~.

Contingent sales charges are earned from investor redemptions within a contracted period of time. Substantially all of these charges are levied on certain shares sold without a front-end sales charge, and vary with the mix of redemptions of these shares. ~~Contingent~~

We pay substantially all of our sales ~~charges~~and distribution fees to the financial advisers, broker-dealers and other intermediaries that sell our funds on our behalf. See the description of sales, distribution and marketing expenses below.

Sales and distribution fees by revenue driver are presented below.


(in millions)							2022 vs. 2021		2021 vs. 2020
for the fiscal years ended September 30,	2022		2021		2020
Asset-based fees	$	1,150.2	$	1,302.3	$	1,096.3	(12	%)	19	%
Sales-based fees	251.1		314.6		245.9		(20	%)	28	%
Contingent sales charges	13.7		18.6		19.8		(26	%)	(6	%)
Sales and Distribution Fees	$	1,415.0	$	1,635.5	$	1,362.0	(13	%)	20	%

Asset-based distribution fees decreased ~~$2.8~~$152.1 million in fiscal year ~~2019~~ ~~and~~2022 primarily due to a 12% decrease in the related average AUM. Asset-based distribution fees increased ~~$5.5~~$206.0 million in fiscal year ~~2018~~2021 primarily due to ~~changes~~the acquisition of Legg Mason and $53.1 million from a 5% increase in ~~redemptions~~the related average AUM, partially offset by $33.2 million from a higher mix of ~~non-U.S. products.~~lower-fee U.S. assets.

Sales-based fees decreased $63.5 million in fiscal year 2022 primarily due to a 20% decrease in commissionable sales. Sales-based fees increased $68.7 million in fiscal year 2021 primarily due to the acquisition of Legg Mason and $13.0 million from higher commissionable sales.

~~Table of Contents~~

Shareholder Servicing Fees

Substantially all shareholder servicing fees are earned from our sponsored funds for providing transfer agency services, which include providing shareholder statements, transaction processing, customer service and tax reporting. These fees are primarily determined based on a percentage of AUM and either the number of transactions in shareholder accounts or the number of shareholder accounts, while fees from certain funds are based only on AUM. ~~In addition,~~Shareholder servicing fees also include fund reimbursements of expenses incurred while providing transfer agency services are recognized as revenue effective October 1, 2018 under new revenue recognition guidance. Prior to November 1, 2017, the fees for U.S. funds were based on a fixed charge per shareholder account that varied by fund type and service provided.services.

Shareholder servicing fees decreased ~~$5.6~~$18.2 million in fiscal year ~~2019~~2022 primarily due to lower levels of related AUM and ~~transactions, partially offset by $8.6 million of fund expense reimbursement revenue.~~transactions. Shareholder servicing fees ~~decreased $3.8~~increased $16.1 million in fiscal year ~~2018~~2021 primarily due to ~~a $4.9 million decrease from U.S. funds which reflects lower levels~~the acquisition of ~~transactions~~Legg Mason and ~~AUM under the new fee structure, partially offset by a $1.0 million increase from funds in Europe resulting from~~ higher levels of related ~~AUM.~~AUM, partially offset by lower levels of transactions.

Other

Other revenue ~~decreased $1.5~~increased $13.3 million and increased $9.5 million in fiscal ~~year~~ ~~2019~~ ~~primarily due to lower interest~~years 2022 and ~~dividend income from consolidated investment products (“CIPs”), largely offset by higher miscellaneous fee revenues. Other revenue increased $28.2 million in fiscal year~~ ~~2018~~2021 primarily due to higher ~~interest and dividend income from CIPs.~~real estate transaction fees earned by certain of our alternative asset managers.

Table of Contents

OPERATING EXPENSES

The table below presents the percentage change in each operating expense category.


(in millions)	2022		2021		2020		2022 vs. 2021		2021 vs. 2020
for the fiscal years ended September 30,
Compensation and benefits	$	3,089.8	$	2,971.3	$	1,873.9	4	%	59	%
Sales, distribution and marketing	1,845.6		2,105.8		1,703.1		(12	%)	24	%
Information systems and technology	500.2		486.1		288.4		3	%	69	%
Occupancy	218.9		218.1		147.9		0	%	47	%
Amortization of intangible assets	282.0		232.0		54.0		22	%	330	%
General, administrative and other	564.9		537.2		450.3		5	%	19	%
Total Operating Expenses	$	6,501.4	$	6,550.5	$	4,517.6	(1	%)	45	%

Compensation and Benefits

The components of compensation and benefits expenses are presented below.


(in millions)							2022 vs. 2021		2021 vs. 2020
for the fiscal years ended September 30,	2022		2021		2020
Salaries, wages and benefits	$	1,426.4	$	1,428.6	$	1,062.7	0	%	34	%
Incentive compensation	1,500.5		1,303.9		550.0		15	%	137	%
Acquisition-related retention	167.2		163.7		195.8		2	%	(16	%)
Other1	(4.3)		75.1		65.4		NM		15	%
Compensation and Benefits Expenses	$	3,089.8	$	2,971.3	$	1,873.9	4	%	59	%

_______________

1 Includes impact of gains and losses on investments related to deferred compensation plans and seed investments, which is offset in investment and other income (losses), net; minority interests in certain subsidiaries, which is offset in net income (loss) attributable to redeemable noncontrolling interests; special termination benefits; and acquisition-related performance-based investment management fees which are passed through as compensation and benefits expense.

Salaries, wages and benefits decreased $2.2 million in fiscal year 2022 primarily due to a $16.8 million decrease in termination benefits and the impact of headcount reductions which were substantially offset by increases due to annual salary adjustments and the acquisitions of Lexington and OSAM. Salaries, wages and benefits increased $365.9 million in fiscal year 2021, primarily due to the acquisition of Legg Mason.

Incentive compensation increased $196.6 million in fiscal year 2022, primarily due to higher performance fees and the acquisition of Lexington. Incentive compensation increased $753.9 million in fiscal year 2021, primarily due to the acquisition of Legg Mason.

Acquisition-related retention expenses increased $3.5 million in fiscal year 2022, primarily due to acquisition of Lexington and decreased $32.1 million in fiscal year 2021 primarily due to lower costs associated with the acquisition of Legg Mason.

Other compensation and benefits were $(4.3) million, $75.1 million, and $65.4 million for fiscal years 2022, 2021, and 2020. The changes for fiscal years 2022 and 2021 were primarily related to market adjustments on investments related to our deferred compensation plans and compensation related to minority interests. Special termination benefits also decreased $18.9 million and $27.7 million in fiscal years 2022 and 2021 primarily due to workforce optimization initiatives related to the acquisition of Legg Mason.

We expect to incur acquisition-related retention expenses of approximately $230 million during the fiscal year ending September 30, 2023 (“fiscal year 2023”), and decreasing over the following two fiscal years by approximately $30 million and $70 million. At September 30, 2022, our global workforce had decreased to approximately 9,800 employees from approximately 10,300 at September 30, 2021.

Table of Contents

(in millions) 2019 2018 2017 2019 vs. 2018 2018 vs. 2017
for the fiscal years ended September 30,
Sales, distribution and marketing $ 1,819.6
$ 2,039.7
$ 2,130.9
(11 %) (4 %)
Compensation and benefits 1,584.7
1,390.6
1,333.7
14 % 4 %
Information systems and technology 258.5
243.9
219.8
6 % 11 %
Occupancy 133.6
128.6
121.3
4 % 6 %
General, administrative and other 420.7
397.7
322.2
6 % 23 %
Total Operating Expenses $ 4,217.1
$ 4,200.5
$ 4,127.9
0 % 2 %
We continue to place a high emphasis on our pay for performance philosophy. As such, any changes in the underlying performance of our investment products or changes in the composition of our incentive compensation offerings could have an impact on compensation and benefits expenses going forward. However, in order to attract and retain talented individuals, our level of compensation and benefit expenses may increase more quickly or decrease more slowly than our revenue.

Sales, Distribution and Marketing

Sales, distribution and marketing expenses primarily relate to services provided by financial advisers, broker-dealers and other ~~third parties~~intermediaries to our sponsored funds, including marketing support services. Substantially all distribution expenses are incurred from assets that generate distribution fees and are determined as a percentage of AUM. Substantially all sales expenses are incurred from the same commissionable sales transactions that generate sales fee revenues and are determined as a percentage of sales. ~~Substantially all distribution expenses are incurred from assets that generate distribution fees and are determined as a percentage of AUM.~~ Marketing support expenses are based on AUM, sales or a combination thereof. Also included is the amortization of deferred sales commissions related to upfront commissions on shares sold without a front-end sales charge. The deferred sales commissions are amortized over the periods in which commissions are generally recovered from related revenues.

Sales, distribution and marketing expenses by cost driver are presented below.

(in millions) 2019 2018 2017 2019 vs. 2018 2018 vs. 2017
for the fiscal years ended September 30,
Asset-based expenses $ 1,476.0
$ 1,703.9
$ 1,735.8
(13 %) (2 %)
Sales-based expenses 257.8
255.1
323.1
1 % (21 %)
Amortization of deferred sales commissions 85.8
80.7
72.0
6 % 12 %
Sales, Distribution and Marketing $ 1,819.6
$ 2,039.7
$ 2,130.9
(11 %) (4 %)

~~Table of Contents~~


(in millions)	2022		2021		2020		2022 vs. 2021		2021 vs. 2020
for the fiscal years ended September 30,
Asset-based expenses	$	1,532.6	$	1,714.7	$	1,369.0	(11	%)	25	%
Sales-based expenses	248.2		312.9		253.8		(21	%)	23	%
Amortization of deferred sales commissions	64.8		78.2		80.3		(17	%)	(3	%)
Sales, Distribution and Marketing	$	1,845.6	$	2,105.8	$	1,703.1	(12	%)	24	%

Asset-based expenses decreased ~~$227.9~~$182.1 million in fiscal year ~~2019~~2022 primarily due to ~~decreases of $161.4 million from a 10%~~an 11% decrease in the related average ~~AUM, and $64.3 million from a lower mix of U.S. Class C assets which have higher expense rates than other share classes.~~AUM. Asset-based expenses ~~decreased $31.9~~increased $345.7 million in fiscal year ~~2018 as a $60.8 million decrease in U.S. product expenses~~2021 primarily due to the acquisition of Legg Mason and $59.7 million from a 5% ~~decrease in the related average U.S. AUM was partially offset by a $28.9 million increase in non-U.S. product expenses primarily due to a 2%~~ increase in the related average ~~international~~ AUM. Distribution expenses, which are typically higher for non-U.S. products, are generally not directly correlated with distribution fee revenues due to certain international fee structures that do not provide full recovery of distribution costs.

Sales-based expenses ~~increased $2.7~~decreased $64.7 million in fiscal year ~~2019~~2022 primarily due to increases of $22.6 million from the recognition of sales commissions on U.S. Class C shares as expense at the time of sale and $10.0 million from revised U.S. dealer commission pricing effective September 2018, partially offset by decreases of $14.2 million from a 5%20% decrease in ~~total~~ commissionable sales and $12.6 million in India primarily related to regulatory-driven changes in fee structure. The recognition of sales commissions on U.S. Class C shares as expense at the time of sale is consistent with the treatment of contract costs with a useful life of one year or less under new revenue recognition accounting guidance adopted on October 1, 2018. The commissions relate to shares sold without a front-end sales charge and were deferred and amortized over one year in prior years.

sales. Sales-based expenses ~~decreased $68.0~~increased $59.1 million in fiscal year ~~2018~~2021 primarily due to ~~a $75.0 million decrease from a 26% decrease in total commissionable sales, partially offset by a $4.4 million increase from a higher average commission rate resulting from a higher mix~~the acquisition of ~~U.S. product commissionable sales. U.S. products typically generate higher sales commissions than non-U.S. products.~~

~~Amortization of deferred sales commissions increased $5.1 million in fiscal year~~ ~~2019~~, as the impact of higher sales of shares sold without a front-end sales charge was largely offset by the change in accounting for U.S. Class C shares discussed above, which resulted in no further deferralLegg Mason and amortization. The unamortized deferred Class C commission balance of $9.1 million at September 30, 2018 was reversed against retained earnings upon adoption of the new accounting guidance. Amortization of deferred sales commissions increased $8.7 million in fiscal year 2018 primarily due to a $21.0 million increase from higher sales of non-U.S. shares sold without a front-end sales charge, partially offset by a $12.0 million decrease from lower such sales of U.S. shares.

~~Compensation and Benefits~~

~~Compensation and benefit expenses increased $194.1 million in fiscal year~~ ~~2019~~ due to increases of $162.6 million in salaries, wages and benefits and $31.5 million in variable compensation. Salaries, wages and benefits increased primarily due to increases of $60.7 million from acquisition-related retention compensation, $60.1 million~~in termination benefits, $24.5 million for annual salary increases that were effective December 1, 2018 and 2017, and $23.8~~$12.1 million from higher average staffing levels primarily due to acquisitions, partially offset by a $12.5 million decrease from favorable foreign currency impacts. The increase in termination benefits was primarily due to special benefits related to the voluntary separation of approximately 250 employees, which was 2.5% of our global workforce, and an additional 2.0% workforce reduction. Variable compensation increased primarily due to a $46.6 million increase for acquired firms’ performance bonus plans, partially offset by an $18.0 million decrease in bonus expense based on our lower performance.commissionable sales.

We expect to incur additional acquisition-related retention expenses of approximately $80 million during the fiscal year ending September 30, 2020 (“fiscal year 2020”), and amounts that decrease by approximately $10 million per year in the following four fiscal years. We also expect to incur termination benefit expenses of approximately $6 million during fiscal year 2020 related to outsourcing our fund administration services.

Compensation and benefit expenses increased $56.9 million in fiscal year 2018 due to a $69.1 million increase in salaries, wages and benefits, partially offset by a $12.2 million decrease in variable compensation. The increase in salaries, wages and benefits was primarily due to increases of $25.1 million from higher average staffing levels, $21.9 million for annual merit salary adjustments that were effective December 1, 2017 and 2016, $14.2 millionin termination benefits and $6.5 million from unfavorable foreign currency impacts. The decrease in variable compensation was primarily due to decreases of $24.0 million related to unvested mutual fund awards and $5.5 million in stock and stock unit award amortization, partially offset by a $14.2 million increase in bonus expense primarily due to higher staffing levels.

~~Variable compensation as a percentage of compensation and benefits was 31%, 33% and 36% for fiscal years~~ ~~2019, 2018 and 2017. At September 30, 2019, our global workforce had decreased to approximately 9,600 employees from approximately 9,700 at September 30, 2018.~~

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We continue to place a high emphasis on our pay for performance philosophy. As such, any changes in the underlying performance of our investment products or changes in the composition of our incentive compensation offerings could have an impact on compensation and benefit expenses going forward. However, in order to attract and retain talented individuals, our level of compensation and benefit expenses may increase more quickly or decrease more slowly than our revenue.

Information Systems and Technology

Information systems and technology expenses increased ~~$14.6~~$14.1 million in fiscal year ~~2019~~2022 primarily due to higher costs incurred for technology consulting, software and external data services offset in part by lower technology depreciation. Information systems and technology expenses increased $197.7 million in fiscal year 2021 primarily due to higher external data service and software costs and technology consulting as a result of the Legg Mason acquisition.

Occupancy

Occupancy expenses remained relatively flat in fiscal year 2022 and increased ~~$24.1~~$70.2 million in fiscal year ~~2018~~2021. The increase in fiscal year 2021 was primarily due to ~~higher technology consulting and software costs.~~an increase in leased office space as a result of the Legg Mason acquisition.

~~Details~~

Amortization of ~~capitalized information systems and technology costs are shown below.~~intangible assets

(in millions)
for the fiscal years ended September 30, 2019 2018 2017
Net carrying value at beginning of year $ 106.2
$ 102.1
$ 88.1
Additions, net of disposals 53.8
51.2
63.1
Amortization (48.0 ) (47.1 ) (49.1 )
Net Carrying Value at End of Year $ 112.0
$ 106.2
$ 102.1

~~Occupancy~~

~~We conduct our worldwide operations using a combination~~Amortization of ~~leased and owned facilities. Occupancy expenses include rent and other facilities-related costs including depreciation and utilities.~~

~~Occupancy expenses~~intangible assets increased ~~$5.0~~$50.0 million in fiscal year ~~2019~~2022, primarily due to ~~higher levels~~intangible assets recognized as part of ~~rent expense~~the acquisition of Lexington Partners, and ~~building depreciation and maintenance, partially offset by a $6.3 million decrease in equipment impairment. Occupancy expenses~~ increased ~~$7.3~~$178.0 million in fiscal year ~~2018~~2021 primarily due to ~~$6.6 million~~intangible assets recognized as part of ~~equipment impairment.~~the acquisition of Legg Mason.

~~During the second half~~

Table of fiscal year 2019 we completed construction of two new buildings at our corporate headquarters campus in San Mateo, California and purchased an office building in Poznan, Poland. The additions of these new properties will result in increased annual depreciation and other occupancy expenses of approximately $12 million beginning in fiscal year 2020.Contents

General, Administrative and Other

General, administrative and other ~~operating~~ expenses primarily consist of professional fees, fund-related service fees payable to external parties, ~~professional fees,~~ advertising and promotion, travel and entertainment, and other miscellaneous expenses.

General, administrative and other operating expenses increased $23.0 million in fiscal year 2019 primarily due to a $13.9 million litigation settlement and higher third-party service fees, intangible asset amortization and professional fees. Third-party fees primarily for sub-advisory and fund administration services increased $13.7 million, including $8.6 million from the recognition of certain payments reimbursed by funds as expense upon adoption of new revenue recognition accounting guidance on October 1, 2018. Intangible asset amortization increased $12.9 million and professional fees increased $10.6 million, both primarily related to the current year acquisition of Benefit Street Partners, L.L.C. The increases were partially offset by decreases of $11.1 million in contingent consideration expense for the K2 Advisors Holdings, LLC (“K2”) acquisition, $9.7 million in CIPs expenses and $8.6 million in advertising and promotion. The total consideration for the K2 acquisition was finalized during fiscal year 2019.

General, administrative and other operating expenses increased ~~$75.5~~$27.7 million in fiscal year ~~2018~~2022, primarily due to ~~higher contingent consideration expense, third-party service fees, professional fees,~~increases of $27.1 million in advertising and promotion expenses, due in part to our global brand campaign, $25.7 million in professional fees, largely related to acquisition-costs, and $24.0 million in travel and entertainment expenses. ~~Contingent~~Fiscal year 2022 also included $20.3 million of non-recurring costs incurred in connection with the outsourcing of our transfer agent functions. These increases were partially offset by $43.0 million of closed-end fund product launch costs incurred in the prior year. Fiscal year 2022 also included net credits of $19.2 million to adjust the fair values of our contingent consideration asset and liabilities, as compared to $4.1 million of expense recognized in the prior year.

General, administrative and other operating expenses increased ~~$26.9~~$86.9 million in fiscal year 2021, primarily due to ~~revised estimates~~the acquisition of ~~future revenues~~Legg Mason and ~~profits from K2 and a prior-year decline~~$43.0 million of closed-end fund product launch costs. The increase was also due to increases of $35.0 million in ~~other acquisition-related AUM. Third-party fees primarily for sub-advisory and~~third-party fund administration ~~services increased $17.6~~and sub-advisory service fees and $12.9 million ~~professional fees increased $16.6~~in placement and platform fees. The increases were partially offset by $55.4 million of prior year impairments of intangible assets and goodwill primarily related to ~~various corporate activities,~~assets recognized from the acquisitions of Benefit Street Partners, L.L.C. and ~~advertising and promotion and travel and entertainment expenses increased $7.3 million and $6.6 million due to higher activity levels.~~Onsa, Inc., (formally known as TokenVault, Inc.).

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We are committed to investing in advertising and promotion in response to changing business conditions, and to advance our products where we see continued or potential new growth opportunities. As a result of potential changes in our strategic marketing campaigns, the level of advertising and promotion expenses may increase more rapidly, or decrease more slowly, than our revenues.

OTHER INCOME (EXPENSES)

Other income (expenses) consisted of the following:


(in millions)										2019 vs. 2018			2018 vs. 2017		(in millions)											2022 vs. 2021				2021 vs. 2020
for the fiscal years ended September 30,	2019			2018			2017					for the fiscal years ended September 30,					2022			2021			2020
Investment and other income, net	$	115.1		$	145.3		$	336.3			(21	%)			(57	%)
Investment and other income (losses), net															Investment and other income (losses), net			$	91.1		$	264.7		$	(38.4)		(66		%)		NM
Interest expense	(24.7		)	(48.7		)	(51.5		)	(49	%)		(5	%)	Interest expense			(98.2)			(85.4)			(33.4)		15		%		156		%
Other Income, Net	$	90.4		$	96.6		$	284.8		(6	%)		(66	%)
Investment and other income (losses) of consolidated investment products, net															Investment and other income (losses) of consolidated investment products, net			(17.7)			421.1			70.2		NM				500		%
Expenses of consolidated investment products															Expenses of consolidated investment products			(19.7)			(31.2)			(29.4)		(37		%)		6		%
Other Income (Expenses), Net															Other Income (Expenses), Net			$	(44.5)		$	569.2		$	(31.0)	NM				NM

Investment and other income (losses), net consists primarily of ~~dividend and interest income, income (losses) from equity method investees,~~ gains (losses) on investments held by the Company, ~~and investments of CIPs, rental~~ income ~~and~~(losses) from equity method investees, foreign currency exchange gains (losses)., rental income from excess owned space which we lease to third parties, gains (losses) on derivatives, and dividend income.

~~Other~~Investment and other income (losses), net decreased ~~$6.2~~$173.6 million in fiscal year ~~2019~~2022 primarily due to ~~losses~~the impact of market declines in the current year. Investment and other income (losses), net increased $303.1 million in fiscal year 2021 primarily due to income from equity method investees ~~as compared to income in the prior year, lower interest income~~ and ~~losses~~gains on investments held by the Company, ~~as compared to gains in the prior year. These decreases were largely~~partially offset by ~~higher~~a decrease in dividend income ~~lower~~and losses on ~~investments held by CIPs, lower interest expense and higher foreign exchange gains. Equity~~derivatives.

Income from equity method investees ~~generated losses of $10.4 million as compared to income of $44.4~~decreased $118.1 million in fiscal year 2022. The current year included a $52.6 million gain recognized on the ~~prior year primarily due~~sale of our investment in Embark, offset in part by losses from equity method investees, largely related to ~~changes~~declines in market valuations of investments held by ~~two~~various global equity ~~funds. Interest~~and alternative funds, while the prior year included gains from equity method investees. Equity method investees generated income ~~decreased $45.5~~of $154.3 million ~~primarily due~~in fiscal year 2021, as compared to ~~lower levels~~losses of ~~cash equivalents and debt securities, partially offset~~$98.1 million in fiscal year 2020, reflecting recovery in market valuations of investments held by ~~higher interest rates.~~ various global equity funds.

Investments held by the Company generated net losses of ~~$9.7~~$75.4 million, ~~primarily due to $9.0 million of other-than-temporary impairment of an available-for-sale debt security,~~ as compared to net gains of ~~$6.0~~$90.9 million in the prior year, primarily from investments in nonconsolidated funds and separate accounts and assets invested for deferred compensation plans, partially offset by net gains from investments measured at cost adjusted for observable price change. Investments held by the Company generated net gains of $90.9 million in fiscal year 2021, as compared to net losses of $16.8 million in fiscal year 2020, primarily from various nonconsolidated funds, and in fiscal year 2021, assets invested for Legg Mason deferred compensation plans.

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Net foreign currency exchange gains were $40.6 million in fiscal year 2022, as compared to net losses of $11.9 million in the prior year. The ~~decreases~~increases were ~~partially offset by a $45.9 million increase in dividend income~~ primarily due to higher yields on, and investments in, money market funds, and a $28.7 million decrease in net losses on investments held by CIPs primarily from holdings of various global/international funds and a U.S. fixed income fund. Interest expense decreased $24.0 million primarily due to $12.5 million of prior-year costs related to early redemption of senior notes and lower debt balances. Net foreign currency exchange gains increased $12.5 million primarily from the impact of the strengthening of the U.S. dollar against the Euro ~~on cash~~ and ~~cash equivalents denominated in U.S. dollars held in Europe.~~British Pound.

~~Other income, net decreased $188.2~~Derivatives generated gains of $20.9 million in fiscal year ~~2018~~2022, losses of $23.2 million in fiscal 2021, and gains of $3.0 million in fiscal 2020.

Dividend and interest income increased $20.3 million in fiscal year 2022, primarily due to ~~losses on investments held by CIPs, lower income from equity method investees and lower net gains on trading investment securities, partially offset by~~ higher dividend income and foreign exchange gains. Investments held by CIPs generated net losses of $55.0 million, as compared to net gains of $118.2 million in the prior year. The losses were primarily from lower market valuations of holdings by an emerging markets equity fund with a significant exposure in Turkey, several global/international fixed income funds and a U.S. fixed income fund. Income from equity method investees decreased $63.5 million primarily due to lower gains and losses on investments held by three global equity funds, one of which incurred losses on Turkish holdings, and a global macro hedge fund. Net gains on trading investment securities decreased $11.1 million primarily due to losses and lower gains from fixed income funds and other debt and equity securities. The decreases were partially offset by a $37.2 million increase in dividend income primarily due to higher investments in, and yields on money market funds, and ~~net foreign currency exchange gains of $0.6 million, as compared to net losses of $16.0~~decreased $45.6 million in fiscal year 2021 primarily due to lower dividend yields on money market funds.

Interest expense increased $12.8 million in fiscal year 2022 primarily due to accretion on Lexington deferred consideration. Interest expense increased $52.0 million in fiscal year 2021 primarily due to interest expense recognized on debt of Legg Mason and on the ~~prior~~senior unsecured unsubordinated notes issued during fiscal year ~~primarily from~~2021, partially offset by the ~~impact of strengthening~~redemption of the ~~U.S. dollar against the Euro~~junior notes issued by Legg Mason.

Investment and other income (loss) of consolidated investment products, net consists of investment gains (losses) on ~~cash~~investments held by consolidated investment products (“CIPs”) and ~~cash equivalents denominated in U.S. dollars held in Europe.~~

dividend and interest income. Expenses of consolidated investment products primarily consists of fund-related expenses, including professional fees and other administrative expenses, and interest expense. Significant portions of the investment and other income of consolidated investment products, net ~~gains (losses)~~and expenses of ~~CIPs~~consolidated investment products are offset in noncontrolling interests in our consolidated statements of income.

Investments held by CIPs generated losses of $66.9 million in fiscal year 2022, as compared to gains of $324.6 million in the prior year, largely related to net losses on holdings of various equity and fixed income funds and lower gains on holdings of various alternative funds. Dividend and interest income of CIPs was $49.2 million in fiscal year 2022, as compared to $96.5 million in the prior year. Investment and other income of consolidated investment products, net increased $350.9 million in fiscal year 2021 primarily due to net gains on investments held by various alternative funds.

Expenses of consolidated investment products decreased $11.5 million in fiscal year 2022 and increased $1.8 million in fiscal year 2021, due to activity of the funds.

Our investments in sponsored funds include initial cash investments made in the course of launching mutual fund and other investment product offerings, as well as investments for other business reasons. The market conditions that impact our AUM similarly affect the investment income earned or losses incurred on our investments in sponsored funds.

We lease excess owned space in our San Mateo, California corporate headquarters and various other office buildings to third parties, from which we earned rental income of $19.8 million and $15.9 million in fiscal years 2019 and 2018. Additional leases taking effect in fiscal year 2020 are expected to increase annual rental income by approximately $9 million.

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Our cash, cash equivalents and investments portfolio by ~~investment objective~~asset class and accounting classification at September 30, ~~2019,~~2022, excluding third-party assets of CIPs, was as follows:

Accounting Classification¹
Total Direct Portfolio
(in millions)
Cash and Cash Equivalents and Other²
Equity Securities,
at
Fair Value Equity Method Investments
Direct Investments
in CIPs

Cash and Cash Equivalents $ 5,803.4
$ —
$ —
$ —
$ 5,803.4
Investments
Equity
Global/international 9.3
111.3
603.4
133.3
857.3
United States 8.1
5.5
13.2
48.1
74.9
Total equity 17.4
116.8
616.6
181.4
932.2
Multi-Asset/Balanced 3.1
19.9
39.5
109.7
172.2
Fixed Income
Tax-free —
—
—
6.1
6.1
Taxable
Global/international 43.0
197.8
125.6
627.7
994.1
United States 28.9
195.5
151.7
206.7
582.8
Total fixed income 71.9
393.3
277.3
840.5
1,583.0
Total investments 92.4
530.0
933.4
1,131.6
2,687.4
Total Cash and Cash Equivalents and Investments $ 5,895.8
$ 530.0
$ 933.4
$ 1,131.6
$ 8,490.8


	Accounting Classification 1										Total
(in millions)	Cash and Cash Equivalents		Investments, at Fair Value		Equity Method Investments		Other Investments		Direct Investments in CIPs
Cash and Cash Equivalents	$	4,134.9	$	—	$	—	$	—	$	—	$	4,134.9
Investments
Alternative	—		167.2		510.9		78.3		580.3		1,336.7
Equity	—		229.8		235.5		152.0		82.9		700.2
Fixed Income	—		172.7		10.2		36.0		232.4		451.3
Multi-Asset	—		43.8		14.9		—		71.6		130.3
Total investments	—		613.5		771.5		266.3		967.2		2,618.5
Total Cash and Cash Equivalents and Investments 2, 3	$	4,134.9	$	613.5	$	771.5	$	266.3	$	967.2	$	6,753.4

^{______________}

1See Note 1 – Significant Accounting Policies and Note 5 – Investments in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report for information on investment accounting classifications.

2Total cash and cash equivalents and investments includes $3,602.0 million held for operational activities, including investments in sponsored funds and other products, and $216.4 million necessary to comply with regulatory requirements.

3Total cash and cash equivalents and investments includes $296.3 million attributable to employee-owned and other third-party investments made through partnerships which are offset in nonredeemable noncontrolling interests.

See Note 1 – Significant Accounting Policies, Note 2 – New Accounting Guidance and Note 6 – Investments in the notes to consolidated financial statements in Item 8 of Part II of this Form 10‑K for information on investment accounting classifications.


²	Other consists of $48.2 million of debt securities and $11.5 million of investments in life settlement contracts, both of which are measured at fair value, and $32.7 million of investments carried at adjusted cost.

TAXES ON INCOME

The Tax Act, which was enacted into law in the U.S. in December 2017, includes various changes to the tax law, including a permanent reduction in the corporate income tax rate from 35% to 21% effective January 1, 2018 and assessment of a one-time transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiaries’ earnings. We completed our analysis of the Tax Act impact during the quarter ended December 31, 2018 with no significant adjustment to the provisional amounts previously recorded. The transition tax expense recognized in fiscal year 2018 was net of an $87.6 million tax benefit related to U.S. taxation of deemed foreign dividends. This benefit was reversed in fiscal year 2019 upon issuance of final regulations by the U.S. Department of Treasury.

Our effective income tax rate for fiscal year ~~2019~~2022 was ~~26.8%~~22.9% as compared to ~~66.5%~~14.3% in fiscal year ~~2018~~2021 and ~~29.8%~~22.7% in fiscal year ~~2017.~~2020. The rate increase in fiscal year 2022 was primarily due to the release of a tax reserve in the prior year following the close of an IRS audit of the U.S. taxation of deemed foreign dividends for fiscal year 2018, net losses on investments held by CIPs for which there are no related tax benefits, as compared to net gains in fiscal year 2021, and a decrease in foreign earnings. The rate decrease in fiscal year ~~2019~~2021 was primarily due to the ~~prior year impact of the transition tax, net~~release of the tax ~~benefit from the revaluation of~~reserve mentioned above and net ~~deferred tax liabilities at the lower statutory rate, and the current year impact of the lower 21% statutory rate~~income attributable to noncontrolling interests as compared to ~~the prior-year blended statutory rate of 24.5%, partially offset by the reversal of the tax benefit related to the U.S. taxation of deemed foreign dividends. The rate increase~~a net loss in fiscal year 2018 was primarily due to the impact of the transition tax, partially offset by the lower federal statutory rate and the net tax benefit from the revaluation of net deferred tax liabilities. Our effective income tax rate excluding the one-time impacts of the Tax Act was 21.6% and 22.7% for fiscal years 2019 and 2018.2020.

Our effective income tax rate reflects the relative contributions of earnings in the jurisdictions in which we operate, which have varying tax rates. Changes in our pre-tax income mix, tax rates or tax legislation in ~~the~~such jurisdictions may affect our effective income tax rate and net income.

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES

As supplemental information, we are providing performance measures for “adjusted operating income,” “adjusted operating margin,” “adjusted net income” and “adjusted diluted earnings per share,” each of which is based on methodologies other than generally accepted accounting principles (“non-GAAP measures”). Management believes these non-GAAP measures are useful indicators of our financial performance and may be helpful to investors in evaluating our relative performance against industry peers.

“Adjusted operating income,” “adjusted operating margin,” “adjusted net income” and “adjusted diluted earnings per share” are defined below, followed by reconciliations of operating income, operating margin, net income attributable to Franklin Resources, Inc. and diluted earnings per share on a U.S. GAAP basis to these non-GAAP measures. Non-GAAP measures should not be considered in isolation from, or as substitutes for, any financial information prepared in accordance with U.S. GAAP, and may not be comparable to other similarly titled measures of other companies. Additional reconciling items may be added in the future to these non-GAAP measures if deemed appropriate.

Adjusted Operating Income

We define adjusted operating income as operating income adjusted to exclude the following:

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•Elimination of operating revenues upon consolidation of investment products.

•Acquisition-related items:

◦Acquisition-related retention compensation.

◦Other acquisition-related expenses including professional fees, technology costs and fair value adjustments related to contingent consideration assets and liabilities.

◦Amortization of intangible assets.

◦Impairment of intangible assets and goodwill, if any.

•Special termination benefits related to workforce optimization initiatives related to past acquisitions and certain initiatives undertaken by the Company.

•Impact on compensation and benefits expense from gains and losses on investments related to deferred compensation plans, which is offset in investment and other income (losses), net.

•Impact on compensation and benefits expense related to minority interests in certain subsidiaries, which is offset in net income (loss) attributable to redeemable noncontrolling interests.

Adjusted Operating Margin

We calculate adjusted operating margin as adjusted operating income divided by adjusted operating revenues. We define adjusted operating revenues as operating revenues adjusted to exclude the following:

•Elimination of operating revenues upon consolidation of investment products.

•Acquisition-related performance-based investment management fees which are passed through as compensation and benefits expense.

•Sales and distribution fees and a portion of investment management fees allocated to cover sales, distribution and marketing expenses paid to the financial advisers and other intermediaries who sell our funds on our behalf.

Adjusted Net Income and Adjusted Diluted Earnings Per Share

We define adjusted net income as net income attributable to Franklin Resources, Inc. adjusted to exclude the following:

•Activities of CIPs.

•Acquisition-related items:

◦Acquisition-related retention compensation.

◦Other acquisition-related expenses including professional fees, technology costs and fair value adjustments related to contingent consideration assets and liabilities.

◦Amortization of intangible assets.

◦Impairment of intangible assets and goodwill, if any.

◦Write off of noncontrolling interests related to the wind down of an acquired business.

◦Interest expense for amortization of Legg Mason debt premium from acquisition-date fair value adjustment.

•Special termination benefits related to workforce optimization initiatives related to past acquisitions and certain initiatives undertaken by the Company.

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•Net gains or losses on investments related to deferred compensation plans which are not offset by compensation and benefits expense.

•Net compensation and benefits expense related to minority interests in certain subsidiaries not offset by net income (loss) attributable to redeemable noncontrolling interests.

•Unrealized investment gains and losses.

•Net income tax expense of the above adjustments based on the respective blended rates applicable to the adjustments.

We define adjusted diluted earnings per share as diluted earnings per share adjusted to exclude the per share impacts of the adjustments applied to net income in calculating adjusted net income.

In calculating our non-GAAP measures, we adjust for the impact of CIPs because it is not considered reflective of our underlying results of operations. Acquisition-related items and special termination benefits are excluded to facilitate comparability to other asset management firms. We adjust for compensation and benefits expense related to funded deferred compensation plans because it is partially offset in other income (expense), net. We adjust for compensation and benefits expense and net income (loss) attributable to redeemable noncontrolling interests to reflect the economics of certain profits interest arrangements. Sales and distribution fees and a portion of investment management fees generally cover sales, distribution and marketing expenses and, therefore, are excluded from adjusted operating revenues. In addition, when calculating adjusted net income and adjusted diluted earnings per share we exclude unrealized investment gains and losses included in investment and other income (losses) because the related investments are generally expected to be held long term.

The calculations of adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted earnings per share are as follows:

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(in millions)	2022			2021			2020
for the fiscal years ended September 30,
Operating income	$	1,773.9		$	1,875.0		$	1,048.9
Add (subtract):
Elimination of operating revenues upon consolidation of investment products¹	48.2			22.8			23.6
Acquisition-related retention	167.2			163.7			195.8
Compensation and benefits expense from gains (losses) on deferred compensation and seed investments, net	(36.7)			22.7			1.2
Other acquisition-related expenses	60.7			36.0			57.4
Amortization of intangible assets	282.0			232.0			54.0
Impairment of goodwill and intangible assets	—			—			55.4
Special termination benefits	8.2			27.1			54.8
Compensation and benefits expense related to minority interests in certain subsidiaries	20.0			—			—
Adjusted operating income	$	2,323.5		$	2,379.3		$	1,491.1

Total operating revenues	$	8,275.3		$	8,425.5		$	5,566.5
Add (subtract):
Acquisition-related pass through performance fees	(4.2)			(25.3)			(9.4)
Sales and distribution fees	(1,415.0)			(1,635.5)			(1,362.0)
Allocation of investment management fees for sales, distribution and marketing expenses	(430.6)			(470.3)			(341.1)
Elimination of operating revenues upon consolidation of investment products¹	48.2			22.8			23.6
Adjusted operating revenues	$	6,473.7		$	6,317.2		$	3,877.6

Operating margin	21.4		%	22.3		%	18.8		%
Adjusted operating margin	35.9		%	37.7		%	38.5		%

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(in millions, except per share data)	2022		2021		2020
for the fiscal years ended September 30,
Net income attributable to Franklin Resources, Inc.	$	1,291.9	$	1,831.2	$	798.9
Add (subtract):
Net income of consolidated investment products¹	(0.2)		(2.8)		(4.6)
Acquisition-related retention	167.2		163.7		195.8
Other acquisition-related expenses	73.3		34.0		58.6
Amortization of intangible assets	282.0		232.0		54.0
Impairment of goodwill and intangible assets	—		—		55.4
Special termination benefits	8.2		27.1		54.8
Net losses (gains) on deferred compensation plan investments not offset by compensation and benefits expense	9.0		(1.2)		(0.1)
Unrealized investment losses (gains)	191.9		(285.7)		221.0
Interest expense for amortization of debt premium	(25.2)		(51.4)		(4.7)
Write-off of noncontrolling interests	—		—		(16.7)
Net compensation and benefits expense related to minority interests in certain subsidiaries not offset by net income (loss) attributable to redeemable noncontrolling interests	1.4		—		—
Net income tax expense of adjustments	(143.9)		(31.7)		(101.4)
Adjusted net income	$	1,855.6	$	1,915.2	$	1,311.0

Diluted earnings per share	$	2.53	$	3.57	$	1.59
Adjusted diluted earnings per share	3.63		3.74		2.61

__________________

1The impact of consolidated investment products is summarized as follows:


(in millions)	2022		2021		2020
for the fiscal years ended September 30,
Elimination of operating revenues upon consolidation	$	(48.2)	$	(22.8)	$	(23.6)
Other income, net	24.2		207.4		33.6
Less: income (loss) attributable to noncontrolling interests	(24.2)		181.8		5.4
Net income	$	0.2	$	2.8	$	4.6

LIQUIDITY AND CAPITAL RESOURCES

Cash flows were as follows:


(in millions)										(in millions)
for the fiscal years ended September 30,	2019			2018			2017			for the fiscal years ended September 30,	2022		2021		2020
Operating cash flows	$	201.6		$	2,229.7		$	1,135.4		Operating cash flows	$	1,956.7	$	1,245.4	$	1,083.3
Investing cash flows	(1,077.1		)	(290.4		)	52.0			Investing cash flows	(3,329.2)		(2,615.9)		(4,061.9)
Financing cash flows	(40.5		)	(3,761.7		)	(956.0		)	Financing cash flows	1,585.0		2,030.1		734.4

Net cash provided by operating activities ~~decreased~~increased in fiscal year ~~2019~~2022 primarily due to lower net purchases of investments by CIPs, higher net income adjusted for non-cash items and timing differences in the cash settlement of operating assets and liabilities. Net cash used in investing activities increased as compared to the prior year primarily due to cash paid for acquisitions in the current year, partially offset by net liquidations of our investments as compared to net purchases in the prior year. Net cash provided by financing activities decreased as compared to the prior year primarily due to proceeds from issuance of debt in the prior year, partially offset by higher net proceeds from debt of CIPs.

Net cash provided by operating activities increased in fiscal year 2021 primarily due to higher net income, a higher

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adjustment for amortization of intangible assets and increases in accrued compensation and benefits, partially offset by a lower change in investments, net, adjustments for gains of CIPs ~~which had~~as compared to losses in the prior year, increases in receivables and other assets and income from investments in equity method investees as compared to losses in the prior year. Net cash used in investing activities decreased as compared to the prior year primarily due to lower cash paid for acquisitions, partially offset by net deconsolidation of CIPs as compared to net consolidation in the prior year, higher net purchases of investments by CLOs and net purchases of investments as compared to net liquidations in the prior year. Net cash ~~used in investing~~provided by financing activities increased as compared to the prior year primarily due to ~~cash paid for the BSP acquisition~~proceeds from debt of CIPs, proceeds from issuance of debt and higher net additions of property and equipment primarily related to construction of two new buildings at our corporate headquarters campus in San Mateo, California and a purchased office building in Poznan, Poland. Net cash used in financing activities decreased primarily due to lower dividends paid on, and repurchases of, common stock, higher net subscriptions in CIPs by noncontrolling interests, ~~and a prior-year debt payment.~~

~~Net cash provided by operating activities increased in fiscal year 2018 primarily due to activities of CIPs which had net liquidations of investments as compared to net purchases in the prior year,~~ partially offset by an increase in our investments as compared to a decrease in the prior year. Net cash used in investing activities, as compared to net cash provided in the prior year, primarily resulted from net purchases of other investments by CIPs, as compared to net liquidations in the prior year, and higher cash paid for acquisitions. Net cash used in financing activities increased primarily due to higher dividends paid on common stock, lower net subscriptions in CIPs by noncontrolling interests and higher repurchases of common stock, partially offset by lower payments on debt by ~~CIPs.~~CIPs and debt.

The assets and liabilities of CIPs attributable to third-party investors do not impact our liquidity and capital resources. We have no right to the CIPs’ assets, other than our direct equity investment in them and investment management and other fees earned from them. The debt holders of the CIPs have no recourse to our assets beyond the level of our direct investment, therefore we bear no other risks associated with the CIPs’ liabilities. Accordingly, the assets and liabilities of CIPs, other than our direct investments in them, are excluded from the amounts and discussion below.

Our liquid assets and debt consisted of the following:


(in millions)							(in millions)
as of September 30,	2019		2018		2017		as of September 30,	2022		2021		2020
Assets							Assets
Cash and cash equivalents	$	5,803.4	$	6,610.8	$	8,523.3	Cash and cash equivalents	$	4,086.8	$	4,357.8	$	3,026.8
Receivables	740.0		733.7		767.8		Receivables	1,130.8		1,300.4		1,114.8
Investments	2,029.4		2,130.6		1,995.2		Investments	830.0		1,042.2		982.2
Total Liquid Assets	$	8,572.8	$	9,475.1	$	11,286.3	Total Liquid Assets	$	6,047.6	$	6,700.4	$	5,123.8

Liability							Liability
Debt	$	696.9	$	695.9	$	1,044.2	Debt	$	3,376.4	$	3,399.4	$	3,017.1

Liquidity

Liquid assets consist of cash and cash equivalents, receivables and certain investments. Cash and cash equivalents at September 30, ~~2019~~2022 primarily consist of money market funds and deposits with financial institutions. Liquid investments consist of investments in sponsored and other funds, direct investments in redeemable CIPs, other equity and debt securities, and time deposits with maturities greater than three months.

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We utilize a significant portion of our liquid assets to satisfy operational and regulatory requirements and fund capital contributions to sponsored and other products. Certain of our subsidiaries are required by our internal policy or regulation to maintain minimum levels of cash and/or capital, and may be restricted in their ability to transfer cash to their parent companies. ~~Liquid assets used to satisfy these purposes were $3,429.0 million at September 30, 2019 and $3,382.6 million at~~ ~~September 30, 2018, including $263.3 million and $252.6 million that was restricted by regulatory requirements.~~ Should we require more capital than is available for use, we could elect to reduce the level of discretionary activities, such as share repurchases or investments in sponsored and other products, or we could raise capital through debt or equity ~~issuance.~~issuances, or utilize existing or new credit facilities. These alternatives could result in increased interest expense, decreased dividend or interest income, or other dilution to our earnings.

Capital Resources

We believe that we can meet our present and reasonably foreseeable operating cash needs and future commitments through existing liquid assets, continuing cash flows from operations, amounts available under the credit facility discussed below, the ability to issue debt or equity securities and borrowing capacity under our uncommitted commercial paper private placement program.

On September 15, 2022, we repaid all of the outstanding $300.0 million 2.800% senior notes due in September 2022 issued by Franklin Resources, Inc. at the principal amount plus accrued and unpaid interest of $4.2 million.

On September 8, 2022, we entered into a term loan credit agreement with several financial institutions to establish a 3-year term loan with an aggregate commitment of $300.0 million.

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On January 10, 2022, we entered into a bi-lateral credit agreement with Bank of America, N.A. to establish a 364- day revolving credit facility with an aggregate commitment of $500.0 million. On September 8, 2022, we amended and restated the credit facility to, among other things, extend its maturity to September 7, 2023. As of the time of this filing, there were no amounts outstanding.

In prior fiscal years, we issued senior unsecured unsubordinated notes for general corporate purposes and to redeem outstanding ~~notes and to finance an acquisition.~~notes. At September 30, ~~2019, $699.4 million of the~~2022, Franklin’s outstanding senior notes ~~were outstanding with~~had an aggregate ~~face value~~principal amount due of ~~$700.0 million~~.$1,600.0 million. The notes ~~were issued at~~have fixed interest rates from 1.600% to 2.950% with interest paid semi-annually and ~~consist~~have an aggregate carrying value, inclusive of ~~$300.0 million~~ at ~~2.80%~~ ~~per annum which mature in~~ ~~2022~~unamortized discounts and ~~$400.0 million at 2.85% per annum which mature in 2025.~~debt issuance costs, of $1,583.3 million. At September 30, 2022, Legg Mason’s outstanding senior notes had an aggregate principal amount due of $1,250.0 million. The notes have fixed interest rates from 3.950% to 5.625% with interest paid semi-annually and have an aggregate carrying value, inclusive of unamortized premium, of $1,493.1 million. Effective August 2, 2021, Franklin agreed to unconditionally and irrevocably guarantee all of the outstanding notes issued by Legg Mason.

~~Interest on the notes is payable semi-annually.~~ The senior notes contain an optional redemption feature that allows us to redeem each series of notes prior to maturity in whole or in part at any time, at a make-whole redemption price. The indentures governing the senior notes contain limitations on our ability and the ability of our subsidiaries to pledge voting stock or profit participating equity interests in our subsidiaries to secure other debt without similarly securing the notes equally and ratably. ~~The~~In addition, the indentures ~~also~~ include requirements that must be met if we consolidate or merge with, or sell all of our assets to, another entity. The 364-day revolving credit facility and term loan credit agreement contain a financial performance covenant requiring that the Company maintains a consolidated net leverage ratio, measured as of the last day of each fiscal quarter, of no greater than 3.00 to 1.00. We were in compliance with all debt covenants at September 30, ~~2019.~~2022.

At September 30, ~~2019,~~2022, we had $500.0 million of short-term commercial paper available for issuance under an uncommitted private placement program which has been inactive since 2012 and is unrated.

Our ability to access the capital markets in a timely manner depends on a number of factors, including our credit rating, the condition of the global economy, investors’ willingness to purchase our securities, interest rates, credit spreads and the valuation levels of equity markets. If we are unable to access capital markets in a timely manner, our business could be adversely impacted.

Uses of Capital

We expect that our main uses of cash will be to invest in and grow our business ~~repurchase shares of our common stock,~~including through acquisitions, pay stockholder dividends, invest in our products, ~~fund property~~pay income taxes and ~~equipment purchases, pay~~ operating expenses of the business, enhance technology infrastructure and business processes, ~~pay stockholder dividends and income taxes,~~repurchase shares of our common stock, and repay and service debt. While we expect to continue to repurchase shares to offset dilution from stock-based compensation, and expect to continue to repurchase shares opportunistically from time to time, we will likely spend more of our post-dividend free cash flow investing in our business, including seed capital and acquiring resources to help grow our investment teams and operations.

In the ordinary course of business, we enter into contracts or purchase obligations with third parties whereby the third parties provide goods or services to or on behalf of the Company. Purchase obligations include contractual amounts that will be due to purchase goods and services to be used in our operations and are recorded as liabilities in the consolidated financial statements when services are provided. At September 30, 2022, we had $706.6 million of purchase obligations.

We repatriate the earnings in excess of regulatory, capital or operational requirements for substantially all non-U.S. subsidiaries. Prior to January 1, 2018, we indefinitely reinvested the undistributed earnings of all non-U.S. subsidiaries, except for income previously taxed in the U.S. or subject to regulatory or legal repatriation restrictions or requirements.

Wetypically declare cash dividends on a quarterly ~~basis.~~basis, subject to approval by our Board of Directors. We declared regular dividends of ~~$1.04~~$1.16 per share (~~$0.26~~($0.29 per share per quarter) in fiscal year ~~2019~~,2022, and ~~regular dividends~~ of ~~$0.92~~$1.12 per share (~~$0.23~~($0.28 per share per quarter) ~~and a special dividend of $3.00 per share~~ in fiscal year ~~2018~~.2021. We currently expect to continue paying comparable regular dividends on a quarterly basis to holders of our common stock depending upon earnings and other relevant factors.

We maintain a stock repurchase program to manage our equity capital with the objective of maximizing shareholder value. Our stock repurchase program is effected through ~~regular~~ open-market purchases and private transactions in accordance with applicable laws and regulations, and is not subject to an expiration date. The size and timing of these purchases will depend on business conditions, price, market ~~and business conditions~~ and other factors. During fiscal years ~~2019~~2022 and ~~2018,~~2021, we repurchased ~~24.6~~6.5 million and ~~39.9~~7.3 million shares of our common stock at a cost of ~~$756.3~~$180.8 million and ~~$1,426.7 million~~.$208.2 million. At September 30, ~~2019, 47.2~~2022, 24.4 million shares remained available for repurchase under the authorization of 80.0 million shares approved by our Board of Directors in April 2018.

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We routinely make cash investments in the course of launching sponsored funds. At September 30, 2022, we had $227.6 million of committed capital contributions which relate to discretionary commitments to invest in sponsored funds and other investment products and entities, including CIPs. These unfunded commitments are not recorded in the consolidated balance sheet.

We invested ~~$128.0~~$109.2 million, net of redemptions, ininto our sponsored products during fiscal year ~~2019~~,2022, and ~~redeemed $105.9~~invested $182.2 million, net of ~~investments,~~redemptions, during fiscal year ~~2018~~.2021.

On ~~February~~September 27, 2022 we entered into a lease agreement for office space in New York City located at One Madison Avenue with occupancy expected to begin in early fiscal year 2024 with an aggregate expected commitment of $766.7 million over 16 years. This is part of an initiative to consolidate our existing office space in New York City.

On November 1, ~~2019,~~2022, we acquired all of the outstanding ownership interests in ~~Benefit Street Partners L.L.C., a U.S. alternative credit manager,~~BNY Alcentra Group Holdings, Inc. from The Bank of New York Mellon Corporation for ~~a purchase~~cash consideration of ~~$720.1~~approximately $587.3 million paid at closing, including $188.3 million related to investments, and up to $350.0 million in contingent consideration to be paid upon on the achievement of certain performance thresholds over the next four years. We paid the purchase price from our existing cash. ~~During fiscal year~~ ~~2018~~,

On April 1, 2021, we ~~paid $86.8 million, net~~acquired all of the outstanding ownership interests in Lexington, a leading global manager of secondary private equity and co-investment funds, for cash ~~acquired, and issued 0.8 million shares of our common stock related to acquisitions.~~

~~During fiscal year 2019, we completed construction of two new buildings at our corporate headquarters campus in San Mateo, California with a total cost~~consideration of approximately ~~$130~~$1.0 billion and additional payments totaling $750.0 million to be paid in cash over the next three years. In connection with the acquisition, we granted a 25% profits interest in Lexington and ~~purchased an office building~~performance-based cash retention awards to certain employees that vest over approximately five years. We paid the purchase price from our existing cash.

On December 31, 2021, we acquired all of the outstanding ownership interests in ~~Poznan, Poland with~~OSAM, a ~~total cost~~leading quantitative asset

management firm, for cash consideration of approximately ~~$86 million. The buildings are used in~~$300.0 million, excluding future payments to be made subject to the attainment of certain performance measures. We paid the purchase price from our ~~business operations, and portions of the space may be leased to third parties.~~

~~On May 21, 2018, we redeemed our outstanding $350.0 million 4.625% senior notes due in May 2020 at a make-whole redemption price of $361.9 million.~~existing cash.

The funds that we manage have their own resources available for purposes of providing liquidity to meet shareholder redemptions, including securities that can be sold or provided to investors as in-kind redemptions, and lines of credit. Increased liquidity risks and redemptions have required, and may continue to require, increased cash in the form of loans or other lines of credit to help settle redemptions and for other related purposes. While we have no legal or contractual obligation to do so, we ~~may~~have in certain instances voluntarily ~~elect~~elected to provide the funds with direct or indirect financial support based on our business objectives. We did not provide financial or other support to our sponsored funds during fiscal year ~~2019. During fiscal year 2018, we purchased $32.6 million of certain equity and debt securities from two sponsored funds.~~2022 or 2021.

~~CONTRACTUAL OBLIGATIONS AND COMMITMENTS~~

~~The following table summarizes our contractual obligations and commitments.~~

(in millions) Payments Due by Fiscal Year
as of September 30, 2019 2020 2021 2022 2023 2024 There-
after Total
Debt
Principal ¹
$ 0.2
$ —
$ 300.0
$ —
$ —
$ 400.0
$ 700.2
Interest 19.8
19.8
19.8
11.4
11.4
5.7
87.9
Operating leases 49.5
45.3
40.9
39.1
36.7
149.1
360.6
Purchase obligations ²
158.6
75.6
28.9
16.8
17.1
0.6
297.6
Total Contractual Obligations 228.1
140.7
389.6
67.3
65.2
555.4
1,446.3
Committed capital contributions ³
267.8
—
—
—
—
—
267.8
Federal transition tax liability ⁴
49.9
74.1
74.1
74.1
138.9
416.8
827.9
Total Contractual Obligations and Commitments $ 545.8
$ 214.8
$ 463.7
$ 141.4
$ 204.1
$ 972.2
$ 2,542.0

^{__________________}


¹	~~Debt principal represents maturity amount.~~


²	Purchase obligations include contractual amounts that will be due to purchase goods and services to be used in our operations and may be canceled at earlier times than those indicated under certain conditions that may include termination fees.


³	Committed capital contributions relate to discretionary commitments to invest in sponsored funds and other investment products and entities. Generally, the timing of the funding of these commitments is unknown as they are callable on demand at any time prior to the expiration of the commitment periods.


⁴	~~Transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiaries’ earnings under the Tax Act.~~

~~The debt holders of CIPs have no recourse to our assets beyond the level of our direct investments, therefore we bear no risks associated with these entities~~’ liabilities and have not included them in the table above. See Note 11 – Consolidated Investment Products in the notes to consolidated financial statements in Item 8 of Part II of this Form 10‑K.

At ~~September 30, 2019, our consolidated balance sheet included liabilities for unrecognized tax benefits of~~ ~~$202.6 million~~ ~~and related accrued interest of~~ ~~$11.9 million~~ (see Note 13 – Taxes on Income in the notes to consolidated financial statements in Item 8 of Part II of this Form 10‑K). Because of the high degree of uncertainty regarding the timing and amounts of future cash outflows, unrecognized tax benefits and related accrued interest are not included in the table above.

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CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. These estimates, judgments and assumptions are affected by our application of accounting policies. Further, concerns about the global economic outlook and the risk of recession as well as the ongoing COVID-19 pandemic have adversely affected and may continue to adversely affect, our business, financial condition and results of operations including the estimates and assumptions made by management. Actual results could differ from the estimates. Described below are the accounting policies that we believe are most critical to understanding our financial position and results of operations. For additional information about our accounting policies, see Note 1 – Significant Accounting Policies in the notes to consolidated financial statements in Item 8 of Part II of this ~~Form 10‑K.~~Annual Report.

Consolidation

We consolidate our subsidiaries and investment products in which we have a controlling financial interest. We have a controlling financial interest when we own a majority of the voting interest in a voting interest entity (“VOE”) or are the primary beneficiary of a variable interest entity (“VIE”).

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A VIE is an entity in which the equity investment holders have not contributed sufficient capital to finance its activities or do not have defined rights and obligations normally associated with an equity investment. The assessment of whether an entity is a VIE or VOE involves judgment and analysis on a ~~structure-by-structure~~structure by structure basis. When performing the assessment, we consider factors such as the entity’s legal organization, design and capital structure, the rights of the equity investment holders and our contractual involvement with and ownership interest in the entity. ~~Substantially all of our~~Our VIEs are primarily investment products and our variable interests consist of our equity ownership interests in and investment management fees earned from these products.

We are the primary beneficiary of a VIE if we have the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of or right to receive benefits from the VIE that could potentially be significant to the VIE. Investment management fees earned from VIEs are excluded from the primary beneficiary determination if they are deemed to be at market and commensurate with service. The key ~~estimates and assumptions~~assumption used in the ~~analyses include~~analysis includes the amount of ~~AUM and the life of the investment product.~~AUM. These estimates and assumptions are subject to variability. For example, AUM is impacted by market volatility and the level of sales, redemptions, distributions to investors and reinvested distributions. There is judgment involved in assessing whether we have the power to direct the activities that most significantly impact VIEs’ economic performance and the obligation to absorb losses of or right to receive benefits from VIEs that could potentially be significant to the VIEs. As of September 30, ~~2019~~,2022, we were the primary beneficiary of 3753 investment product VIEs.

Business Combinations

Business combinations are accounted for by recognizing the acquired assets, including separately identifiable intangible assets, and assumed liabilities at their acquisition-date estimated fair values. Any excess of the purchase consideration over the acquisition-date fair values of these identifiable assets and liabilities is recognized as goodwill. Determining the fair value of assets acquired and liabilities assumed involves the use of significant estimates and assumptions. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in earnings.

Intangible assets acquired in business combinations consist primarily of investment management ~~contracts.~~contracts and trade names. The fair values of the acquired ~~intangible assets~~management contracts are based on the net present value of estimated future cash flows attributable to the contracts, which include significant assumptions about forecasts of the AUM growth rate, pre-tax profit margin, discount rate, average effective fee rate and effective tax rate. The fair value of trade names is determined using the relief from royalty method based on net present value of estimated future cash flows, which include significant assumptions about royalty rate, revenue growth rate, discount rate and ~~discount~~effective tax rate. Our estimates are based on assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, may differ from actual results. ~~The~~

Our management contract intangible assets are amortized over their estimated useful lives, which range from three to 15sixteen years, using the straight-line method, unless the asset is determined to have an indefinite useful life. Indefinite-lived intangible assets represent contracts to manage investment assets for which there is no foreseeable limit on the contract period. Trade names are amortized over their estimated useful lives which range from five to twenty years using the straight-line method.

Goodwill and indefinite-lived intangible assets are tested for impairment annually and when an event occurs or circumstances change that more likely than not reduce the fair value of the related reporting unit or indefinite-lived intangible asset below its carrying value. We have one reporting unit, investment management and related services, consistent with our single operating segment, to which all goodwill has been assigned.We make significant estimates and assumptions when evaluating goodwill and other intangible assets for impairment.

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We may first assess goodwill and indefinite-lived intangible assets for qualitative factors to determine whether it is necessary to perform a quantitative impairment test. The qualitative analysis considers entity-specific and macroeconomic factors and their potential impact on ~~the~~ key assumptions used in the determination of the fair value of the reporting unit or indefinite-lived intangible asset. A quantitative impairment test is performed if the results of the qualitative assessment indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying value or an indefinite-lived intangible asset is impaired, or if a qualitative assessment is not performed. Quantitative tests compare the fair value of the asset to its carrying value.

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The fair values of the reporting unit and indefinite-lived intangible assets are based on the net present value of estimated future cash flows, which include significant assumptions about the AUM growth rate, pre-tax profit margin, discount rate, average effective fee rate and effective tax ~~rate and discount~~ rate. The most relevant of these assumptions to the determination of estimated fair value are the AUM growth rate, pre-tax profit margin and the discount rate.

We performed ~~our~~a qualitative annual impairment ~~tests~~test for goodwill and all indefinite-lived intangible assets as of August 1, ~~2019~~. We performed a quantitative test for goodwill and the majority of indefinite-lived intangible assets, and recognized $9.3 million of impairment of intangible assets related to Canadian management contracts due to revised estimates of future pre-tax profit margins and AUM growth rates for the associated fund products. The estimated fair values of the reporting unit and substantially all of the other indefinite-lived intangible assets exceeded their carrying values by more than 55%. We estimated the discounted future cash flows for goodwill using compounded annual AUM growth rates ranging from (3.0%) to 4.0%, and for indefinite-lived intangible assets from (0.1%) to 12.7%, which were developed taking into account ongoing volatility in the capital markets, and a discount rate of 9.3%, which is based on our weighted average cost of capital. A hypothetical 500 basis point decline in the AUM growth rates or a 500 basis point increase in the discount rate would not reduce the estimated fair values of the reporting unit or other indefinite-lived intangible assets below their carrying values.

~~We performed a qualitative assessment for 37% of the indefinite-lived intangible assets~~2022 and concluded it is more likely than not that the fair ~~value~~values of the ~~specific~~reporting unit and the indefinite-lived intangible assets ~~exceeds~~exceed their carrying ~~value.~~values.

We subsequently monitored market conditions and their potential impact on the assumptions used in the annual ~~calculations of fair value~~assessment to determine whether circumstances have changed that would more likely than not reduce the fair value of the reporting unit below its carrying value, or indicate that the other indefinite-lived intangible assets might be impaired. We considered, among other things, changes in our AUM and weighted-average cost of capital by assessing whether these changes would impact the reasonableness of ~~the assumptions used in the~~our impairment ~~tests~~assessment as of August 1, ~~2019~~.2022. We also monitored fluctuations of our common stock per share price to evaluate our market capitalization relative to the reporting unit as a whole. Subsequent to August 1, ~~2019~~,2022, there were no impairments of goodwill or indefinite-lived intangible assets as no events occurred or circumstances changed that would indicate these assets might be impaired.

We test definite-lived intangible assets for impairment quarterly. Impairment is indicated when the carrying value of an asset is not recoverable and exceeds its fair value. Recoverability is evaluated based on estimated undiscounted future cash flows using assumptions about the AUM growth rate, pre-tax profit margin, average effective fee rate and expected useful ~~life.~~life as well as royalty rate for trade name intangible assets. The most relevant of these assumptions to determine future cash flows is the AUM growth rate. If the carrying value of an asset is not recoverable through undiscounted cash flows, impairment is recognized in the amount by which the carrying value exceeds the asset’s fair value, as determined by discounted cash flows or other methods as appropriate for the asset type. ~~We recognized $4.0 million of impairment~~There were no impairments of definite-lived intangible assets during fiscal year ~~2019~~ ~~primarily due to lower AUM growth rate assumptions.~~2022.

While we believe that the assumptions used to estimate fair value in our impairment tests are reasonable and appropriate, future changes in the assumptions could result in recognition of impairment.

Fair Value Measurements

~~A substantial amount of our~~Our investments isare primarily recorded at fair value or amounts that approximate fair value on a recurring basis. We use a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on whether the inputs to those valuation techniques are observable or unobservable. The assessment of the hierarchy level of the assets or liabilities measured at fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety. See Note 1 – Significant Accounting Policies in the notes to consolidated financial statements in Item 8 of Part II of this ~~Form 10‑K~~Annual Report for more information on the fair value hierarchy.

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As of September 30, ~~2019,~~2022, Level 3 assets represented ~~22%~~12% of total assets measured at fair value, substantially all of which related to CIPs’ investments in equity and debt securities, and real estate. There were ~~$36.1~~$5.8 million of transfers into and $9.3 million of transfers out of ~~and insignificant transfers into,~~ Level 3 during fiscal year ~~2019~~.2022.

~~Following~~The following are descriptions of the significant assets measured at fair value and their fair value methodologies.

~~Equity Securities, at fair value~~Sponsored funds and separate accounts consist primarily of investments in nonconsolidated sponsored funds and to a lesser extent, ~~other equity securities.~~separate accounts. Changes in the fair value of the investments are recognized as gains and losses in earnings. The fair values of ~~funds~~fund products are determined based on their published NAV or estimated using NAV as a practical expedient. The fair values of ~~equity securities other than funds~~the underlying investments in the separate accounts are determined using quoted market prices, or independent third-party broker or dealer price quotes orif quoted market prices are not available.

Investments related to long-term incentive plans consist primarily of investments in sponsored funds related to certain compensation plans that have certain vesting provisions. Changes in fair value are recognized as gains and losses in earnings. The fair values of the investments are determined based on ~~discounted cash flows~~the fund products’ published NAV or estimated using ~~significant unobservable inputs.~~NAV as a practical expedient.

~~Debt Securities~~Other equity and debt securities consist of ~~trading and available-for-sale~~other equity investment securities and ~~are~~debt securities carried at fair value. Changes in the fair value ~~of trading securities~~ are recognized as gains and losses in earnings. Unrealized gains and losses on available-for-sale securities are recorded net of tax as part of accumulated other comprehensive income (loss) until realized, at which time they are recognized in earnings using the average cost method. The fair values of equity securities, excluding fund products, and debt securities are determined using independent third-party broker or dealer price quotes or based on ~~discounted cash flows~~either a

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market-based or income-based approach using significant unobservable inputs. The fair values of fund products are determined based on their published NAV or estimated using NAV as a practical expedient.

Investments of CIPs consist of marketable debt and equity securities and other investments that are not generally traded in active ~~markets, and are carried at fair value.~~markets. Changes in the fair value of the investments are recognized as gains and losses in earnings. The fair values of marketable securities are determined using quoted market prices, or independent third-party broker or dealer price quotes if quoted market prices are not available. The investments that are not generally traded in active markets consist of loans, other equity and debt securities of entities in emerging markets, fund products ~~other equity~~ and ~~debt instruments,~~ real ~~estate and loans.~~estate. The fair values are determined using significant unobservable inputs in either a market-based or income-based approach, except for fund products, for which fair values are estimated using NAV as a practical expedient.

Noncontrolling interests consist of third-party equity interests in CIPs and minority interests in certain subsidiaries. Noncontrolling interests that are redeemable or convertible for cash or other assets at the option of the noncontrolling interest holders and are classified as temporary equity at fair value, except when the fair value is less than the issuance date fair value, the reported amount is the issuance date fair value. Changes in fair value of redeemable noncontrolling interest is recognized as an adjustment to retained earnings. Nonredeemable noncontrolling interests do not permit the noncontrolling interest holders to request settlement, are reported at their issuance value and undistributed net income (loss) attributable to noncontrolling interests.

The fair value of third-party equity interests in CIPs are determined based on the published NAV or estimated using NAV a practical expedient. The fair values of redeemable noncontrolling interests related to minority interest in certain subsidiaries are determined using discounted cash flows and guideline public company methods, which include significant assumptions about forecasts of the AUM growth rate, pre-tax profit margin, discount rate and public company earnings multiples.

Revenues

We earn revenue primarily from providing investment management and related services to our ~~customers. In addition to~~customers, which are generally investment ~~management,~~products or investors in separate accounts. Related services include fund administration, sales and distribution, and shareholder servicing. Revenues are recognized when our obligations related to the services are satisfied and it is probable that a significant reversal of the revenue amount would not occur in future periods. The obligations are satisfied over time as the services are rendered, except for the sales and distribution obligations for the sale of shares of sponsored funds, which are satisfied on trade date. Multiple services included in customer contracts are accounted for separately when the obligations are determined to be distinct. ~~Management judgement is involved in assessing the probability of significant revenue reversal and in the identification of distinct services.~~

Fees from providing investment management and fund administration services (“investment management fees”), other than performance-based investment management fees, are determined based on a percentage of AUM, primarily on a monthly basis using daily average AUM, and are recognized as the services are performed over time. Performance-based investment management fees are generated when investment products’ performance exceeds targets established in customer contracts. These fees are recognized when significant reversal of the amount is no longer probable ~~of significant reversal~~ and may relate to investment management services that were provided in prior periods.

Sales and distribution fees primarily consist of upfront sales commissions and ongoing distribution fees. Sales commissions are based on contractual rates for sales of certain classes of sponsored funds and are recognized on trade date. Distribution service fees are determined based on a percentage of AUM, primarily on a monthly basis using daily average AUM. As the fee amounts are uncertain on trade date, they are recognized over time as the amounts become known and may relate to sales and distribution services provided in prior periods.

AUM is generally based on the fair value of the underlying securities held by investment products and is calculated using fair value methods derived primarily from unadjusted quoted market prices, unadjusted independent third-party broker or dealer price quotes in active markets, or market prices or price quotes adjusted for observable price movements after the close of the primary market. The fair values of securities for which market prices are not readily available are valued internally using various methodologies which incorporate significant unobservable inputs as appropriate for each security type. Pricing of the securities is governed by our global valuation and pricing policy, which defines valuation and pricing conventions for each security type, including practices for responding to unexpected or unusual market events. ~~As of~~ ~~September 30, 2019, our total AUM by fair value hierarchy level was~~ ~~50%~~ ~~Level 1,~~ ~~45%~~ ~~Level 2 and~~ 5% ~~Level 3.~~

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As substantially all of our AUM is valued based on observable market prices or inputs, market risk is the most significant risk underlying the valuation of our AUM.

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Income Taxes

Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and the reported amounts in the consolidated financial statements using the statutory tax rates in effect for the year when the reported amount of the asset or liability is expected to be recovered or settled, respectively. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying values of deferred tax assets to the amount that is more likely than not to be realized. In assessing whether a valuation allowance should be established against a deferred income tax asset, we consider all positive and negative evidence, which includes timing of expiration, projected sources of taxable income, limitations on utilization under the statute and the effectiveness of prudent and feasible tax planning strategies among other factors. For each tax position taken or expected to be taken in a tax return, we utilize significant judgment related to the range of possible favorable or unfavorable outcomes to determine whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement.

~~As a multinational corporation, we~~We operate in ~~various locations outside~~numerous countries, states and other taxing jurisdictions. The income tax laws are complex and subject to different interpretations by the ~~U.S.~~taxpayer and ~~generate earnings worldwide.~~the relevant taxing authorities. Significant judgment is required in the determination of our annual income tax provisions, which includes the assessment of deferred tax assets and uncertain tax positions, as well as the interpretation and application of existing and newly enacted tax laws, regulation changes, and new judicial rulings. We repatriate foreign earnings that are in excess of regulatory, capital or operational requirements ~~for substantially~~of all of our non-U.S. subsidiaries.

It is possible that actual results will vary from those recognized in our consolidated financial statements due to changes in the interpretation of applicable guidance or as a result of examinations by taxing authorities.

Loss Contingencies

We are involved in various lawsuits and claims encountered in the normal course of business. When such a matter arises and periodically thereafter, we consult with our legal counsel and evaluate the merits of the claims based on the facts available at that time. In management’s opinion, an adequate accrual has been made as of September 30, ~~2019~~2022 to provide for any probable losses that may arise from such matters for which we could reasonably estimate an amount. See also Note 1415 – Commitments and Contingencies in the notes to consolidated financial statements in Item 8 of Part II of this ~~Form 10‑K.~~Annual Report.

~~NEW ACCOUNTING GUIDANCE~~54

~~See Note 2 – New Accounting Guidance in the notes to consolidated financial statements in Item 8 of Part II of this Form 10‑K.~~

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~~Selected Quarterly Financial Data (Unaudited)~~

(in millions, except per share data)
Quarter ended December 31 March 31 June 30 September 30
Fiscal year 2019
Operating revenues $ 1,411.5
$ 1,433.8
$ 1,476.7
$ 1,452.5
Operating income 411.5
379.5
374.9
391.5
Net income attributable to Franklin Resources, Inc.¹
275.9
367.5
245.9
306.4
Earnings per share
Basic $ 0.54
$ 0.72
$ 0.48
$ 0.61
Diluted 0.54
0.72
0.48
0.61
Dividends declared per share $ 0.26
$ 0.26
$ 0.26
$ 0.26
AUM (in billions)

Ending $ 649.9
$ 712.3
$ 715.2
$ 692.6
Average 683.2
688.6
710.8
702.0

Fiscal year 2018
Operating revenues $ 1,615.5
$ 1,617.8
$ 1,558.6
$ 1,527.2
Operating income 581.1
555.7
503.1
478.7
Net income (loss) attributable to Franklin Resources, Inc.¹
(583.3 ) 443.2
402.0
502.5
Earnings (loss) per share
Basic $ (1.06 ) $ 0.79
$ 0.75
$ 0.96
Diluted (1.06 ) 0.78
0.75
0.96
Dividends declared per share $ 0.23
$ 3.23
$ 0.23
$ 0.23
AUM (in billions)

Ending $ 753.8
$ 737.5
$ 724.1
$ 717.1
Average 752.7
751.8
731.7
724.3

^{__________________}

Net income (loss) attributable to Franklin Resources, Inc. for the quarter ended December 31, 2017 includes an estimated income tax charge of $1.1 billion resulting from enactment of the Tax Act. Decreases to the estimate of $0.8 million, $9.7 million, $89.6 million and $0.4 million were recognized during the quarters ended March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018. The tax charge increased by $86.4 million during the quarter ended June 30, 2019 due to the reversal of a tax benefit recognized in fiscal year 2018 upon issuance of final regulations by the U.S. Department of Treasury.

~~Risk Factors~~

For a description of certain risk factors and other important factors that may affect us, our subsidiaries and our business, please see the description of the risk factors set forth under Item 1A of Part I of this Form 10‑K, which is incorporated herein by reference.

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~~Item 7A.~~	~~Quantitative and Qualitative Disclosures About Market Risk.~~

Item 7A.Quantitative and Qualitative Disclosures About Market Risk.

In the normal course of business, our financial position is subject to market risk, including, but not limited to, potential loss due to changes in the value of financial instruments including those resulting from adverse changes in interest rates, foreign currency exchange rates and market valuation. Financial instruments include, but are not limited to, investment securities and debt obligations. Management is responsible for managing market risk. Our Enterprise Risk Management Committee is responsible for providing a framework to assist management to identify, assess and manage market and other risks.

Our market risk from assets and liabilities of CIPs is limited to that of our direct equity investments in them and investment management fees earned from them. Accordingly, the assets and liabilities of CIPs are excluded from the discussion below.

AUM Market Price Risk

We are exposed to market risk through our investment management and distribution fees, which are generally calculated as a percentage of AUM. Changes in ~~equity~~ market prices, interest rates, credit spreads, foreign exchange rates, or a combination of these factors could cause the value of AUM to decline, which would result in lower investment management and distribution fees. Our exposure to these risks is ~~minimized~~reduced as we sponsor a broad range of investment products in various global jurisdictions, which serves to mitigate the impact of changes in any particular market or region.

Assuming the respective effective fee rates and asset mix remain unchanged, a proportional 10% change in the value of our average AUM would result in corresponding 10% changes in our investment management fees and asset-based distribution fee revenues, ~~and expenses,~~ excluding performance-based investment management fees. Such a change for the fiscal year ended September 30, ~~2019~~2022 would have resulted in an increase or decrease in ~~pre-tax earnings~~operating revenues of ~~$364.5 million~~.$726.9 million.

Interest Rate Risk

We are exposed to changes in interest rates primarily through our investments in ~~sponsored~~ funds that invest in debt securities, which were ~~$1,691.4~~$1,918.3 million at September 30, ~~2019~~.2022. Our exposure to interest rate risks from these investments is ~~minimized~~mitigated by the low average duration exposure ~~mandate of a substantial majority of the funds. The investment mandates of the remaining funds consist of~~and a broad range of products in various global ~~jurisdictions, mitigating the impact of changes in any particular market or region.~~jurisdictions. We had nominimal exposure to changes in interest rates from debt obligations at September 30, ~~2019~~2022 as substantially all of our outstanding debt was issued at fixed rates.

As of September 30, ~~2019~~,2022, we have considered the potential impact of a 100 basis point movement in market interest rates on our ~~portfolio of sponsored~~investments in funds that invest in debt securities. Based on our analysis, we do not expect that such a change would have a material impact on our earnings in the next ~~twelve~~12 months.

Foreign Currency Exchange Risk

We are subject to foreign currency exchange risk through our international operations. While the majority of our revenues are earned in the U.S., we also provide services and earn revenues in Europe, ~~the~~ Middle East and Africa, Asia-Pacific ~~Canada, The Bahamas~~ and ~~Latin America.~~Americas excluding U.S. Our exposure to foreign currency exchange risk is ~~minimized~~reduced in relation to our results of operations since a significant portion of these revenues is denominated in U.S. dollars. This situation may change in the future as our business continues to grow outside the U.S. and expenses incurred denominated in foreign currencies increase.

The exposure to foreign currency exchange risk in our consolidated balance sheet mostly relates to cash and cash equivalents and investments that are denominated in foreign currencies, primarily in the Euro, Indian Rupee, Pound Sterling and ~~Canadian~~Australian dollar. These assets accounted for ~~11%~~19% of the total cash and cash equivalents and investments at September 30, ~~2019~~. Changes in the values of these assets resulting from changes in U.S. dollar exchange rates are recorded in accumulated other comprehensive income (loss), except for cash and cash equivalents held by subsidiaries for which the U.S. dollar is the functional currency, for which the changes are recorded in earnings. We also have exposure to foreign exchange revaluation of cash and cash equivalents and investments that are denominated in U.S. dollars and held by non-U.S. subsidiaries for which their local currency is the functional currency. These assets accounted for 4% of the total cash and cash equivalents and investments at ~~September 30, 2019. Changes in the values of these assets resulting from changes in U.S. dollar exchange rates are recorded in earnings.~~

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2022.

A 10% weakening of the U.S. dollar against the various foreign currencies to which we had exposure as described above would result in corresponding 10% increases in the U.S. dollar values of the foreign currency assets and 10% decreases in the foreign currency values of the U.S. dollar assets. Such a weakening as of September 30, ~~2019~~2022 would result in a ~~$67.1~~$109.1 million decrease in accumulated other comprehensive loss and a ~~$19.2~~$19.9 million decrease in pre-tax earnings. We generally do not use derivative financial instruments to manage foreign currency exchange risk exposure. As a result, both positive and negative currency fluctuations against the U.S. dollar may affect our results of operations and accumulated other comprehensive income (loss).

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Market Valuation Risk

We are exposed to market valuation risks related to securities we hold that are carried at fair value. To mitigate the risks we maintain a diversified investment portfolio and, from time to time, we may enter into derivative agreements.

The following is a summary of the effect of a 10% increase or decrease in the carrying values of our financial instruments subject to market valuation risks at September 30, ~~2019~~.2022. If such a 10% increase or decrease in carrying values were to occur, the changes from ~~equity securities~~investments measured at fair value ~~debt securities~~ and direct investments in CIPs would result in a ~~$171.0~~$158.1 million increase or decrease in our pre-tax earnings.


(in millions)	Carrying Value		Carrying Value Assuming a 10% Increase		Carrying Value Assuming a 10% Decrease
Investments, at fair value	$	613.5	$	674.9	$	552.1
Direct investments in CIPs	967.2		1,063.9		870.5
Total	$	1,580.7	$	1,738.8	$	1,422.6

(in millions) Carrying Value
Carrying Value
Assuming a 10% Increase

Carrying Value
Assuming a 10% Decrease
Equity securities, at fair value $ 530.0
$ 583.0
$ 477.0
Debt securities 48.2
53.0
43.4
Direct investments in CIPs 1,131.6
1,244.8
1,018.4
Total $ 1,709.8
$ 1,880.8
$ 1,538.8

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~~Item 8.~~	~~Financial Statements and Supplementary Data.~~

Item 8.Financial Statements and Supplementary Data.

Index of Consolidated Financial Statements for the fiscal years ended September 30, ~~2019~~, ~~2018~~2022, 2021 and ~~2017~~.2020.



CONTENTS						Page
Management’s Report on Internal Control Over Financial Reporting						58
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)						59
Consolidated Financial Statements of Franklin Resources, Inc. and its consolidated subsidiaries:
Consolidated Statements of Income for the fiscal years ended September 30, ~~2019, 2018~~2022 , 2021 and ~~2017~~2 020						62
Consolidated Statements of Comprehensive Income for the fiscal years ended September 30, ~~2019, 2018~~2022 , 2021 and ~~2017~~202 0						63
Consolidated Balance Sheets as of September 30, ~~2019~~2022 and ~~2018~~2 021						64
Consolidated Statements of Stockholders’ Equity as of and for the fiscal years ended September 30, ~~2019, 2018~~2022 , 2021 and ~~2017~~2 020						65
Consolidated Statements of Cash Flows for the fiscal years ended September 30, ~~2019, 2018~~2022 , 2021 and ~~2017~~2 020						66
Notes to Consolidated Financial Statements						68

All schedules have been omitted as the information is provided in the financial statements or in related notes thereto or is not required to be filed, as the information is not applicable.

Certain required quarterly information is included in Item 7 of Part II of this Form 10‑K report under the heading “Selected Quarterly Financial Data (Unaudited)” and incorporated herein by reference.

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Franklin Resources, Inc. and its consolidated subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

On April 1, 2022, Franklin Resources, Inc. completed the acquisition of Lexington Partners L.P. (“Lexington”). Consistent with guidance issued by the SEC that an assessment of a recently acquired business may be omitted from management’s report on internal control over financial reporting for one year following the acquisition, management excluded an assessment of the effectiveness of the Company’s internal control over financial reporting related to Lexington. Lexington represents approximately 2% of the Company’s consolidated total operating revenues and approximately 1% of the Company’s consolidated total assets, excluding associated goodwill and intangible assets, as of and for the fiscal year ended September 30, 2022. The recognition of goodwill and intangible assets, however, is covered by our internal controls over business combinations, which were included in management's assessment of the effectiveness of the Company's internal control over financial reporting as of September 30, 2022.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, ~~2019,~~2022, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on that assessment, management concluded that, as of September 30, ~~2019,~~2022, the Company’s internal control over financial reporting was effective.

The effectiveness of the Company’s internal control over financial reporting as of September 30, ~~2019~~2022 has been audited by PricewaterhouseCoopers LLP, the independent registered public accounting firm that audits the Company’s consolidated financial statements, as stated in their report immediately following this report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of September 30, ~~2019~~.

2022.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

and Stockholders of Franklin Resources, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Franklin Resources, Inc. and its subsidiaries (the “Company”) as of September 30, ~~2019~~2022 and ~~2018~~,2021, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended September 30, ~~2019~~,2022, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of September 30, ~~2019~~2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, ~~2019~~2022 and ~~2018~~,2021, and the results of its operations and its cash flows for each of the three years in the period ended September 30, ~~2019~~2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, ~~2019~~,2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control ~~over~~Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Lexington Partners L.P. from its assessment of internal control over financial reporting as of September 30, 2022 because Lexington Partners L.P. was acquired by the Company in a purchase business combination during 2022. We have also excluded Lexington Partners L.P. from our audit of internal control over financial reporting. Lexington Partners L.P. is a subsidiary whose total assets and total operating revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 1% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended September 30, 2022.

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Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Critical Audit Matters

The critical audit ~~matters~~matter communicated below ~~are matters~~is a matter arising from the current period audit of the consolidated financial statements that ~~were~~was communicated or required to be communicated to the audit committee and that (i) ~~relate~~relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit ~~matters~~matter below, providing a separate ~~opinions~~opinion on the critical audit ~~matters~~matter or on the accounts or disclosures to which ~~they relate.~~it relates.

~~Acquisition~~Realizability of ~~Benefit Street Partners L.L.C. - Fair value of Indefinite-lived Investment Management Contract Intangible~~Deferred Tax Assets

As described in ~~Notes 1 and 3~~Note 13 to the consolidated financial statements, ~~in February 2019,~~ the Company ~~completed its acquisition~~had gross deferred tax assets of ~~Benefit Street Partners, L.L.C. for~~$1,014.7 million as of September 30, 2022, reduced by a ~~purchase consideration of $720.1~~$258.3 million ~~in cash, which resulted in management recording $280.1 million of indefinite-lived investment management contract intangible assets. Fair~~valuation allowance. Management records a valuation allowance to reduce the carrying values of ~~acquired indefinite-lived investment management contract intangible~~deferred tax assets ~~are based on the net present value of estimated future cash flows attributable~~ to the ~~contracts,~~amount that is more likely than not to be realized. In assessing whether a valuation allowance should be established against a deferred income tax asset, management considers all positive and negative evidence, which ~~include significant assumptions about forecasts~~includes timing of expiration, projected sources of taxable income, limitations on utilization under the ~~assets under management (“AUM”) growth rate, pre-tax profit margin, average effective fee rate, effective~~statute, and effectiveness of prudent and feasible tax ~~rate and discount rate.~~planning strategies.

The principal considerations for our determination that performing procedures relating to the ~~fair value~~realizability of ~~indefinite-lived investment management contract intangible~~deferred tax assets ~~from the acquisition of Benefit Street Partners L.L.C.~~ is a critical audit matter are ~~there was~~the significant judgment by management when ~~developing~~assessing the ~~estimated fair value~~realizability of ~~indefinite-lived investment management contract intangible assets. This~~deferred tax assets, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence ~~related~~relating to management’s assessment of the realizability of deferred tax assets and significant assumptions ~~within~~relating to the ~~estimated future cash flows, including AUM growth rate~~timing of expiration, projected sources of taxable income, limitations on utilization under the statute, and ~~discount rate. In addition, the audit effort involved the use~~effectiveness of ~~professionals with specialized skill~~prudent and ~~knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.~~feasible tax planning strategies.

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Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the ~~fair value~~realizability of ~~indefinite-lived investment management contract intangible~~deferred tax assets, ~~in the acquisition of Benefit Street Partners, L.L.C.,~~ including controls over ~~development~~the completeness and accuracy of data relevant to the ~~significant assumptions within the estimated future cash flows, specifically, AUM growth rate~~analysis, determination of projected sources of taxable income and ~~discount rate.~~expected utilization of deferred tax assets. These procedures also included, among ~~others,~~others: (i) identifying the acquired contracts by reading the purchase agreement, (ii) testing management’s process for estimating the fair value of the acquired indefinite-lived investment management contract intangible assets, (iii) testing the completeness, accuracy, and relevance of underlying data used in the model and (iv) evaluating management’s significant assumptions within the estimated future cash flows, including AUM growth rate and discount rate. Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Company’s discounted cash flow model and the reasonableness of the discount rate. The discount rate was evaluated by developing an independent discount rate considering the cost of capital of comparable benchmark rates and other industry factors. Evaluating the reasonableness of the AUM growth rate involved considering the past performance of the acquired business, the consistency with external market and industry data and whether these assumptions were consistent with evidence obtained in other areas of the audit.

~~Assessment of Investment Products for Consolidation~~

~~As described in Notes 1 and~~ 11 to the consolidated financial statements, the Company consolidates various mutual and other investment funds, limited partnerships and similar structures (collectively, “investment products”) when the Company owns a majority of the voting interest in a voting interest entity (“VOE”) or is the primary beneficiary of a variable interest entity (“VIE”). As of September 30, 2019, the assets of consolidated investment products were ~~$2,557.1 million~~. As disclosed by management, the assessment of whether an investment product is a VOE or VIE involves management’s judgment and analysis on a structure-by-structure basis and considers factors such as the investment product’s legal organization and capital structure, the rights of the equity investment holders and the Company’s contractual involvement with and ownership interest in the investment product. If the investment product is determined to be a VIE, assessment of the primary beneficiary of a VIE requires management to exercise judgment to eval~~uate whether the Company has the power to direct the activities that~~

~~Table of Contents~~

~~most significantly impact the VIE’s economic performance and the obligation to absorb losses of or the right to receive benefits from the VIE that could potentially be significant to the VIE.~~

~~The principal considerations for our determination that performing procedures relating to the assessment of investment products for consolidatio~~n is a critical audit matter are there was significant judgment by management in determining whether the investment product is a VOE or VIE, and if determined to be a VIE, whether the Company is the primary beneficiary of the VIE. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures relating to management’s application of consolidation accounting, and significant auditor judgment in evaluating the audit evidence obtained relating to the legal organization and capital structure, the rights of the equity investment holders and the Company’s ability to direct the activities that impact the VIE through contractual involvement with and ownership interest in the investment products.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the assessment of investment products for consolidation, including controls addressing the completeness of the Company’s investment products evaluated for consolidation, as well as controls over the judgments and factors used to reach consolidation conclusions regarding these investment products.These procedures also included, among others, testing the completeness of the investment products subject to the analysis, and, for a sample of investment products, (i) evaluating the legal and capital structures of each investment product, including the rights of the equity investment holders, (ii) evaluating management’s assessment of ~~each investment product as~~the realizability of deferred tax assets and the need for a ~~VOE or VIE~~valuation allowance, (ii) evaluating the reasonableness of management’s significant assumptions related to timing of expiration, projected sources of taxable income, limitations on utilization under the statute and effectiveness of prudent and feasible tax planning strategies, (iii) evaluating the ~~Company’s contractual involvement with~~prudence and ~~ownership interest~~feasibility of the implementation of available tax planning strategies, and (iv) testing the completeness and accuracy of the data utilized in ~~each investment product and management’s determination~~the assessment of ~~whether a VIE is consolidated.~~the realizability of deferred tax assets.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

November ~~12, 2019~~

14, 2022

We have served as the Company’s auditor since 1974.

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FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data)										(in millions, except per share data)
for the fiscal years ended September 30,	2019			2018			2017			for the fiscal years ended September 30,	2022		2021		2020
Operating Revenues										Operating Revenues
Investment management fees	$	3,985.2		$	4,367.5		$	4,359.2		Investment management fees	$	6,616.8	$	6,541.6	$	3,981.7
Sales and distribution fees	1,444.6			1,599.8			1,705.6			Sales and distribution fees	1,415.0		1,635.5		1,362.0
Shareholder servicing fees	216.3			221.9			225.7			Shareholder servicing fees	193.0		211.2		195.1
Other	128.4			129.9			101.7			Other	50.5		37.2		27.7
Total operating revenues	5,774.5			6,319.1			6,392.2			Total operating revenues	8,275.3		8,425.5		5,566.5
Operating Expenses										Operating Expenses
Compensation and benefits										Compensation and benefits	3,089.8		2,971.3		1,873.9
Sales, distribution and marketing	1,819.6			2,039.7			2,130.9			Sales, distribution and marketing	1,845.6		2,105.8		1,703.1
Compensation and benefits	1,584.7			1,390.6			1,333.7
Information systems and technology	258.5			243.9			219.8			Information systems and technology	500.2		486.1		288.4
Occupancy	133.6			128.6			121.3			Occupancy	218.9		218.1		147.9
Amortization of intangible assets										Amortization of intangible assets	282.0		232.0		54.0
General, administrative and other	420.7			397.7			322.2			General, administrative and other	564.9		537.2		450.3
Total operating expenses	4,217.1			4,200.5			4,127.9			Total operating expenses	6,501.4		6,550.5		4,517.6
Operating Income	1,557.4			2,118.6			2,264.3			Operating Income	1,773.9		1,875.0		1,048.9
Other Income (Expenses)										Other Income (Expenses)
Investment and other income, net	115.1			145.3			336.3
Investment and other income (losses), net										Investment and other income (losses), net	91.1		264.7		(38.4)
Interest expense	(24.7		)	(48.7		)	(51.5		)	Interest expense	(98.2)		(85.4)		(33.4)
Other income, net	90.4			96.6			284.8
Investment and other income (losses) of consolidated investment products, net										Investment and other income (losses) of consolidated investment products, net	(17.7)		421.1		70.2
Expenses of consolidated investment products										Expenses of consolidated investment products	(19.7)		(31.2)		(29.4)
Other income (expenses), net										Other income (expenses), net	(44.5)		569.2		(31.0)
Income before taxes	1,647.8			2,215.2			2,549.1			Income before taxes	1,729.4		2,444.2		1,017.9
Taxes on income	442.3			1,472.5			759.4			Taxes on income	396.2		349.6		230.8
Net income	1,205.5			742.7			1,789.7			Net income	1,333.2		2,094.6		787.1
Less: net income (loss) attributable to										Less: net income (loss) attributable to
Redeemable noncontrolling interests	6.2			(12.8		)	53.0			Redeemable noncontrolling interests	(46.9)		94.1		48.6
Nonredeemable noncontrolling interests	3.6			(8.9		)	40.0			Nonredeemable noncontrolling interests	88.2		169.3		(60.4)
Net Income Attributable to Franklin Resources, Inc.	$	1,195.7		$	764.4		$	1,696.7		Net Income Attributable to Franklin Resources, Inc.	$	1,291.9	$	1,831.2	$	798.9

Earnings per Share										Earnings per Share
Basic	$	2.35		$	1.39		$	3.01		Basic	$	2.53	$	3.58	$	1.59
Diluted	2.35			1.39			3.01			Diluted	2.53		3.57		1.59

See Notes to Consolidated Financial Statements.

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FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)									(in millions)
for the fiscal years ended September 30,	2019			2018			2017		for the fiscal years ended September 30,	2022		2021		2020
Net Income	$	1,205.5		$	742.7		$	1,789.7	Net Income	$	1,333.2	$	2,094.6	$	787.1
Other Comprehensive Income (Loss)									Other Comprehensive Income (Loss)
Currency translation adjustments, net of tax	(52.5		)	(91.9		)	65.4		Currency translation adjustments, net of tax	(244.6)		29.1		25.8
Net unrealized gains (losses) on defined benefit plans, net of tax	(2.0		)	1.9			2.1		Net unrealized gains (losses) on defined benefit plans, net of tax	0.8		0.9		(1.8)
Net unrealized gains on investments, net of tax	1.5			4.3			2.2		Net unrealized gains on investments, net of tax	0.4		—		—
Total other comprehensive income (loss)	(53.0		)	(85.7		)	69.7		Total other comprehensive income (loss)	(243.4)		30.0		24.0
Total comprehensive income	1,152.5			657.0			1,859.4		Total comprehensive income	1,089.8		2,124.6		811.1
Less: comprehensive income (loss) attributable to									Less: comprehensive income (loss) attributable to
Redeemable noncontrolling interests	6.2			(12.8		)	53.0		Redeemable noncontrolling interests	(46.9)		94.1		48.6
Nonredeemable noncontrolling interests	3.6			(8.9		)	40.0		Nonredeemable noncontrolling interests	88.2		169.3		(60.4)
Comprehensive Income Attributable to Franklin Resources, Inc.	$	1,142.7		$	678.7		$	1,766.4	Comprehensive Income Attributable to Franklin Resources, Inc.	$	1,048.5	$	1,861.2	$	822.9

See Notes to Consolidated Financial Statements.

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FRANKLIN RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

FRANKLIN RESOURCES, INC. CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)							(in millions, except share and per share data)
as of September 30,	2019			2018			as of September 30,	2022		2021
Assets							Assets
Cash and cash equivalents	$	5,803.4		$	6,610.8		Cash and cash equivalents	$	4,134.9	$	4,357.8
Receivables	740.0			733.7			Receivables	1,264.8		1,428.2
Investments (including $589.7 and $551.6 at fair value at September 30, 2019 and 2018)	1,555.8			1,426.5
Investments (including $613.5 and $588.3 at fair value at September 30, 2022 and 2021)							Investments (including $613.5 and $588.3 at fair value at September 30, 2022 and 2021)	1,651.3		1,510.3
Assets of consolidated investment products							Assets of consolidated investment products
Cash and cash equivalents	154.2			299.8			Cash and cash equivalents	647.6		289.4
Receivables	99.0			114.2
Investments, at fair value	2,303.9			2,109.4			Investments, at fair value	7,898.1		5,820.1
Property and equipment, net	683.7			535.0			Property and equipment, net	743.3		770.0
Goodwill and other intangible assets, net	2,994.5			2,333.4
Goodwill							Goodwill	5,778.6		4,457.7
Intangible assets, net							Intangible assets, net	5,082.1		4,710.2
Operating lease right-of-use assets							Operating lease right-of-use assets	464.5		448.4
Other	197.7			220.7			Other	395.4		376.3
Total Assets	$	14,532.2		$	14,383.5		Total Assets	$	28,060.6	$	24,168.4

Liabilities							Liabilities
Compensation and benefits	$	502.4		$	405.6		Compensation and benefits	$	1,464.4	$	1,179.3
Accounts payable and accrued expenses	222.9			158.9			Accounts payable and accrued expenses	466.2		479.3
Dividends	137.4			127.7
Commissions	254.0			297.9
Income taxes	824.7			1,034.8			Income taxes	523.1		693.6
Debt	696.9			695.9			Debt	3,376.4		3,399.4
Liabilities of consolidated investment products							Liabilities of consolidated investment products
Accounts payable and accrued expenses	81.5			68.0			Accounts payable and accrued expenses	646.9		558.0
Debt	50.8			32.6			Debt	5,457.7		3,671.0
Deferred taxes	120.1			126.5
Deferred tax liabilities							Deferred tax liabilities	347.8		311.7
Operating lease liabilities							Operating lease liabilities	528.4		518.4
Other	270.6			184.1			Other	1,425.0		614.1
Total liabilities	3,161.3			3,132.0			Total liabilities	14,235.9		11,424.8
Commitments and Contingencies (Note 14)
Commitments and Contingencies (Note 15)							Commitments and Contingencies (Note 15)
Redeemable Noncontrolling Interests	746.7			1,043.6			Redeemable Noncontrolling Interests	1,525.8		933.0
Stockholders’ Equity							Stockholders’ Equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none issued	—			—			Preferred stock, $1.00 par value, 1,000,000 shares authorized; none issued	—		—
Common stock, $0.10 par value, 1,000,000,000 shares authorized; 499,303,269 and 519,122,574 shares issued and outstanding at September 30, 2019 and 2018	49.9			51.9
Common stock, $0.10 par value, 1,000,000,000 shares authorized; 499,575,175 and 501,807,677 shares issued and outstanding at September 30, 2022 and 2021							Common stock, $0.10 par value, 1,000,000,000 shares authorized; 499,575,175 and 501,807,677 shares issued and outstanding at September 30, 2022 and 2021	50.0		50.2
Retained earnings	10,288.2			10,217.9			Retained earnings	12,045.6		11,550.8
Accumulated other comprehensive loss	(431.6		)	(370.6		)	Accumulated other comprehensive loss	(621.0)		(377.6)
Total Franklin Resources, Inc. stockholders’ equity	9,906.5			9,899.2			Total Franklin Resources, Inc. stockholders’ equity	11,474.6		11,223.4
Nonredeemable noncontrolling interests	717.7			308.7			Nonredeemable noncontrolling interests	824.3		587.2
Total stockholders’ equity	10,624.2			10,207.9			Total stockholders’ equity	12,298.9		11,810.6
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	14,532.2		$	14,383.5		Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	28,060.6	$	24,168.4

See Notes to Consolidated Financial Statements.

Table of Contents

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Franklin Resources, Inc.																	Non- redeemable Non- controlling Interests			Total Stockholders’ Equity					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											Common Stock					Capital in Excess of Par Value			Retained Earnings			Accum- ulated Other Compre- hensive Loss			Stockholders’ Equity
(in millions)																								(in millions)
as of and for the fiscal years ended September 30, 2019, 2018 and 2017	Shares		Amount
Balance at October 1, 2016	570.3		$	57.0		$	—		$	12,226.2		$	(347.4	)	$	11,935.8		$	592.4		$	12,528.2
Adoption of new accounting guidance									5.8			(7.1		)	(1.3		)	(324.6		)	(325.9		)
Net income									1,696.7						1,696.7			40.0			1,736.7
as of and for the fiscal years ended September 30, 2022, 2021 and 2020																								as of and for the fiscal years ended September 30, 2022, 2021 and 2020			Shares			Amount			Capital in Excess of Par Value			Retained Earnings			Accum- ulated Other Compre- hensive Loss			Stockholders’ Equity			Non- redeemable Non- controlling Interests			Total Stockholders’ Equity
Balance at October 1, 2019																								Balance at October 1, 2019	499.3			$	49.9
Net income (loss)																								Net income (loss)
Other comprehensive income												69.7			69.7						69.7			Other comprehensive income													24.0			24.0
Dividends declared on common stock ($0.80 per share)									(449.9		)				(449.9		)				(449.9		)
Repurchase of common stock	(19.1	)	(1.9		)	(140.1		)	(629.5		)				(771.5		)				(771.5		)
Issuance of common stock	3.7		0.4			134.2									134.6						134.6
Tax shortfall from stock-based compensation						(8.7		)							(8.7		)				(8.7		)
Stock-based compensation						14.6									14.6						14.6
Net subscriptions and other																		17.3			17.3
Deconsolidation of investment product																		(9.3		)	(9.3		)
Balance at September 30, 2017	554.9		$	55.5		$	—		$	12,849.3		$	(284.8	)	$	12,620.0		$	315.8		$	12,935.8
Adoption of new accounting guidance						2.1			(1.6		)	(0.1		)	0.4						0.4
Net income (loss)									764.4						764.4			(8.9		)	755.5
Other comprehensive loss												(85.7		)	(85.7		)				(85.7		)
Dividends declared on common stock ($3.92 per share)									(2,131.3		)				(2,131.3		)				(2,131.3		)
Repurchase of common stock	(39.9	)	(4.0		)	(170.4		)	(1,252.3		)				(1,426.7		)				(1,426.7		)
Issuance of common stock	3.3		0.3			130.8									131.1						131.1
Stock-based compensation						10.6									10.6						10.6
Acquisition	0.8		0.1			26.9									27.0						27.0
Net distributions and other																		(6.0		)	(6.0		)
Net consolidation of investment products																		2.4			2.4
Purchase of noncontrolling interest									(10.6		)				(10.6		)	5.4			(5.2		)
Balance at September 30, 2018	519.1		$	51.9		$	—		$	10,217.9		$	(370.6	)	$	9,899.2		$	308.7		$	10,207.9
Adoption of new accounting guidance									22.9			(8.0		)	14.9						14.9
Net income									1,195.7						1,195.7			3.6			1,199.3
Other comprehensive loss												(53.0		)	(53.0		)				(53.0		)
Dividends declared on common stock ($1.04 per share)									(528.3		)				(528.3		)				(528.3		)
Dividends declared on common stock ($1.08 per share)																								Dividends declared on common stock ($1.08 per share)										(539.0)						(539.0)						(539.0)
Repurchase of common stock	(24.6	)	(2.5		)	(133.8		)	(620.0		)				(756.3		)				(756.3		)	Repurchase of common stock		(9.0)		(0.9)			(143.0)			(75.5)						(219.4)						(219.4)
Issuance of common stock	4.8		0.5			129.8									130.3						130.3			Issuance of common stock		4.8		0.5			126.7									127.2						127.2
Stock-based compensation						4.0									4.0						4.0			Stock-based compensation							16.3									16.3						16.3
Net subscriptions and other																		165.0			165.0			Net subscriptions and other																			164.4			164.4
Consolidation of investment product																		24.3			24.3
Net deconsolidation of investment product																								Net deconsolidation of investment product																			(6.8)			(6.8)
Acquisitions																								Acquisitions																			39.1			39.1
Wind-down of a subsidiary																								Wind-down of a subsidiary																			(16.7)			(16.7)
Balance at September 30, 2020																								Balance at September 30, 2020		495.1		$	49.5		$	—		$	10,472.6		$	(407.6)		$	10,114.5		$	754.6		$	10,869.1
Adoption of new accounting guidance																								Adoption of new accounting guidance										(3.3)						(3.3)						(3.3)
Net income																								Net income										1,831.2						1,831.2			169.3			2,000.5
Other comprehensive income																								Other comprehensive income													30.0			30.0						30.0
Dividends declared on common stock ($1.12 per share)																								Dividends declared on common stock ($1.12 per share)										(573.7)						(573.7)						(573.7)
Repurchase of common stock																								Repurchase of common stock		(7.3)		(0.7)			(192.8)			(14.7)						(208.2)						(208.2)
Issuance of common stock																								Issuance of common stock		14.0		1.4			132.0									133.4						133.4
Stock-based compensation																								Stock-based compensation							60.8									60.8						60.8
Net subscriptions and other																								Net subscriptions and other										(2.1)						(2.1)			215.7			213.6
Net deconsolidation of investment products																								Net deconsolidation of investment products																			(552.4)			(552.4)
Adjustment to fair value of redeemable noncontrolling interests																								Adjustment to fair value of redeemable noncontrolling interests										(159.2)						(159.2)						(159.2)
Balance at September 30, 2021																								Balance at September 30, 2021		501.8		$	50.2		$	—		$	11,550.8		$	(377.6)		$	11,223.4		$	587.2		$	11,810.6
Net income																								Net income										1,291.9						1,291.9			88.2			1,380.1
Other comprehensive loss																								Other comprehensive loss													(243.4)			(243.4)						(243.4)
Dividends declared on common stock ($1.16 per share)																								Dividends declared on common stock ($1.16 per share)										(585.2)						(585.2)						(585.2)
Repurchase of common stock																								Repurchase of common stock		(6.5)		(0.6)			(231.4)			51.2						(180.8)						(180.8)
Issuance of common stock																								Issuance of common stock		4.3		0.4			171.4									171.8						171.8
Stock-based compensation																								Stock-based compensation							60.0									60.0						60.0
Net subscriptions and other																								Net subscriptions and other										—						—			24.7			24.7
Net deconsolidation of investment products																								Net deconsolidation of investment products																			(25.7)			(25.7)
Acquisition																		216.1			216.1			Acquisition																			149.9			149.9
Balance at September 30, 2019	499.3		$	49.9		$	—		$	10,288.2		$	(431.6	)	$	9,906.5		$	717.7		$	10,624.2
Adjustment to fair value of redeemable noncontrolling interests																								Adjustment to fair value of redeemable noncontrolling interests										(263.1)						(263.1)						(263.1)
Balance at September 30, 2022																								Balance at September 30, 2022		499.6		$	50.0		$	—		$	12,045.6		$	(621.0)		$	11,474.6		$	824.3		$	12,298.9

See Notes to Consolidated Financial Statements.

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FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


(in millions)
for the fiscal years ended September 30,	2022		2021		2020
Net Income	$	1,333.2	$	2,094.6	$	787.1
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	208.2		171.9		122.3
Amortization of deferred sales commissions	64.8		78.2		80.3
Depreciation and other amortization	95.8		78.6		74.5
Amortization of intangible assets	282.0		232.0		54.0
Impairments of intangible assets and goodwill	—		—		55.4
Net losses (gains) on investments	75.4		(75.5)		15.5
Losses (income) from investments in equity method investees	(36.2)		(154.3)		98.1
Net losses (gains) on investments of consolidated investment products	95.1		(316.4)		36.8
Net purchase of investments by consolidated investment products	(355.9)		(781.0)		(682.8)
Deferred income taxes	98.0		3.7		(7.1)
Other	25.1		16.0		(28.7)
Changes in operating assets and liabilities:
Decrease (increase) in receivables and other assets	(86.7)		(182.5)		134.7
Decrease (increase) in investments, net	(3.7)		12.8		537.3
Increase (decrease) in accrued compensation and benefits	281.7		114.8		(10.5)

Decrease in income taxes payable	(180.1)		(12.5)		(123.0)
Increase (decrease) in accounts payable, accrued expenses and other liabilities	64.8		(97.3)		(131.2)
Increase (decrease) in accounts payable and accrued expenses of consolidated investment products	(4.8)		62.3		70.6
Net cash provided by operating activities	1,956.7		1,245.4		1,083.3
Purchase of investments	(926.4)		(770.4)		(481.4)
Liquidation of investments	1,026.4		594.0		880.0
Purchase of investments by consolidated collateralized loan obligations	(3,991.7)		(3,654.7)		(1,530.3)
Liquidation of investments by consolidated collateralized loan obligations	1,948.8		1,624.2		448.3
Decrease (increase) in loan receivables, net	—		42.7		(40.6)
Additions of property and equipment, net	(90.3)		(79.3)		(103.7)
Acquisitions, net of cash acquired	(1,354.7)		(9.0)		(3,821.4)
Payments of contingent consideration asset	19.9		20.3		—
Net consolidation (deconsolidation) of investment products	38.8		(383.7)		587.2
Net cash used in investing activities	(3,329.2)		(2,615.9)		(4,061.9)

FRANKLIN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
for the fiscal years ended September 30, 2019 2018 2017
Net Income $ 1,205.5
$ 742.7
$ 1,789.7
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred sales commissions 85.8
80.7
72.0
Depreciation and other amortization 93.4
76.4
80.3
Stock-based compensation 111.5
117.8
123.4
Losses (income) from investments in equity method investees 10.4
(44.4 ) (107.9 )
Net losses (gains) on investments of consolidated investment products 26.3
55.0
(118.2 )
Net (purchase) liquidation of investments by consolidated investment products (1,497.6 ) 365.7
(812.2 )
Deferred income taxes (1.3 ) (50.6 ) 8.8
Other 25.1
33.7
(14.9 )
Changes in operating assets and liabilities:
Increase in receivables and other assets (34.2 ) (90.1 ) (96.7 )
Decrease (increase) in receivables of consolidated investment products (34.3 ) 68.5
(64.3 )
Decrease (increase) in investments, net 142.5
(39.2 ) 130.2
Increase (decrease) in accrued compensation and benefits 89.4
(19.1 ) 37.2
Increase (decrease) in commissions payable (43.9 ) (15.4 ) 11.3
Increase (decrease) in income taxes payable (210.1 ) 965.2
44.5
Increase (decrease) in accounts payable, accrued expenses and other liabilities 126.0
(23.0 ) (9.2 )
Increase in accounts payable and accrued expenses of consolidated investment products 107.1
5.8
61.4
Net cash provided by operating activities 201.6
2,229.7
1,135.4
Purchase of investments (393.9 ) (358.2 ) (372.5 )
Liquidation of investments 343.2
286.2
344.9
Purchase of investments by consolidated investment products —
(73.8 ) (114.7 )
Liquidation of investments by consolidated investment products —
73.3
368.1
Additions of property and equipment, net (233.7 ) (106.5 ) (74.9 )
Adoption of new accounting guidance —
—
(49.2 )
Acquisitions, net of cash acquired (684.2 ) (86.8 ) (14.0 )
Net deconsolidation of investment products (108.5 ) (24.6 ) (35.7 )
Net cash (used in) provided by investing activities (1,077.1 ) (290.4 ) 52.0
Issuance of common stock 23.3
24.8
24.9
Dividends paid on common stock (518.6 ) (2,116.9 ) (441.2 )
Repurchase of common stock (754.5 ) (1,424.8 ) (765.3 )
Excess tax benefit from stock-based compensation —
—
0.9
Payments on debt —
(361.9 ) (300.0 )
Proceeds from loan 1.7
—
—
Payments on loan (1.5 ) —
(53.7 )

[Table continued on next page]

See Notes to Consolidated Financial Statements.

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FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

[Table continued from previous page]


(in millions)
for the fiscal years ended September 30,	2022		2021		2020
Issuance of common stock	$	25.1	$	22.3	$	20.6
Dividends paid on common stock	(583.1)		(559.7)		(533.2)
Repurchase of common stock	(180.8)		(208.2)		(218.2)
Proceeds from issuance of debt	—		1,193.9		—
Payment of debt issuance costs	—		(11.8)		—
Payments on debt	(300.0)		(750.0)		—
Proceeds from loan	300.0		—		0.2
Payments on loan	—		—		(0.4)
Proceeds from debt of consolidated investment products	4,884.4		2,937.9		1,390.7
Payments on debt by consolidated investment products	(2,745.8)		(1,315.7)		(334.2)
Payments on contingent consideration liabilities	(14.8)		—		(0.6)
Noncontrolling interests	200.0		721.4		409.5
Net cash provided by financing activities	1,585.0		2,030.1		734.4
Effect of exchange rate changes on cash and cash equivalents	(77.2)		(2.2)		27.4
Increase (decrease) in cash and cash equivalents	135.3		657.4		(2,216.8)
Cash and cash equivalents, beginning of year	4,647.2		3,989.8		6,206.6
Cash and Cash Equivalents, End of Year	$	4,782.5	$	4,647.2	$	3,989.8

Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	$	467.5	$	498.0	$	359.4
Cash paid for interest	133.3		116.6		18.9
Cash paid for interest by consolidated investment products	148.2		102.8		65.6

FRANKLIN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Table continued from previous page]
(in millions)
for the fiscal years ended September 30, 2019 2018 2017
Proceeds from debt of consolidated investment products $ 19.9
$ —
$ 20.6
Payments on debt by consolidated investment products (2.0 ) (21.0 ) (308.5 )
Payments on contingent consideration liability (20.4 ) (21.6 ) (35.3 )
Noncontrolling interests 1,211.6
159.7
901.6
Net cash used in financing activities (40.5 ) (3,761.7 ) (956.0 )
Effect of exchange rate changes on cash and cash equivalents (37.0 ) (16.7 ) 35.0
Increase (decrease) in cash and cash equivalents (953.0 ) (1,839.1 ) 266.4
Cash and cash equivalents, beginning of year 6,910.6
8,749.7
8,483.3
Cash and Cash Equivalents, End of Year $ 5,957.6
$ 6,910.6
$ 8,749.7

Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes $ 520.8
$ 523.5
$ 712.2
Cash paid for interest 27.4
38.6
42.3
Cash paid for interest by consolidated investment products 2.3
2.6
11.2

See Notes to Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Significant Accounting Policies

Business. Franklin ~~Resources, Inc. (“Franklin”)~~ is a holding company ~~that, together~~ with subsidiaries operating under its ~~subsidiaries (collectively, the “Company”), operates as~~ Franklin ~~Templeton.~~Templeton and/or subsidiary brand names. The Company provides investment management and related services to investors in jurisdictions worldwide ~~for investors in~~through investment products which include sponsored funds, as well as institutional and high-net-worth separate ~~accounts. In addition to~~accounts, retail separately managed account programs, sub-advised products, and other investment ~~management, the Company~~’svehicles. The Company’s related services include fund administration, sales and distribution, and shareholder servicing.

Basis of Presentation. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Management 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. Certain comparative amounts for prior fiscal years have been reclassified to conform to the financial statement presentation as of and for the fiscal year ended September 30, ~~2019~~2022 (“fiscal year ~~2019~~”2022”).

Consolidation. The consolidated financial statements include the accounts of Franklin and its subsidiaries and consolidated investment products (“CIPs”) in which it has a controlling financial interest. The Company has a controlling financial interest when it owns a majority of the voting interest in a voting interest entity (“VOE”) or is the primary beneficiary of a variable interest entity (“VIE”). Intercompany accounts and transactions have been eliminated.

A VIE is an entity in which the equity investment holders have not contributed sufficient capital to finance its activities or do not have defined rights and obligations normally associated with an equity investment. ~~Substantially all of the~~The Company’s VIEs are primarily investment products, and its variable interests consist of its equity ownership interests in and investment management fees earned from these products.

The Company is the primary beneficiary of a VIE if it has the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of or right to receive benefits from the VIE that could potentially be significant to the VIE. Investment management fees earned from VIEs are excluded from the primary beneficiary determination if they are deemed to be at market and commensurate with service. The key ~~estimates and assumptions~~assumption used in the ~~analyses include~~analysis includes the amount of assets under management (“AUM”) ~~and the life of the investment product.~~.

Related Parties include sponsored funds and equity method investees. A substantial amount of the Company’s operating revenues and receivables are from related parties.

Earnings per Share. Basic and diluted earnings per share are computed using the two-class method, which considers participating securities as a separate class of shares. The Company’s participating securities consist of its nonvested stock and stock unit awards that contain nonforfeitable rights to dividends or dividend equivalents. Basic earnings per share is computed by dividing net income available to the Company’s common stockholders, adjusted to exclude earnings allocated to participating securities, by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period.

Business combinations are accounted for by recognizing the acquired assets, including separately identifiable intangible assets, and assumed liabilities at their acquisition-date estimated fair values. Any excess of the purchase consideration over the acquisition-date fair values of these identifiable assets and liabilities is recognized as goodwill. During the measurement period, which is not to exceed one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed due to new information about facts that existed as of the acquisition date, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in earnings.

Intangible assets acquired in business combinations consist primarily of investment management ~~contracts.~~contracts and trade names. The fair values of the acquired ~~assets~~management contracts are based on the net present value of estimated future cash flows attributable to the contracts, which include significant assumptions about forecasts of the AUM growth rate, pre-tax profit margin, discount rate, average effective fee rate and effective tax rate. The fair value of trade names is determined using the relief from royalty method based on net present value of estimated future cash flows, which include significant assumptions about royalty rate, revenue growth rate, discount rate and ~~discount~~effective tax rate. The management contract

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intangible assets are amortized over their estimated useful lives, which range from three to 1516 years, using the straight-line method, unless the asset is determined to have an indefinite useful life. Indefinite-lived intangible assets represent contracts to manage investment assets for which there is no foreseeable limit on the contract period.

~~Table of Contents~~ Trade names intangible assets are amortized over their estimated useful lives which range from five to twenty years using the straight-line method. Amortization and impairment are recognized in general, administrative and other expense.

Goodwill and indefinite-lived intangible assets are tested for impairment annually as of August 1 and when an event occurs or circumstances change that more likely than not reduce the fair value of the related reporting unit or indefinite-lived intangible asset below its carrying value. The Company has one reporting unit, investment management and related services, consistent with its single operating segment, to which all goodwill has been assigned. ~~Amortization and impairment are recognized in general, administrative and other expense.~~

Goodwill and indefinite-lived intangible assets may first be assessed for qualitative factors to determine whether it is necessary to perform a quantitative impairment test. The qualitative analysis considers entity-specific and macroeconomic factors and their potential impact on the key assumptions used in the determination of the fair value of the reporting unit or indefinite-lived intangible asset. A quantitative impairment test is performed if the results of the qualitative assessment indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying value or an indefinite-lived intangible asset is impaired, or if a qualitative assessment is not performed.

The fair values of the reporting unit and indefinite-lived intangible assets are based on the net present value of estimated future cash flows, which include assumptions about the AUM growth rate, pre-tax profit margin, discount rate, average effective fee rate and effective tax rate.

If a quantitative goodwill impairment test indicates that the carrying value of the ~~goodwill~~reporting unit exceeds ~~the~~its fair value, ~~of the reporting unit,~~ impairment is recognized in the amount of the ~~excess~~difference in values not to exceed the total amount of ~~the carrying value over the implied fair value of the~~ goodwill ~~which considers the fair value assigned~~allocated to ~~all other assets and liabilities of~~ the reporting unit.

If a quantitative indefinite-lived intangible assets impairment test indicates that the carrying value of the asset exceeds the fair value, impairment is recognized in the amount of the difference in values.

The fair values of the reporting unit and indefinite-lived intangible assets are based on the net present value of estimated future cash flows, which include assumptions about the AUM growth rate, pre-tax profit margin, average effective fee rate, effective tax rate and discount rate.

Definite-lived intangible assets are tested for impairment quarterly. Impairment is indicated when the carrying value of an asset is not recoverable and exceeds its fair value. Recoverability is evaluated based on estimated undiscounted future cash flows using assumptions about the AUM growth rate, pre-tax profit margin, average effective fee rate and expected useful ~~lives.~~lives as well as royalty rate for trade name intangible assets. If the carrying value of an asset is not recoverable through undiscounted cash flows, impairment is recognized in the amount by which the carrying value exceeds the asset’s fair value, as determined by discounted cash flows or other methods as appropriate for the asset type.

Fair Value Measurements. The Company uses a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on whether the inputs to those valuation techniques are observable or unobservable. The three levels of fair value hierarchy are set forth below. The assessment of the hierarchy level of the assets or liabilities measured at fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety.



Level 1			Unadjusted quoted prices in active markets for identical assets or liabilities, which may include published net asset values (“NAV”) for fund products.

Level 2			Observable inputs other than Level 1 quoted prices, such as non-binding quoted prices for similar assets or liabilities in active ~~markets;~~markets, quoted prices for identical or similar assets or liabilities in inactive markets, or model-based valuation methodologies that ~~are not active; or inputs other than quoted prices~~utilize significant assumptions that are observable or corroborated by observable market data. Level 2 quoted prices are generally obtained from two independent third-party brokers or dealers, including prices derived from model-based valuation techniques for which the significant assumptions are observable in the market or corroborated by observable market data. Quoted prices are validated through price variance analysis, subsequent sales testing, stale price review, price comparison across pricing vendors and due diligence reviews of third-party vendors.

Level 3			Unobservable inputs that are supported by little or no market activity. These inputs require significant management judgment and reflect the Company’s estimation of assumptions that market participants would use in pricing the asset or liability.

Quoted market prices may be adjusted if events occur, such as significant price changes in proxies traded in relevant markets after the close of corresponding markets, trade halts or suspensions, or unscheduled market closures. These proxies consist of correlated country-specific exchange-traded securities, such as futures, American Depositary Receipts indices or exchange-traded funds. The price adjustments are primarily determined based on third-party factors derived from model-based valuation techniques for which the significant assumptions are observable in the market.

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~~A substantial amount of the~~The Company’s investments isare primarily recorded at fair value or amounts that approximate fair value on a recurring basis. Investments in fund products for which fair value is estimated using NAV as a practical expedient (when the NAV is available to the Company as an investor but is not publicly available) are not classified in the fair value hierarchy. Fair values are estimated for disclosure purposes for financial instruments that are not measured at fair value.

Cash and Cash Equivalents primarily consist of nonconsolidated sponsored money market funds and deposits with financial institutions and are carried at cost. Due to the short-term nature and liquidity of these financial instruments, their carrying values approximate fair value.

The Company maintains cash and cash equivalents with financial institutions in various countries, limits the amount of credit exposure with any given financial institution and conducts ongoing evaluations of the creditworthiness of the financial institutions with which it does business.

Receivables consist primarily of fees receivable from investment products and are carried at invoiced amounts. Due to the short-term nature and liquidity of the receivables, their carrying values approximate fair value.

Investments consist of investments in sponsored funds and separate accounts, investments related to long-term incentive plans, other equity ~~securities measured at fair value,~~and debt securities, investments in equity method investees and other investments. At September 30, 2018, prior to the adoption of new accounting guidance, investments in equity securities with a readily determinable fair value were classified as either trading or available-for-sale and investments in fund products without a published NAV were carried at cost.

~~Equity Securities, at fair value~~Sponsored funds and separate accounts consist primarily of nonconsolidated sponsored funds and to a lesser extent, ~~other equity investment securities. Changes~~separate accounts. Sponsored funds and separate accounts are carried at fair value with changes in the fair value ~~of the investments are~~ recognized as gains and losses in earnings. The fair values of ~~funds~~fund products are determined based on their published NAV or estimated using NAV as a practical expedient. The fair values of ~~equity securities other than funds~~the underlying investments of the separate accounts are determined using quoted market prices, or independent third-party broker or dealer price quotes orif quoted market prices are not available.

Investments related to long-term incentive plans consist primarily of investments in sponsored funds related to certain compensation plans that have vesting provision and are carried at fair value. Changes in fair value are recognized as gains and losses in earnings. The fair values of the investments are determined based on ~~discounted cash flows~~the sponsored funds’ published NAV or estimated using ~~significant unobservable inputs.~~NAV as a practical expedient.

~~Debt Securities~~Other equity and debt securities consist of ~~trading and available-for-sale~~equity investment securities and ~~are~~debt securities carried at fair value. Changes in the fair value of ~~trading~~equity securities other than fund products are recognized as gains and losses in earnings. Unrealized gains and losses on available-for-sale securities are recorded net of tax as part of accumulated other comprehensive income (loss) until realized, at which time they are recognized in earnings using the average cost method. The fair values of equity and debt securities are determined using independent third-party broker or dealer price quotes or based on ~~discounted cash flows~~either a market-based or income-based approach using significant unobservable inputs. The fair values of fund products are determined based on their published NAV or estimated using NAV as a practical expedient.

Investments in Equity Method Investees consist of equity investments in entities, including sponsored funds, over which the Company is able to exercise significant influence, but not control. Significant influence is generally considered to exist when the Company’s ownership interest in the investee is between 20% and 50%, although other factors, such as representation on the investee’s board of directors and the impact of commercial arrangements, also are considered in determining whether the equity method of accounting is appropriate. Investments in limited partnerships and limited liability companies are accounted for using the equity method when the Company’s investment is more than minor or when the Company is the general partner. Under the equity method of accounting, the investments are initially carried at cost and subsequently adjusted by the Company’s proportionate share of the entities’ net income, which is recognized in earnings.

Other Investments consist of equity investments in entities over which the Company is unable to exercise significant influence and do not have a readily determinable fair value, and time deposits with maturities greater than three months from the date of ~~purchase, and life settlement contracts.~~purchase. The equity investments are measured at cost adjusted for observable price changes and impairment, if any, which are recognized in earnings. The fair value of the entities is generally estimated using significant unobservable inputs in either a market-based or income-based approach. The time deposits are carried at cost, which approximates fair value due to their short-term nature and liquidity. ~~Life settlement contracts are carried at fair value, which is determined based on discounted cash flows using significant unobservable inputs.~~

Impairment of Investments. Investments in ~~available-for-sale securities,~~ equity method investees and equity investments that do not have a readily determinable fair value are evaluated for impairment on a quarterly basis. The evaluation of equity investments considers qualitative factors, including the financial condition and specific events related to an investee that may indicate the fair value of the investment is less than its carrying value. Impairment of equity securities is recognized in earnings.

1Based on the relative fair value of the instruments.

(in millions)
as of September 30, 2018 Fair Value Valuation Technique Significant Unobservable Inputs Range (Weighted Average)
Equity securities $ 171.9
Market comparable companies Enterprise value/
EBITDA multiple 5.0–13.6 (9.3)
27.8
Discounted cash flow Discount rate 8.0%–16.5% (14.1%)

Debt securities 78.7
Discounted cash flow Discount rate 7.0%–14.8% (10.8%)
33.9
Comparable trading multiple Price-to-earnings ratio 10.0
Enterprise value/
EBITDA multiple 20.9
5.4
Market pricing Private sale pricing $42 per $100 of par

Loans 32.3
Discounted cash flow Loss-adjusted discount rate 3.0%–22.7% (12.0%)

If the relevant significant inputs used in the market-based valuations, other than ~~the~~ discount for lack of marketability, ~~and risk premium,~~ were independently higher (lower) as of September 30, ~~2019,~~2022, the resulting fair value of the assets would be higher (lower). If the relevant significant inputs used in the discounted cash flow or yield capitalization valuations, as well as the discount for lack of marketability ~~and risk premium~~used in the market-based valuations, were independently higher (lower) as of September 30, ~~2019,~~2022, the resulting fair value of the assets would be lower (higher).

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


(in millions)	Fair Value Level	2022				2021
		Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
as of September 30,
Financial Asset
Cash and cash equivalents	1	$	378.5	$	378.5	$	144.0	$	144.0

Financial Liabilities
Debt of CLOs1	2 or 3	5,408.0		5,548.8		3,634.1		3,610.6
Other debt	3	49.7		42.4		36.9		36.6

(in millions)
Fair Value
Level
2019 2018
Carrying
Value

Estimated
Fair Value
Carrying
Value

Estimated
Fair Value
as of September 30,
Financial Asset
Cash and cash equivalents 1 $ 154.2
$ 154.2
$ 299.8
$ 299.8
Financial Liability
Debt 3 $ 50.8
$ 51.0
$ 32.6
$ 32.4
__________________

1Substantially all was Level 2.

Debt

Debt of CIPs ~~totaled $50.8 million and $32.6 million at September 30, 2019 and 2018.~~ consisted of the following:


(in millions) as of September 30,	2022			2021
	Amount		Weighted- Average Effective Interest Rate	Amount		Weighted- Average Effective Interest Rate
Debt of CLOs	$	5,408.0	2.78%	$	3,634.1	2.11%
Other debt	49.7		5.19%	36.9		1.95%
Total	$	5,457.7		$	3,671.0

The debt of CLOs had fixed and floating interest rates ranging from ~~2.08%~~1.42% to ~~7.94% with a weighted-average effective interest rate of 5.09%~~8.51% at September 30, ~~2019,~~2022 and from ~~3.07%~~1.00% to ~~7.88% with a weighted-average effective interest rate of 6.79%~~8.22% at September 30, ~~2018.~~2021. The other debt had floating interest rates ranging from 4.79% to 6.00% at September 30, 2022, and fixed and floating rates from 1.63% to 2.42% at September 30, 2021. The floating rates were primarily based on LIBOR.

The contractual maturities for debt of CIPs at September 30, ~~2019~~2022 were as follows:


(in millions)
for the fiscal years ending September 30,	Amount
2023	$	35.8
2024	33.3
2025	—
2026	—
2027	—
Thereafter	5,388.6
Total	$	5,457.7

(in millions)
for the fiscal years ending September 30, Amount
2020 $ 23.3
2021 7.5
2022 —
2023 —
2024 20.0
Total $ 50.8
Collateralized Loan Obligations

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


(in millions)
as of September 30,	2022		2021
Unpaid principal balance	$	6,118.4	$	3,951.1
Difference between unpaid principal balance and fair value	(356.1)		20.9
Fair Value	$	5,762.3	$	3,972.0

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

During fiscal years 2022 and 2021, the Company recognized $22.6 million of net gains and $15.4 million of net gains related to its own economic interests in the CLOs. The aggregate principal amount due of the debt of CLOs was $5,781.3 million and $3,629.9 million at September 30, 2022 and 2021.

Note 11 –Redeemable Noncontrolling Interests

Changes in redeemable noncontrolling interests ~~of CIPs~~ were as follows:


(in millions) for the fiscal years ended September 30, 2022, 2021 and 2020	CIPs		Minority Interests		Total

Balance at October 1, 2019	$	746.7	$	—	$	746.7
Acquisition	22.1		164.3		186.4
Business divestiture	—		(21.3)		(21.3)
Net income (loss)	45.0		3.6		48.6
Net subscriptions (distributions) and other	247.1		(2.0)		245.1
Net consolidations (deconsolidations)	(663.6)		—		(663.6)
Balance at September 30, 2020	$	397.3	$	144.6	$	541.9
Net income (loss)	63.8		30.3		94.1
Net subscriptions (distributions) and other	531.4		(23.6)		507.8
Net consolidations (deconsolidations)	(370.0)		—		(370.0)
Adjustment to fair value	—		159.2		159.2
Balance at September 30, 2021	$	622.5	$	310.5	$	933.0
Net income (loss)	(106.1)		59.2		(46.9)
Net subscriptions (distributions) and other	244.5		(49.2)		195.3
Net consolidations (deconsolidations)	181.3		—		181.3
Adjustment to fair value	—		263.1		263.1
Balance at September 30, 2022	$	942.2	$	583.6	$	1,525.8

(in millions)
for the fiscal years ended September 30, 2019 2018 2017
Balance at beginning of year $ 1,043.6
$ 1,941.9
$ 61.1
Adoption of new accounting guidance —
—
824.7
Net income (loss) 6.2
(12.8 ) 53.0
Net subscriptions and other 1,046.6
170.9
884.3
Net consolidations (deconsolidations) (1,349.7 ) (1,056.4 ) 118.8
Balance at End of Year $ 746.7
$ 1,043.6
$ 1,941.9

Note 12 – 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, ~~and~~ investment management and other fee receivables, and loans and related interest receivable as follows:

(in millions)
as of September 30, 2019 2018
Investments $ 458.1
$ 161.8
Receivables 149.5
140.1
Total $ 607.6
$ 301.9

~~Table of Contents~~


(in millions)
as of September 30,	2022		2021
Investments	$	718.0	$	639.2
Receivables	165.4		172.1

Total	$	883.4	$	811.3

While the Company has no legal or contractual obligation to do so, it routinely makes cash investments in the course of launching sponsored funds. ~~The~~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, except for loans to certain sponsored funds in India which were fully repaid during the second quarter of fiscal year ~~2019. During fiscal year 2018, the Company purchased $32.6 million~~2021.

Table of ~~certain equity and debt securities from 2 sponsored funds.~~Contents

Note 13 – Taxes on Income

The Tax Cuts and Jobs Act (“the Tax Act”), which was enacted into law in the U.S. in December 2017, includes various changes to the tax law, including a permanent reduction in the corporate income tax rate and assessment of a one-time transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiaries’ earnings. The estimated related changes in the Company’s deferred tax assets and deferred tax liabilities resulted in a $35.6 million decrease in deferred tax assets, an $88.9 million decrease in deferred tax liabilities and a $53.3 million net tax benefit in fiscal year 2018. The Company also reclassified $0.1 million from accumulated other comprehensive loss to retained earnings related to stranded tax effects resulting from the change in tax rate during fiscal year 2018.

The Company completed its analysis of the Tax Act impact during the first quarter of fiscal year 2019 with no significant adjustment to the provisional amounts previously recorded. The estimated transition tax expense recognized in fiscal year 2018 of $983.2 million was net of an $87.6 million tax benefit related to U.S. taxation of deemed foreign dividends. This benefit was reversed during fiscal year 2019 upon issuance of final regulations by the U.S. Department of Treasury, resulting in increased income tax expense and gross unrecognized tax benefits.

The remaining federal portion of the transition tax liability was $827.9 million at September 30, 2019, and will be paid over the next seven years, with 8% of the original liability payable in each of the next four years, 15% in year five, 20% in year six and 25% in year seven.

The Tax Act reduced the federal corporate income tax rate from 35% to 21% effective January 1, 2018. The Company’s federal statutory rate for fiscal year 2018 was a blended rate of 24.5%, based on the pre- and post-Tax Act rates.

Prior to the Tax Act, the Company had not provided for U.S. income taxes on undistributed earnings and other outside basis differences of its non-U.S. subsidiaries as it was the Company’s intention for these tax basis differences to remain indefinitely reinvested. Following the Company’s change in policy effective January 1, 2018 to repatriate earnings of substantially all non-U.S. subsidiaries, other outside basis differences, which arose primarily from purchase accounting adjustments, undistributed earnings that are considered indefinitely reinvested and foreign earnings that are restricted by operational and regulatory requirements, remain indefinitely reinvested. These basis differences could reverse through sales of the subsidiaries or the receipt of dividends from the subsidiaries, as well as various other events, none of which are considered probable as of September 30, 2019. The Company has made no provision for U.S. income taxes on these outside basis differences, and determination of the amount of unrecognized deferred tax liability related to such basis differences is not practicable.

Taxes on income were as follows:

(in millions)
for the fiscal years ended September 30, 2019 2018 2017
Current expense
Federal $ 343.4
$ 1,343.7
$ 585.0
State 37.0
38.0
65.3
Non-U.S. 66.8
141.1
100.2
Deferred expense (benefit) (4.9 ) (50.3 ) 8.9
Total $ 442.3
$ 1,472.5
$ 759.4

The Company had a tax shortfall of $8.7 million in fiscal year 2017 associated with stock-based compensation plans, which increased the amount of income taxes that would have otherwise been payable and was reflected as a component of stockholders’ ~~equity. Income tax effects of stock-based awards are recognized in income tax expense beginning in fiscal year 2018 in accordance with revised accounting guidance.~~

~~Table of Contents~~


(in millions)
for the fiscal years ended September 30,	2022		2021		2020
Current expense
Federal	$	174.6	$	226.7	$	154.9
State	45.0		50.3		28.8
Non-U.S.	78.6		68.9		54.2
Deferred expense (benefit)	98.0		3.7		(7.1)
Total	$	396.2	$	349.6	$	230.8

Income before taxes consisted of the following:

(in millions)
for the fiscal years ended September 30, 2019 2018 2017
U.S. $ 1,151.1
$ 1,458.1
$ 1,594.5
Non-U.S. 496.7
757.1
954.6
Total $ 1,647.8
$ 2,215.2
$ 2,549.1

~~The Company’s income in certain countries is subject to reduced tax rates due to tax rulings and incentives. The impact of the reduced rates on income tax expense was~~ ~~$4.1 million~~ or ~~$0.01~~ ~~per diluted share for fiscal year~~ ~~2019~~, ~~$31.3 million~~ or ~~$0.06~~ ~~per diluted share for fiscal year~~ ~~2018, and~~ ~~$28.8 million~~ or ~~$0.05~~ ~~per diluted share for fiscal year~~ ~~2017. One tax incentive remained in effect at September 30, 2019 which will expire in December 2023.~~


(in millions)
for the fiscal years ended September 30,	2022		2021		2020
U.S.	$	1,427.2	$	1,682.6	$	771.7
Non-U.S.	302.2		761.6		246.2
Total	$	1,729.4	$	2,444.2	$	1,017.9

The significant components of deferred tax assets and deferred tax liabilities were as follows:

(in millions)
as of September 30, 2019 2018
Deferred Tax Assets
Deferred compensation and benefits $ 39.7
$ 33.1
Net operating loss carry-forwards 31.9
31.8
Stock-based compensation 19.6
21.9
Unrealized foreign exchange losses 11.0
3.7
Tax benefit for uncertain tax positions 8.7
10.0
Other 21.7
15.0
Total deferred tax assets 132.6
115.5
Valuation allowance (26.9 ) (27.5 )
Deferred tax assets, net of valuation allowance 105.7
88.0
Deferred Tax Liabilities
Goodwill and other purchased intangibles 159.5
142.2
Depreciation on fixed assets 22.5
20.9
Investments in partnerships 6.6
16.4
Other 16.4
17.7
Total deferred tax liabilities 205.0
197.2
Net Deferred Tax Liability $ 99.3
$ 109.2


(in millions)
as of September 30,	2022		2021
Deferred Tax Assets
Capitalized mixed service costs	$	278.0	$	297.5
Net operating loss and state credit carry-forwards	258.8		318.5
Deferred compensation and benefits	157.3		222.3
Foreign tax credit carry-forwards	109.4		128.0
Debt premium	60.4		72.1
Other	150.8		131.4
Total deferred tax assets	1,014.7		1,169.8
Valuation allowance	(258.3)		(319.3)
Deferred tax assets, net of valuation allowance	756.4		850.5
Deferred Tax Liabilities
Goodwill and other purchased intangibles	907.7		961.6
Other	93.7		68.7
Total deferred tax liabilities	1,001.4		1,030.3
Net Deferred Tax Liability	$	245.0	$	179.8

Deferred income tax assets and liabilities that relate to the same tax jurisdiction are presented net on the consolidated balance sheets. The components of the net deferred tax liability were classified in the consolidated balance sheets as follows:


(in millions)
as of September 30,	2022		2021
Other assets	$	102.8	$	131.9
Deferred tax liabilities	347.8		311.7
Net Deferred Tax Liability	$	245.0	$	179.8

(in millions)
as of September 30, 2019 2018
Other assets $ 20.8
$ 17.3
Deferred tax liabilities 120.1
126.5
Net Deferred Tax Liability $ 99.3
$ 109.2

Table of Contents

Included in the Company’s net deferred tax liability were the deferred tax effects associated with the fair value of assets acquired and liabilities assumed from the acquisition of Legg Mason and acquired attributes that carry over to post-acquisition tax periods, including U.S. state and foreign net operating losses and foreign tax credits. Utilization of the U.S. state net operating losses and federal credit carry-forwards may be subject to annual limitations due to ownership change provisions under Section 382 of the Internal Revenue Code. Foreign tax credits can only be used to offset tax attributable to foreign source income.

At September 30, ~~2019~~,2022, there were ~~$155.0~~$72.5 million of non-U.S. tax effected net operating loss carry-forwards ~~$73.7 million~~ of which ~~expire~~expires between fiscal years ~~2020~~2022 and ~~2038~~ ~~with the remaining carry-forwards having an indefinite life.~~2041. In addition, there were ~~$34.8~~$172.1 million in tax effected state net operating loss carry-forwards that expire between fiscal years ~~2020~~2023 and ~~2039. A partial~~2042, with some having an indefinite carry-forward period. The Company also has federal net operating losses of $10.3 million, the majority of which will carry-forward indefinitely and $109.4 million of foreign tax credit carry-forwards that expire between fiscal years 2023 and 2029.

The valuation allowance ~~has been provided~~decreased $61.0 million in fiscal year 2022, primarily related to ~~offset~~State and non-US net operating loss utilization and US foreign tax credit utilization. The valuation allowance decreased $1.3 million in fiscal year 2021 primarily related to carry-forward assets recognized in connection with the acquisition of Legg Mason. At September 30, 2022, the valuation allowance of $258.3 million was related ~~deferred tax assets~~to $147.9 million for federal, state, and foreign net operating loss carry-forwards, $63.6 million due to ~~the~~ uncertainty of realizing the benefit of ~~the net operating loss carry-forwards. The valuation allowance decreased~~ ~~$0.6~~foreign tax credits, $37.8 million ~~in fiscal year~~ ~~2019~~ for capital losses, and ~~increased~~ ~~$2.3~~$9.0 million ~~in fiscal year~~ ~~2018~~.

~~Table of Contents~~

for other foreign deferred taxes.

A reconciliation of the amount of tax expense at the federal statutory rate and taxes on income as reflected in the consolidated statements of income is as follows:


(in millions)
for the fiscal years ended September 30,	2022				2021				2020
Federal taxes at statutory rate	$	363.2	21.0	%	$	513.3	21.0	%	$	213.8	21.0	%

State taxes, net of federal tax effect	45.6		2.6	%	60.8		2.5	%	28.2		2.8	%
Tax reserve release on audit settlement, net of valuation allowance1	(5.3)		(0.3	%)	(126.8)		(5.2	%)	—		—
Effect of net income (loss) attributable to noncontrolling interests	(8.6)		(0.5	%)	(55.3)		(2.3	%)	2.5		0.2	%
Effect of non-U.S. operations	13.0		0.8	%	(30.4)		(1.2	%)	6.9		0.7	%
Capital loss on investments, net of valuation allowance2	—		—		(12.4)		(0.5	%)	(27.0)		(2.7	%)
Foreign tax credit valuation allowance release3	(20.6)		(1.2)	%	—		—		—		—
Other	8.9		0.5	%	0.4		—		6.4		0.7	%
Tax Provision	$	396.2	22.9	%	$	349.6	14.3	%	$	230.8	22.7	%

(in millions)
for the fiscal years ended September 30, 2019 2018 2017
Federal taxes at statutory rate $ 346.0
21.0 % $ 542.7
24.5 % $ 892.2
35.0 %
Transition tax on deemed repatriation of undistributed foreign earnings 86.0
5.2 % 983.2
44.4 % —
—
Revaluation of net deferred tax liabilities —
—
(53.3 ) (2.4 %) —
—
Other Tax Act impacts 0.4
—
38.9
1.8 % —
—
State taxes, net of federal tax effect 29.7
1.8 % 16.6
0.7 % 41.4
1.6 %
Effect of non-U.S. operations (21.3 ) (1.3 %) (61.9 ) (2.8 %) (146.2 ) (5.7 %)
Effect of net (income) loss attributable to noncontrolling interests (2.1 ) (0.1 %) 5.3
0.2 % (32.6 ) (1.3 %)
Other 3.6
0.2 % 1.0
0.1 % 4.6
0.2 %
Tax Provision $ 442.3
26.8 % $ 1,472.5
66.5 % $ 759.4
29.8 %
______________

1The Company released a tax reserve in fiscal year 2021 following the close of an IRS audit of the transition tax for fiscal year 2018.

2The Company recognized a tax benefit in fiscal years 2021 and 2020 for capital losses that were realized from sales of investments. During fiscal year 2020, the sale of investments were subsequent to the change in corporate tax structure of a foreign holding company to a U.S. branch. These capital losses can be carried forward, for which the Company has assessed for realizability.

3The Company released a valuation allowance on foreign tax credit in fiscal year 2022 due to additional foreign source income from foreign investments.

~~Other Tax Act impacts consist primarily~~88

Table of ~~foreign dividend distribution taxes and tax withholdings.~~Contents

A reconciliation of the beginning and ending balances of gross unrecognized tax benefits is as follows:

(in millions)
for the fiscal years ended September 30, 2019 2018 2017
Balance at beginning of year $ 77.5
$ 81.1
$ 82.1
Additions for tax positions of prior years 131.8
3.6
6.6
Reductions for tax positions of prior years (2.9 ) (6.6 ) (1.3 )
Tax positions related to the current year 10.7
11.6
11.6
Settlements with taxing authorities (2.2 ) —
(5.2 )
Expirations of statute of limitations (12.3 ) (12.2 ) (12.7 )
Balance at End of Year $ 202.6
$ 77.5
$ 81.1


(in millions)
for the fiscal years ended September 30,	2022		2021		2020
Balance at beginning of year	$	184.3	$	342.9	$	202.6
Additions from business combinations	—		—		141.8
Additions for tax positions of prior years	2.5		4.2		0.9
Reductions for tax positions of prior years	(16.0)		(163.6)		(0.6)
Tax positions related to the current year	18.4		22.2		12.2
Settlements with taxing authorities	(0.4)		(3.2)		(0.3)
Expirations of statute of limitations	(20.1)		(18.2)		(13.7)
Balance at End of Year	$	168.7	$	184.3	$	342.9

If recognized, ~~the balance, net of any deferred tax benefits,~~$161.9 million for 2022, $173.4 million for 2021 and $303.1 million for 2020 would favorably affect the Company’s effective income tax rate in future periods.

The Company accrues interest and penalties related to unrecognized tax benefits in interest expense and general, administrative and other expenses. Accrued interest on uncertain tax positions at September 30, ~~2019~~2022 and ~~2018~~2021 was ~~$11.9~~$24.8 million and ~~$11.3~~$25.7 million,, and is not presented in the unrecognized tax benefits table above. ~~Interest expense of~~ ~~$0.7 million~~, ~~$0.9 million~~ ~~and~~ ~~$1.6 million~~ ~~was recognized during fiscal years~~ ~~2019~~, ~~2018~~ ~~and~~ ~~2017~~. Accrued penalties at September 30, ~~2019~~2022 and ~~2018~~2021 were ~~insignificant.~~$4.4 million and $3.9 million.

The Company files a consolidated U.S. federal income tax return, multiple U.S. state and local income tax returns, and income tax returns in multiple non-U.S. jurisdictions. The Company is subject to examination by the taxing authorities in these jurisdictions. The Company’s major tax jurisdictions and the tax years for which the statutes of limitations have not expired are as follows: India 2003 to ~~2019~~;2022; Brazil 2008 to 2022, Canada 2011 to ~~2019~~;2014 and 2017 to 2022; Australia 2018 to 2022, Hong Kong ~~2013~~2016 to ~~2019~~;2022; Singapore ~~2014~~2017 to ~~2019~~;2022; Luxembourg ~~and the U.K.~~ 2018 to 2022; U.K. 2019; to 2022; U.S. federal ~~2016~~2019 to ~~2019~~;2022; the City of New York 2012 to 2022; the States of ~~Florida~~California, New Jersey, and ~~Minnesota,~~New York 2018 to 2022; and State of Maryland 2019 to 2022.

The Company has ongoing litigation and examinations in various stages, in the States of California and New York, and City of New York, ~~2015 to~~ ~~2019~~; and ~~the States of California, Massachusetts~~in Brazil, Canada, India, Japan and ~~New York 2016 to~~ ~~2019~~.

~~The Company has ongoing examinations in various stages of completion in the State of Florida, City of New York, Canada, France, Germany and India.~~Malaysia. Examination outcomes and the timing of settlements are subject to significant uncertainty. Such settlements may involve some or all of the following: the payment of additional taxes, the adjustment of deferred taxes and/or the recognition of unrecognized tax benefits. The Company has recognized a tax benefit only for those positions that meet the more-likely-than-not recognition threshold. It is reasonably possible that the total unrecognized tax benefit as of September 30, ~~2019~~2022 could decrease by an estimated ~~$13.9~~$16.0 million within the next twelve months as a result of the expiration of statutes of limitations in the U.S. federal and certain U.S. state and local and non-U.S. tax jurisdictions, and potential settlements with U.S. states and non-U.S. taxing authorities.

The Tax Cuts and Jobs Act which was enacted into law in the U.S. in December 2017, includes various changes to the tax law, including a permanent reduction in the corporate income tax rate and assessment of a one-time transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiaries’ earnings. The payment for the Company’s remaining federal portion of the transition tax liability were as follows:


(in millions)	Amount
for the fiscal years ending September 30,
2023	$	74.1
2024	138.9
2025	185.2
2026	231.6
Total	$	629.8

Table of Contents

Note 14 – Leases

Lessee Arrangements

The Company’s leases generally include one or more options to renew. Lease expense was as follows:


(in millions)
for the fiscal years ended September 30,	2022		2021		2020
Operating lease cost1	$	127.9	$	141.4	$	72.5
Variable lease cost	8.3		21.2		6.0
Finance lease cost	0.2		0.4		0.5
Less: sublease income	(26.7)		(24.6)		(4.2)
Total lease expense	$	109.7	$	138.4	$	74.8

__________________

1Substantially all operating lease cost is included in occupancy expense.

Supplemental cash flow information related to leases was as follows:


(in millions)
for the fiscal years ended September 30,	2022		2021		2020
Operating cash flows from operating leases included in the measurement of operating lease liabilities	$	130.5	$	133.7	$	65.1
ROU assets obtained in exchange for new/modified operating lease liabilities	53.4		18.7		13.7

The weighted-average remaining lease term and weighted-average discount rate for operating lease liabilities were as follows:


(in millions)
as of September 30,	2022		2021
Weighted-average remaining lease term	7.3 years		6.1 years
Weighted-average discount rate	2.5	%	2.1	%

The maturities of the liabilities were as follows:


(in millions)	Amount
for the fiscal years ending September 30,
2023	$	119.7
2024	104.3
2025	68.3
2026	51.9
2027	47.9
Thereafter	197.1
Total lease payments	589.2
Less: interest	(60.8)
Operating lease liabilities	$	528.4

Lessor Arrangements

The Company leases excess owned space in its San Mateo, California corporate headquarters and other office buildings, primarily in the U.S., to third parties, and generally include one or more options to renew. The Company subleases excess leased office spaces to various firms, primarily in the U.S., and generally include options to renew or terminate within a specified period.

Table of Contents

The maturities of lease payments due to the Company as of September 30, 2022 were as follows:


(in millions)	Subleases		Leases
for the fiscal years ending September 30,
2023	$	19.8	$	44.2
2024	7.3		46.8
2025	0.5		46.8
2026	0.1		45.6
2027	0.1		38.1
Thereafter	—		52.6
Total	$	27.8	$	274.1

Note 1415 – Commitments and Contingencies

Legal Proceedings

India Credit Fund Closure Matters. Effective April 24, 2020, Franklin Templeton Trustee Services Private Limited (“FTTS”), a subsidiary of Franklin, announced its decision to wind up six fixed income mutual fund schemes of the Franklin Templeton Mutual Fund in India (referred to herein as the “Funds”), closing the Funds to redemptions. At the time, the Funds had collective assets under management of INR 25,648.3 crore (approximately $3.4 billion). In ~~2016 and 2017, two former employees filed related class action lawsuits in~~connection with the ~~United States District Court~~wind-up decision, FTTS sought to convene unitholder meetings for the ~~Northern District~~Funds to approve the appointment of ~~California, which were later consolidated,~~a liquidator and the asset management company to the Funds, Franklin Templeton Asset Management (India) Private Limited (“FTAMI”), ceased earning investment management fees on the Funds.

In May and June 2020, certain Fund unitholders and others commenced multiple writ petition actions in different courts in India against a number of respondents, including Franklin, its subsidiaries FTTS, FTAMI, and Templeton International, Inc., as sponsor of the Franklin Templeton Mutual Fund, and related individuals (collectively, the “Company Respondents”), the Securities and Exchange Board of India (“SEBI”), and other governmental entities. The petitioners challenged the decision to wind up the Funds and alleged that the Company Respondents violated various SEBI regulations, mismanaged the Funds, misrepresented or omitted certain information relating to the ~~Franklin Templeton 401(k) Retirement Plan (“Plan”).~~Funds, and/or engaged in other alleged misconduct. The petitioners requested a wide range of relief, including, among other items, an order quashing the winding up notices and blocking the unitholder votes, initiating investigations into the Company Respondents, and allowing the unitholder petitioners to redeem their investments with interest. One of the petitioners obtained an interim injunction order staying the operation and implementation of the unitholder voting process. Following appeals to the Supreme Court of India, the petitions were transferred to the High Court of Karnataka for further consolidated ~~action named as defendants Franklin,~~proceedings.

In October 2020, the ~~Plan’s fiduciary committees~~High Court of Karnataka issued its judgment, in which it upheld the decision taken by FTTS to wind up the Funds and held that there was “nothing wrong with the decision making process,” but determined that, under applicable regulations, unitholder approval is required to implement the decision. Certain Company Respondents and other parties filed cross-appeals to the Supreme Court of India, and certain ~~committee members, and~~intervenors filed applications, challenging aspects of the ~~Franklin Board of Directors and certain individual directors. The plaintiffs principally claimed that~~High Court’s judgment. In December 2020, with the defendants breached their fiduciary duties under the Employee Retirement Income Security Act by, among other things, selecting certain mutual funds sponsored and managed by the Company as investment options for the Plan, when allegedly lower cost and better performing third-party investment options were available, and further challenged the Plan’s record keeping fees as excessive. On December 3, 2018, Franklin elected to enter into an agreement-in-principle to resolve the litigation for a cash payment of $13.9 million, which the Company accrued, and, among other Plan changes, an increase in the Company’s existing matching contribution rate from 75% to 85% for eligible participant contributions for a period of three years. On October 4, 2019, the court issued final approval of the ~~agreement~~Supreme Court, and ~~dismissed~~without prejudice to its arguments on appeal that unitholder approval of the ~~litigation.~~wind-up decision is not required, FTTS proceeded to obtain approval from the majority of the voting unitholders for winding up the six Funds. In February 2021, the Supreme Court issued a decision confirming the results of the unitholder votes and appointed a third-party asset manager to serve as the liquidator and begin cash distributions to unitholders.

In July 2021, the Supreme Court issued a ruling interpreting applicable regulations to require unitholder consent to effect a trustee’s decision to wind up a fund, while finding that, upon the trustee’s publication of its decision to unitholders under applicable regulations, fund business activities, including redemptions, are suspended pending the results of the unitholder vote. The Supreme Court further found that FTTS’ April 2020 publication to unitholders of its wind-up decision complied with applicable regulations, effectively freezing redemptions. The additional issues on appeal remain pending.

FTAMI continues to cooperate with the court-appointed liquidator in its work to liquidate the Funds’ remaining investments and distribute proceeds to unitholders. As of September 2022, an aggregate of INR 26,783.2 crore (approximately $3.3 billion) has been distributed to Fund unitholders.

Table of Contents

Separately, following the completion of a forensic audit/inspection, in late November and early December 2020, SEBI initiated regulatory proceedings by issuing show cause notices against FTAMI, FTTS and certain FTAMI employees (including in their officer or director capacities), alleging certain deficiencies and areas of non-compliance in the management of the Funds. In June 2021, SEBI issued orders against FTAMI, FTTS, and the FTAMI employee respondents, finding violations of certain regulatory provisions, including with respect to similarity in investment strategies among the Funds, calculation of duration and valuation of portfolio securities, deficiencies in documentation relating to investment diligence and investment terms, and portfolio risk management. SEBI’s orders include, as applicable, aggregate monetary penalties of INR 20.0 crore (approximately $2.5 million); disgorgement of investment management and advisory fees, together with interest through the date of SEBI’s order, totaling INR 512.5 crore (approximately $62.9 million), with continuing accrual of 12% interest until paid; and a prohibition on FTAMI from launching new fixed income funds in India for a two-year period. The respondents filed appeals, as well as applications to stay enforcement of SEBI’s orders pending resolution of the appeals, with the Securities Appellate Tribunal (the “SAT”) in India, which stay applications were granted in June and July 2021, subject to respondents’ deposit in escrow of a portion of the ordered penalties for an aggregate deposit made of INR 257.5 crore (approximately $34.7 million). The SAT appeals remain pending.

The Company also responded to related inquiries and investigations commenced by certain governmental agencies in India, including the previously-reported “first information report” (the preliminary step in an investigation) registered by the Economic Offences Wing of the Chennai police department against certain of the Company Respondents in connection with a complaint by two Fund unitholders, as well as a related investigation by India’s Enforcement Directorate commenced in or around April 2021.

The Company strongly believes that the decision taken by FTTS to wind up the Funds was in the best interests of unitholders. The Company further believes that it has meritorious defenses to the outstanding claims in the pending proceedings and intends to continue vigorously defending against the claims. The Company cannot at this time predict the eventual outcome of the matters described above or reasonably estimate the possible loss or range of loss that may arise from any final outcome of such matters, including due to the complexities and uncertainty involved in the appeals and the various questions of law and fact at issue.

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 September 30, ~~2019~~2022 to provide for any probable losses that may arise from such matters for which the Company could reasonably estimate an amount.

Indemnifications and Guarantees

In the ordinary course of business or in connection with certain acquisition agreements, the Company enters into contracts that provide for indemnifications by the Company in certain circumstances. In addition, certain Company entities guarantee certain financial and performance-related obligations of various Franklin subsidiaries. The Company is also subject to certain legal requirements and agreements providing for indemnifications of directors, officers and personnel against liabilities and expenses they may incur under certain circumstances in connection with their service. 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 September 30, 2022.

Other Commitments and Contingencies

~~The Company leases office space and equipment under operating leases expiring at various dates through fiscal year~~ ~~2032. Lease expense was~~ ~~$61.7 million~~, ~~$55.9 million~~ ~~and~~ ~~$56.3 million~~ ~~in fiscal years~~ ~~2019~~, ~~2018~~ ~~and~~ ~~2017. Sublease income totaled~~ ~~$0.3 million, $0.2 million and $0.4 million in fiscal years~~ ~~2019~~, ~~2018~~ ~~and~~ ~~2017~~.

~~Future minimum lease payments under long-term non-cancelable operating leases were as follows as of~~ ~~September 30, 2019~~:

(in millions)
for the fiscal years ending September 30, Amount
2020 $ 49.5
2021 45.3
2022 40.9
2023 39.1
2024 36.7
Thereafter 149.1
Total Minimum Lease Payments $ 360.6

~~Future minimum rentals to be received under non-cancelable subleases were insignificant at~~ ~~September 30, 2019~~.

While the Company has no legal or contractual obligation to do so, it routinely makes cash investments in the course of launching sponsored funds. At September 30, ~~2019~~,2022, the Company had ~~$267.8~~$227.6 million of committed capital contributions which relate to discretionary commitments to invest in sponsored funds and other investment products and ~~entities.~~entities, including CIPs. These unfunded commitments are not recorded in the Company’s consolidated balance sheet.

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Note 1516 – Stock-Based Compensation

The Company’s stock-based compensation plans consist of the Amended and Restated Annual Incentive Compensation Plan (the “AIP”), the 2002 Universal Stock Incentive Plan, as amended and restated (the “USIP”) ~~and~~, the amended and restated Franklin Resources, Inc. 1998 Employee Stock Investment Plan (the “ESIP”)~~. The Compensation Committee of the Board of Directors determines the terms and conditions of awards under the AIP, the USIP~~, and the ~~ESIP.~~Amended and Restated Franklin Resources, Inc. 2017 Equity Incentive Plan (the “EIP”).

Stock-based compensation expenses were as follows:

(in millions)
for the fiscal years ended September 30, 2019 2018 2017
Stock and stock unit awards $ 105.7
$ 111.6
$ 117.0
Employee stock investment plan 5.8
6.2
6.4
Total $ 111.5
$ 117.8
$ 123.4


(in millions)
for the fiscal years ended September 30,	2022		2021		2020
Stock and stock unit awards	$	200.8	$	165.2	$	117.1
Employee stock investment plan	7.4		6.7		5.2
Phantom unit awards	13.5		30.4		2.7
Total	$	221.7	$	202.3	$	125.0

Stock and Stock Unit Awards

Under the terms of the AIP, eligible employees may receive cash, equity awards and/or mutual fund unit awards generally based on the performance of the Company and/or its funds, and the individual employee. The USIP ~~provides~~and EIP provide for the issuance of the Company’s common stock for various stock-related awards to officers, directors and employees. In February 2021, the Company’s stockholders approved an amendment and restatement of the USIP increasing the number of shares authorized by 20.0 million shares to a total of 140.0 million shares. There are ~~120.0~~23.0 million shares authorized under the ~~USIP, of which 14.3~~EIP. At September 30, 2022, 19.0 million shares and 14.5 million shares were available for grant ~~at September 30, 2019.~~under the USIP and EIP.

Stock awards entitle holders to the right to sell the underlying shares of the Company’s common stock once the awards vest. Stock unit awards entitle holders to receive the underlying shares of common stock once the awards vest. Awards vest based on the passage of time or the achievement of predetermined Company financial performance goals.

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 fiscal year ended September 30, 2019
Nonvested balance at September 30, 2018 2,678
1,813
4,491
$ 39.08
Granted 3,906
897
4,803
30.75
Vested (2,347 ) (606 ) (2,953 ) 35.80
Forfeited/canceled (459 ) (250 ) (709 ) 36.23
Nonvested balance at September 30, 2019 3,778
1,854
5,632
$ 34.06


(shares in thousands)	Time-Based Shares	Performance- Based Shares	Total Shares	Weighted-Average Grant-Date Fair Value
for the fiscal year ended September 30, 2022
Nonvested balance at September 30, 2021	14,176	3,658	17,834	$	22.27
Granted	4,772	252	5,024	34.20
Vested	(4,943)	(295)	(5,238)	27.25
Forfeited/canceled	(513)	(214)	(727)	27.70
Nonvested balance at September 30, 2022	13,492	3,401	16,893	$	24.04

Total unrecognized compensation expense related to nonvested stock and stock unit awards was ~~$131.0~~$240.9 million at September 30, ~~2019~~.2022. This expense is expected to be recognized over a remaining weighted-average vesting period of ~~1.8 years~~.1.9 years. The weighted-average grant-date fair values of stock awards and stock unit awards granted during fiscal years ~~2019~~, ~~2018~~2022, 2021 and ~~2017~~2020 were ~~$30.75~~, ~~$42.63~~$34.20, $21.08 and ~~$34.23~~$23.05 per share. The total fair value of stock and stock unit awards vested during the same periods was ~~$84.2~~$147.8 million,, ~~$91.5~~ $121.2 million and ~~$104.0 million~~.$72.2 million.

The Company generally does not repurchase shares upon vesting of stock and stock unit awards. However, in order to pay taxes due in connection with the vesting of employee and executive officer stock and stock unit awards, shares are repurchased using a net stock issuance method.

Employee Stock Investment Plan

The ESIP allows eligible participants to buy shares of the Company’s common stock at a discount of its market value on defined dates. A total of ~~0.9~~1.1 million shares were issued under the ESIP during fiscal year ~~2019~~,2022, and ~~1.9~~3.7 million shares were reserved for future issuance at September 30, ~~2019~~2022.

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Note 1617 – Defined Contribution Plans

The Company sponsors a 401(k) plan which covers substantially all U.S. employees meeting certain employment requirements. Participants may contribute up to 50% of their eligible salary and up to 100% of the cash portion of their year-end bonus, as defined by the plan and subject to Internal Revenue Code limitations, each year to the plan. The Company makes a matching contribution equal to ~~75%~~85% of eligible compensation contributed by participants. Under the terms of a litigation settlement, the Company will increase its matching contribution rate from 75% to 85% for a period of three years beginning January 1, 2020. See Note 14 – Commitments and Contingencies for information related to the litigation. Certain of the Company’s non-U.S. subsidiaries also sponsor defined contribution plans primarily for the purpose of providing deferred compensation incentives for employees and to comply with local regulatory requirements. The total expenses recognized for defined contribution plans were ~~$52.2~~$84.9 million,, ~~$49.8~~ $81.4 million and ~~$45.5~~$59.2 million for fiscal years ~~2019~~, ~~2018~~2022, 2021 and ~~2017~~.2020.

Note 1718 – Segment and Geographic Information

The Company has 1one operating segment, investment management and related services. See Note 4 – Revenues for total operating revenues disaggregated by geographic location.

~~Geographic information was as follows:~~


(in millions)
as of September 30,	2022		2021
Property and Equipment, Net
United States	$	588.5	$	596.6
Europe, Middle East and Africa	115.4		132.1
Asia-Pacific	32.8		34.5
Americas excluding United States	6.6		6.8
Total	$	743.3	$	770.0

(in millions)
for the fiscal years ended September 30, 2019 2018 2017
Operating Revenues
United States $ 3,487.6
$ 3,693.2
$ 3,870.6
Luxembourg 1,533.7
1,732.5
1,654.8
Americas excluding United States 392.3
478.4
483.3
Asia-Pacific 257.0
299.7
282.6
Europe, Middle East and Africa, excluding Luxembourg 103.9
115.3
100.9
Total $ 5,774.5
$ 6,319.1
$ 6,392.2

(in millions)
as of September 30, 2019 2018 2017
Property and Equipment, Net
United States $ 542.8
$ 465.4
$ 426.1
Europe, Middle East and Africa 90.0
10.1
12.2
Asia-Pacific 40.7
42.1
60.2
Americas excluding United States 10.2
17.4
18.7
Total $ 683.7
$ 535.0
$ 517.2

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.

~~Table of Contents~~

Note 1819 – Investment and Other Income ~~(Expenses)~~(Losses), Net

~~Other~~Investment and other income ~~(expenses)~~(losses), net consisted of the following:

(in millions)
for the fiscal years ended September 30, 2019 2018 2017
Investment and Other Income, Net
Dividend income $ 97.0
$ 51.1
$ 13.9
Interest income 31.0
76.5
74.9
Gains (losses) on investments, net (9.7 ) 6.0
23.6
Income (losses) from investments in equity method investees (10.4 ) 44.4
107.9
Gains (losses) on investments of CIPs, net (26.3 ) (55.0 ) 118.2
Rental income 19.8
15.9
11.1
Foreign currency exchange gains (losses), net 13.1
0.6
(16.0 )
Other, net 0.6
5.8
2.7
Total 115.1

145.3

336.3
Interest Expense (24.7 ) (48.7 ) (51.5 )
Other Income, Net $ 90.4
$ 96.6
$ 284.8


(in millions)
for the fiscal years ended September 30,	2022		2021		2020
Dividend and interest income	$	37.9	$	17.6	$	63.2

Gains (losses) on investments, net	(75.4)		90.9		(16.8)
Income (losses) from investments in equity method investees	36.2		154.3		(98.1)
Gains (losses) on derivatives, net	20.9		(23.2)		3.0
Rental income	37.9		28.8		30.0
Foreign currency exchange gains (losses), net	40.6		(11.9)		(22.3)
Other, net	(7.0)		8.2		2.6
Investment and Other Income (Losses), Net	$	91.1	$	264.7	$	(38.4)

Substantially all dividend income was generated by investments in nonconsolidated sponsored funds. ~~Interest income was primarily generated by cash equivalents and debt securities.~~ Gains (losses) on investments, net consists primarily of ~~other-than-temporary impairment of investments and~~ realized and unrealized gains (losses) on equity securities measured at fair ~~value and trading debt securities.~~value.

~~There were no sales of available-for-sale securities in fiscal year~~ ~~2019. Proceeds from the sale of available-for-sale securities were~~ ~~$85.5 million~~ ~~and~~ ~~$51.6 million~~ ~~in fiscal years~~ ~~2018~~ ~~and~~ ~~2017~~.

Net ~~losses~~gains (losses) recognized on equity securities measured at fair value and trading debt securities that were held by the Company at September 30, ~~2019~~2022, 2021 and 2020 were ~~$0.1~~$(128.9) million, $46.5 million, and ~~net gains (losses) recognized on trading investment securities that were held by the Company at September 30, 2018 and 2017 were~~ $(2.6) million.

~~$(1.7) million~~ ~~and~~ ~~$5.0 million. Net gains (losses) recognized on investment securities of CIPs that were held at September 30,~~ ~~2019~~, ~~2018~~ ~~and~~ ~~2017~~ ~~were $1.0 million,~~ ~~$(24.5) million~~ ~~and~~ ~~$21.9 million~~.

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Note 1920 – Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component were as follows:


(in millions)	Currency Translation Adjustments		Unrealized Losses on Defined Benefit Plans		Unrealized Gains on Investments		Total
as of and for the fiscal years ended September 30, 2022, 2021 and 2020
Balance at October 1, 2019	$	(425.4)	$	(6.2)	$	—	$	(431.6)
Adoption of new accounting guidance	—		—		—		—
Other comprehensive income (loss)
Other comprehensive income (loss) before reclassifications, net of tax	23.8		(2.1)		(1.3)		20.4
Reclassifications to compensation and benefits expense, net of tax	—		0.3		—		0.3
Reclassifications to net investment and other income (losses), net of tax	2.0		—		1.3		3.3
Total other comprehensive income (loss)	25.8		(1.8)		—		24.0
Balance at September 30, 2020	$	(399.6)	$	(8.0)	$	—	$	(407.6)
Other comprehensive income
Other comprehensive income before reclassifications, net of tax	27.1		1.6		—		28.7
Reclassifications to compensation and benefits expense, net of tax	—		(0.7)		—		(0.7)
Reclassifications to net investment and other income (losses), net of tax	2.0		—		—		2.0
Total other comprehensive income	29.1		0.9		—		30.0
Balance at September 30, 2021	$	(370.5)	$	(7.1)	$	—	$	(377.6)
Other comprehensive income (loss)
Other comprehensive income (loss) before reclassifications, net of tax	(246.8)		2.3		0.4		(244.1)
Reclassifications to compensation and benefits expense, net of tax	—		(1.5)		—		(1.5)
Reclassifications to net investment and other income (losses), net of tax	2.2		—		—		2.2
Total other comprehensive income (loss)	(244.6)		0.8		0.4		(243.4)
Balance at September 30, 2022	$	(615.1)	$	(6.3)	$	0.4	$	(621.0)

Note 21 – Subsequent Events

(in millions) Currency
Translation
Adjustments Unrealized
Losses on
Defined Benefit
Plans Unrealized
Gains on
Investments Total
for the fiscal year ended September 30, 2019
Balance at October 1, 2018 $ (372.9 ) $ (4.2 ) $ 6.5
$ (370.6 )
Adoption of new accounting guidance —
—
(8.0 ) (8.0 )
Other comprehensive income (loss)
Other comprehensive loss before reclassifications, net of tax (53.9 ) (2.4 ) (5.4 ) (61.7 )
Reclassifications to compensation and benefits expense, net of tax —
0.4
—
0.4
Reclassifications to net investment and other income, net of tax 1.4
—
6.9
8.3
Total other comprehensive income (loss) (52.5 ) (2.0 ) 1.5
(53.0 )
Balance at September 30, 2019 $ (425.4 ) $ (6.2 ) $ —
$ (431.6 )
On November 1, 2022, the Company acquired all of the outstanding ownership interests in BNY Alcentra Group Holdings, Inc. from The Bank of New York Mellon Corporation for cash consideration of approximately $587.3 million paid at closing, including $188.3 million related to investments, and up to $350.0 million in contingent consideration to be paid upon on the achievement of certain performance thresholds over the next four years.

On November 1, 2022, the Company announced a voluntary buyout for certain U.S. employees who meet specific criteria related to age and years of service. The impact of this voluntary termination plan is unknown, but is expected to result in increased compensation and benefits expense during the fiscal year ending September 30, 2023.

(in millions)
Currency
Translation
Adjustments
Unrealized
Losses on
Defined Benefit
Plans Unrealized
Gains on
Investments Total
for the fiscal year ended September 30, 2018
Balance at October 1, 2017 $ (281.0 ) $ (6.0 ) $ 2.2
$ (284.8 )
Adoption of new accounting guidance —
(0.1 ) —
(0.1 )
Other comprehensive income (loss)
Other comprehensive income (loss) before reclassifications, net of tax (85.5 ) 1.5
7.3
(76.7 )
Reclassifications to compensation and benefits expense, net of tax —
0.4
—
0.4
Reclassifications to net investment and other income, net of tax (6.4 ) —
(3.0 ) (9.4 )
Total other comprehensive income (loss) (91.9 ) 1.9
4.3
(85.7 )
Balance at September 30, 2018 $ (372.9 ) $ (4.2 ) $ 6.5
$ (370.6 )

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~~Item 9.~~	~~Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.~~

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.


~~Item 9A.~~	~~Controls and Procedures.~~

Item 9A.Controls and Procedures.

The Company’s management evaluated, with the participation of the Company’s principal executive and principal financial officers, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, ~~2019~~.2022. Based on their evaluation, the Company’s principal executive and principal financial officers concluded that the Company’s disclosure controls and procedures as of September 30, ~~2019~~2022 were designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the ~~SEC~~’sSecurities and Exchange Commission’s (“SEC”) rules and forms, and (ii) accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate, to allow timely decisions regarding ~~required~~ disclosure.

There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company’s fiscal quarter ended September 30, ~~2019~~,2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm are set forth in Item 8 of Part II of this Annual Report on Form 10‑K, ~~are~~which is incorporated herein by reference.

The effectiveness of the Company’s internal control over financial reporting as of September 30, 2022 has been audited by PricewaterhouseCoopers LLP, the independent registered public accounting firm that audits the Company’s consolidated financial statements, as stated in their report which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of September 30, 2022.


~~Item 9B.~~	~~Other Information.~~

Item 9B.Other Information.

None.

Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

9596

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PART III


~~Item 10.~~	~~Directors, Executive Officers and Corporate Governance.~~

Item 10.Directors, Executive Officers and Corporate Governance.

The information required by this Item 10 with respect to executive officers of Franklin is contained at the end of Part I of this ~~Form 10‑K~~Annual Report under the heading “Information About Our Executive Officers.”

Code of Ethics. Franklin has adopted a Code of Ethics and Business Conduct (the “Code of Ethics”) that applies to Franklin’s principal executive officer, principal financial officer, principal accounting officer, controller, and any persons performing similar functions, as well as all directors, officers and employees of Franklin and its subsidiaries and affiliates. The Code of Ethics is posted on our website at www.franklinresources.com under “Corporate Governance.” A copy of the Code of Ethics is available in print free of charge to any stockholder who requests a copy. Interested parties may address a written request for a printed copy of the Code of Ethics to: Secretary, Franklin Resources, Inc., One Franklin Parkway, San Mateo, California 94403-1906. We intend to satisfy the disclosure requirement regarding any amendment to, or a waiver from, a provision of the Code of Ethics for Franklin’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website.

The other information required by this Item 10 is incorporated by reference from the information to be provided under the sections titled “Proposal No. 11: Election of ~~Directors–Nominees”~~Directors” and “Information about the Board and its ~~Committees–~~Committees – The Audit Committee” from Franklin’s definitive proxy statement for its annual meeting of stockholders to be filed with the SEC within 120 days after September 30, ~~2019~~2022 (“~~2020~~2023 Proxy Statement”).


~~Item 11.~~	~~Executive Compensation.~~

Item 11. Executive Compensation.

The information required by this Item 11 is incorporated by reference from the information to be provided under the sections of our ~~2020~~2023 Proxy Statement titled “Director Fees,” “Compensation Discussion and Analysis” and “Executive Compensation.”


~~Item 12.~~	~~Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.~~

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item 12 is incorporated by reference from the information to be provided under the sections of our ~~2020~~2023 Proxy Statement titled “Stock Ownership of Certain Beneficial Owners,” “Stock Ownership and Stock-Based Holdings of Directors and Executive Officers” and “Executive ~~Compensation–~~Compensation – Equity Compensation Plan Information.”


~~Item 13.~~	~~Certain Relationships and Related Transactions, and Director Independence.~~

Item 13.Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item 13 is incorporated by reference from the information to be provided under the sections of our ~~2020~~2023 Proxy Statement titled “Proposal No. 11: Election of ~~Directors–~~Directors – General,” “Corporate ~~Governance–~~Governance – Director Independence Standards” and “Certain Relationships and Related Transactions.”


~~Item 14.~~	~~Principal Accountant Fees and Services.~~

Item 14.Principal Accountant Fees and Services.

The information required by this Item 14 is incorporated by reference from the information to be provided under the section of our ~~2020~~2023 Proxy Statement titled “Fees Paid to Independent Registered Public Accounting Firm.”

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PART IV

Item 15.Exhibits and Financial Statement Schedules.


~~Item 15.~~(a)(1)			~~Exhibits and Financial Statement Schedules.~~



~~(a)(1)~~	The financial statements filed as part of this report are listed in Item 8 of this ~~Form 10‑K.~~Annual Report.
(a)(2)		No financial statement schedules are required to be filed as part of this report because all such schedules have been omitted. Such omission has been made on the basis that information is provided in the financial statements, or in the related notes thereto, in Item 8 of this ~~Form 10‑K~~Annual Report or is not required to be filed as the information is not applicable.
(a)(3)		The exhibits listed on the Exhibit Index to this ~~Form 10‑K~~Annual Report are incorporated herein by reference.


~~Item 16.~~	~~Form 10‑K Summary.~~

Item 16.Form 10‑K Summary.

None.

EXHIBIT INDEX



Exhibit No.		Description
3.1	~~Registrant’s~~ Certificate of Incorporation of Registrant, as filed November 28, 1969, incorporated by reference to Exhibit (3)(i) to ~~the Registrant’s~~our Annual Report on Form 10-K for the fiscal year ended September 30, 1994 (File No. 001-09318) (the “1994 Annual Report”)
3.2	~~Registrant’s~~ Certificate of Amendment of Certificate of Incorporation of Registrant, as filed March 1, 1985, incorporated by reference to Exhibit 3(ii) to the 1994 Annual Report
3.3	~~Registrant’s~~ Certificate of Amendment of Certificate of Incorporation of Registrant, as filed April 1, 1987, incorporated by reference to Exhibit 3(iii) to the 1994 Annual Report
3.4	~~Registrant’s~~ Certificate of Amendment of Certificate of Incorporation of Registrant, as filed February 2, 1994, incorporated by reference to Exhibit 3(iv) to the 1994 Annual Report
3.5	~~Registrant’s~~ Certificate of Amendment of Certificate of Incorporation of Registrant, as filed on February 4, 2005, incorporated by reference to Exhibit (3)(i)(e) to ~~the Registrant’s~~our Quarterly Report on Form 10-Q for the period ended December 31, 2004 (File No. 001-09318)
3.6	~~Registrant’s~~ Amended and Restated Bylaws of Registrant (as adopted and effective ~~October 22, 2018)~~June 29, 2021), incorporated by reference to Exhibit 3.1 to ~~the Registrant’s~~our Current Report on Form 8-K filed ~~with the SEC~~ on ~~October 24, 2018~~July 1, 2021 (File No. 001-09318)
4.1	Indenture, dated as of May 19, 1994, between ~~the~~ Registrant and The Bank of New York Mellon Trust Company, N.A. (as successor to Chemical Bank), as trustee, ~~dated as of May 19, 1994,~~ incorporated by reference to Exhibit 4 to ~~the Registrant’s~~our Registration Statement on Form S-3 filed ~~with the SEC~~ on April 14, 1994 (File No. 033-53147)
4.2	First Supplemental Indenture, dated October 9, 1996, between ~~the~~ Registrant and The Bank of New York Mellon Trust Company, N.A. (as successor to The Chase Manhattan Bank), as trustee, incorporated by reference to Exhibit 4.2 to ~~the Registrant’s~~our Registration Statement on Form S-3 filed ~~with the SEC~~ on October 4, 1996 (File No. 333-12101)
4.3	Second Supplemental Indenture, dated May 20, 2010, between ~~the~~ Registrant and The Bank of New York Mellon Trust Company, N.A., as trustee, incorporated by reference to Exhibit 4.1 to ~~the Registrant’s~~our Current Report on Form 8‑K filed ~~with the SEC~~ on May 20, 2010 (File No. 001-09318)
4.4	~~Third~~Fourth Supplemental Indenture, dated ~~September 24, 2012,~~March 30, 2015 (inclusive of the form of note of Registrant’s 2.850% Notes due 2025), between ~~the~~ Registrant and The Bank of New York Mellon Trust Company, N.A., as trustee, incorporated by reference to Exhibit 4.1 to ~~the Registrant’s~~our Current Report on Form 8‑K filed ~~with the SEC~~ on ~~September 24, 2012~~March 30, 2015 (File No. 001-09318)
4.5	~~Fourth Supplemental~~ Indenture, dated ~~March 30, 2015,~~as of October 6, 2020, between ~~the~~ Registrant and The Bank of New York Mellon Trust Company, N.A., as trustee, incorporated by reference to Exhibit 4.3 to our Registration Statement on Form S-3ASR filed on October 6, 2020 (File No. 033-249350)
4.6	Officer’s Certificate, dated October 19, 2020 (inclusive of the form of note of Registrant’s 1.600% Notes due 2030), incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed on October 19, 2020 (File No. 011-09318)
4.7	Base Indenture, dated as of January 22, 2014, for Senior Notes between Legg Mason, Inc. and The Bank of New York Mellon, as trustee, incorporated by reference to Exhibit 4.1 to Legg Mason’s Registration Statement on Form S-3ASR filed on February 19, 2016 (File No. 333-209616)

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Exhibit No.						Description
4.8						First Supplemental Indenture, dated as of January 22, 2014 (inclusive of the ~~Registrant’s~~form of note of Legg Mason’s 5.625% Senior Notes due 2044), between Legg Mason, Inc. and The Bank of New York Mellon, as trustee, incorporated by reference to Exhibit 4.2 to Legg Mason’s Current Report on Form ~~8‑K~~8-K filed ~~with~~on January 22, 2014 (File No. 001-08529)
4.9						Second Supplemental Indenture, dated as of June 26, 2014, between Legg Mason, Inc. and The Bank of New York Mellon, as trustee, incorporated by reference to Exhibit 4.1 to Legg Mason’s Current Report on Form 8-K filed on June 26, 2014 (File No. 001-08529)
4.10						Third Supplemental Indenture, dated as of June 26, 2014 (inclusive of the ~~SEC~~form of note of Legg Mason’s 3.950% Senior Notes due 2024), between Legg Mason, Inc. and The Bank of New York Mellon, as trustee, incorporated by reference to Exhibit 4.2 to Legg Mason’s Current Report on Form 8-K filed on June 26, 2014 (File No. 001-08529)
4.11						Fourth Supplemental Indenture, dated as of March 22, 2016 (inclusive of the form of note of Legg Mason’s 4.750% Senior Notes due 2026), between Legg Mason, Inc. and The Bank New York Mellon, as trustee, incorporated by reference to Exhibit 4.2 to Legg Mason’s Current Report on Form 8-K filed on March 22, 2016 (File No. 001-08529)
4.12						Registrant Parent Guarantee dated August 2, 2021, incorporated by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q for the period ended June 30, ~~2015~~2021 (File No. 001-09318)
~~4.6~~4.13						Officer’s Certificate, dated August 12, 2021 (inclusive of the form of additional note of Registrant’s 1.600% Notes due 2030 and form of note of Registrant’s 2.950% Notes due 2051), incorporated by reference to Exhibit 4.3 to our Current Report on Form 8-K filed on August 12, 2021 (File No. 011-09318)
4.14						Description of Registrant’s Securities, ~~(filed herewith)~~incorporated by reference to Exhibit 4.16 to our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (File No. 001-09318)
10.1						Amended and Restated Credit Agreement, dated as of September 8 , 2022, between Registrant, as borrower, the financial institutions from time to time party thereto, as lenders, and Bank of America, N.A., as administrative agent, incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on September 13 , 2022 (File No. 001-09318)
10.2						Term Loan Agreement, dated as of September 8, 2022, between Registrant, as borrower, the financial institutions from time to time party thereto, as lenders, and Bank of America, N.A., as administrative agent, incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on September 13, 2022 (File No. 001-09318)
10.3						Representative Form of Amended and Restated Indemnification Agreement with directors of ~~the~~ Registrant, incorporated by reference to Exhibit 10.5 to ~~the Registrant’s~~our Quarterly Report on Form 10-Q for the period ended March 31, 2006 (File No. 001-09318)*
~~10.2~~10.4						2006 Directors Deferred Compensation Plan (as amended and restated effective November 5, 2020), incorporated by reference to Exhibit 10.4 to our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (File No. 001-09318)*
10.5						1998 Employee Stock Investment Plan (as amended and restated effective June 21, 2022), incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended June 30, 2022 (File No. 001-09318)*
10.6						2002 Universal Stock Incentive Plan (as amended and restated effective February 9, 2021), incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on February 10, 2021 (File No. 001-09318)*
10.7						Amended and Restated Annual Incentive Compensation Plan (as amended and restated effective December 10, 2019), incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended December 31, 2019 (File No. 001-09318)*
10.8						Amended and Restated 2017 Equity Incentive Plan, incorporated by reference to Exhibit 99.1 to our Registration Statement on Form S-8 filed on October 6, 2020 (File No. 333-249336)*
10.9						Deferred Compensation Fund Plan (effective November 16, 2021), incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 16, 2021 (File No. 001-09318)*
10.10						Non-Employee Director Compensation as of February 11, 2020, incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the period ended March 31, 2020 (File No. 001-09318)*
10.11						Named Executive Of ficer Compensation as of January 1, 2022 , incorporated by reference to Exhibit 10 .2 to our Quarterly Report on Form 10 -Q for the period ended December 31,2021 (F ile No. 001-09318)*
10.12						Representative Forms of Notice of Restricted Stock Unit Award and Restricted Stock Unit Award Agreement (RSU) under our 2002 Universal Stock Incentive Plan for certain time-based awards to executive officers of Registrant (filed herewith )*

Table of Contents


Exhibit No.						Description
10.13						Representative Forms of Notice of Restricted Stock Unit Award and Restricted Stock Unit Award Agreement (RSU) under our 2002 Universal Stock Incentive Plan for certain performance-based awards to executive officers of Registrant (filed herewith )*
10.14						Representative Forms of Notice of Restricted Stock Award and Restricted Stock Award Agreement (RSA) under ~~the Registrant’s~~our 2002 Universal Stock Incentive Plan for certain time-based awards to executive officers of Registrant, incorporated by reference to Exhibit 10.2 to our Annual Report on Form 10-K for the ~~Registrant (filed herewith)~~fiscal year ended September 30, 2020 (File No. 001-09318)*

~~Table of Contents~~


10.15
~~Exhibit No.~~	~~Description~~
~~10.3~~	Representative ~~Form~~Forms of Notice of Restricted Stock Unit Award and Restricted Stock Unit Award Agreement (RSU) under ~~the Registrant’s~~our 2002 Universal Stock Incentive Plan for certain performance-based awards to executive officers of ~~the~~ Registrant, (filed herewith)*
~~10.4~~	~~2006 Directors Deferred Compensation Plan, as amended and restated effective March 13, 2013,~~ incorporated by reference to Exhibit ~~10.1~~10.3 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2013 (File No. 001-09318)*
~~10.5~~	~~1998 Employee Stock Investment Plan (as amended and restated effective September 13, 2017), incorporated by reference to Exhibit 10.5 to the Registrant’s~~our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017~~2020 (File No. 001-09318) ~~(the “2017 Annual Report”)~~*
~~10.6~~10.16		Representative Forms of Notice of Restricted Stock Unit Award and Restricted Stock Unit Award Agreement (RSU) under our 2002 Universal Stock Incentive Plan ~~(as amended~~for certain time-based awards to executive officers of Registrant , incorporated by re fere nce to Exhibit 10.15 to our Annual Report on Form 10-K for the fiscal year ended September 30, 202 1 (File No. 001-09318)*
10.17		Representative Forms of Notice of Restricted Stock Unit Award and ~~restated effective June 14, 2017)~~Restricted Stock Unit Award Agreement (RSU) under our 2002 Universal Stock Incentive Plan for certain performance-based awards to executive officers of Registrant , incorporated by reference to Exhibit ~~10.6 to~~10.16 t o ou r An nual Report on Form 10-K for the 2017 Annual Reportfiscal year ended Se ptember 30, 2021 (File No. 001-09318)
~~10.7~~10.18		~~Amended~~Notice of Restricted Stock Award and ~~Restated Annual~~Restricted Stock Award Agreement (dated September 2, 2020) under our 2002 Universal Stock Incentive ~~Compensation~~ Plan ~~(as amended and restated effective June 14, 2016)~~for performance-based award to Adam B. Spector , incorporated by reference to Exhibit ~~10.1~~10.17 to our Annual R eport on Fo rm 1 0-K for the ~~Registrant’s Quarterly Report on Form 10-Q for the period~~fiscal year ended ~~June~~September 30, ~~2016~~2021 (File No. ~~001-09318)~~001-09318)*
~~10.8~~21		2014 Key Executive Incentive Compensation Plan (as adopted and effective December 10, 2013), incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 13, 2014 (File No. 001-09318)*
~~10.9~~	Non-Employee Director Compensation as of February 14, 2018, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2018 (File No. 001-09318)*
~~10.10~~	Named Executive Officer Compensation as of September 30, 2018, incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the period ended December 31, 2018 (File No. 001-09318*
~~10.11~~	Offer Letter, dated March 6, 2019, between the Registrant and Matthew Nicholls, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2019 (File No. 001-09318)*
~~10.12~~	Executive Transition Agreement, effective May 7, 2019, between the Registrant and Kenneth A. Lewis, incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2019 (File No. 001-09318)*
21	List of Subsidiaries (filed herewith)
23		Consent of Independent Registered Public Accounting Firm (filed herewith)
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101		The following materials from ~~the~~ Registrant’s Annual Report on Form 10‑K for the fiscal year ended September 30, ~~2019,~~2022, formatted in Inline Extensible Business Reporting Language (iXBRL), include: (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) related notes (filed herewith)
104		Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101)

^{__________________}


*			Management contract or compensatory plan or arrangement

98100

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


				FRANKLIN RESOURCES, INC.

Date:			November 14, 2022	~~FRANKLIN RESOURCES, INC.~~
By:
~~Date:~~	~~November 12, 2019~~	~~By:~~	/s/ Matthew Nicholls
					Matthew Nicholls, Executive Vice President, ~~and~~ Chief Financial Officer and Chief Operating Officer

Date:			November ~~12, 2019~~14, 2022	By:	/s/ Gwen L. Shaneyfelt
					Gwen L. Shaneyfelt, Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:


Date:			November 14, 2022	By:	/s/ Jennifer M. Johnson
					Jennifer M. Johnson, President, Chief Executive Officer and Director (Principal Executive Officer)

Date:			November ~~12, 2019~~14, 2022	By:	~~/s/ Gregory E. Johnson~~
			~~Gregory E. Johnson, Chairman, Director and Chief Executive Officer~~ ~~(Principal Executive Officer)~~

~~Date:~~	~~November 12, 2019~~	~~By:~~	/s/ Matthew Nicholls
					Matthew Nicholls, Executive Vice President, ~~and~~ Chief Financial Officer and Chief Operating Officer (Principal Financial Officer)

Date:			November ~~12, 2019~~14, 2022	By:	/s/ Gwen L. Shaneyfelt
					Gwen L. Shaneyfelt, Chief Accounting Officer (Principal Accounting Officer)

Date:			November ~~12, 2019~~14, 2022	By:	~~/s/ Peter K. Barker~~
			~~Peter K. Barker, Director~~

~~Date:~~	~~November 12, 2019~~	~~By:~~	/s/ Mariann Byerwalter
					Mariann Byerwalter, Director

Date:			November ~~12, 2019~~14, 2022	By:	/s/ ~~Charles~~Alexander S. Friedman
					Alexander S. Friedman, Director

Date:			November 14, 2022	By:	/s/ Gregory E. Johnson
					~~Charles~~Gregory E. Johnson, Executive Chairman, Chairman of the Board and Director

Date:			November ~~12, 2019~~14, 2022	By:	/s/ Rupert H. Johnson, Jr.
					Rupert H. Johnson, Jr., Vice Chairman and Director

Date:			November ~~12, 2019~~14, 2022	By:	/s/ ~~Mark C. Pigott~~John Y. Kim
					~~Mark C. Pigott,~~John Y. Kim, Director

Date:			November ~~12, 2019~~14, 2022	By:	/s/ ~~Chutta Ratnathicam~~ Karen M. King
					~~Chutta Ratnathicam,~~Karen M. King, Director

Date:			November ~~12, 2019~~14, 2022	By:	/s/ ~~Laura Stein~~ Anthony J. Noto
					~~Laura Stein,~~Anthony J. Noto, Director

Date:			November ~~12, 2019~~14, 2022	By:	/s/ John W. Thiel
					John W. Thiel, Director

Date:			November 14, 2022	By:	/s/ Seth H. Waugh
					Seth H. Waugh, Director

Date:			November ~~12, 2019~~14, 2022	By:	/s/ Geoffrey Y. Yang
					Geoffrey Y. Yang, Director

99101



Delaware						13-2670991
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.10 per share	BEN	New York Stock Exchange



☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


(in billions) as of September 30, 2022	U.S. Funds		Non-U.S. Funds		Institutional Separate Accounts		Retail Separately Managed Accounts		Other		Total		Percentage of Total AUM
Fixed Income	$	146.9	$	35.6	$	238.2	$	28.0	$	42.2	$	490.9	38	%
Equity	188.9		68.1		35.5		66.7		33.1		392.3		30	%
Alternative	5.7		6.0		32.1		—		181.3		225.1		17	%
Multi-Asset	82.2		7.5		6.8		5.4		29.6		131.5		10	%
Cash Management	28.6		27.9		1.1		—		—		57.6		5	%
Total	$	452.3	$	145.1	$	313.7	$	100.1	$	286.2	$	1,297.4	100	%



Investment Objective	Value in Billions		Percentage of Total AUM
Equity
Growth potential, income potential, value or various combinations thereof	$	270.5	39	%
Multi-Asset/Balanced
Asset allocation, balanced, flexible, alternative and income-mixed funds	134.3		20	%
Fixed Income
Global/international, U.S. tax-free and U.S. taxable	278.3		40	%
Cash Management
Short-term liquid assets	9.5		1	%
Total	$	692.6	100	%


•	~~U.S. Funds~~ - Our U.S. funds (including U.S.-registered open-end and closed-end funds, exchange-traded funds and our insurance products trust), in the aggregate, accounted for $379.8 billion of AUM. Our five largest U.S. funds represented, in the aggregate, 23% of total AUM.


•	~~Cross-Border Funds~~ - Our cross-border products, which are comprised of a variety of funds principally domiciled in Luxembourg and registered for sale to non-U.S. investors in certain other countries, in the aggregate, accounted for $93.7 billion of AUM. Our five largest cross-border funds represented, in the aggregate, 7% of total AUM.


•	~~Local/Regional Funds~~ ~~- In addition to our cross-border products, in some countries we offer products for the particular local market. These local/regional funds, in the aggregate, accounted for $44.8 billion of AUM.~~


•	~~Other Accounts, Alternative Investment Products and Trusts~~ ~~- Our other accounts, alternative investment products and trusts, in the aggregate, accounted for $174.3 billion of AUM.~~



(in billions) Investment Objective	U.S. Funds		Cross-Border Funds		Local/Regional Funds		Other Accounts, Alternative Investment Products and Trusts		Total
Equity
Asia-Pacific	$	1.0	$	6.7	$	7.6	$	11.2	$	26.5
Canada	—		—		3.3		3.6		6.9
Europe, Middle East and Africa	1.6		2.0		3.3		2.1		9.0
U.S.	97.4		9.6		1.6		3.5		112.1
Emerging markets ¹	3.3		4.2		5.9		3.2		16.6
Global/international ²	44.8		10.9		3.7		40.0		99.4
Total equity	148.1		33.4		25.4		63.6		270.5
Multi-Asset/Balanced
Asia-Pacific	—		—		0.4		0.2		0.6
Canada	—		—		0.6		0.6		1.2
U.S.	91.3		2.4		0.2		20.0		113.9
Global/international ²	3.0		6.7		0.6		8.3		18.6
Total multi-asset/balanced	94.3		9.1		1.8		29.1		134.3
Fixed Income
Asia-Pacific	—		0.4		8.5		0.5		9.4
Canada	—		—		3.3		0.5		3.8
Europe, Middle East and Africa	—		2.0		0.2		0.9		3.1
U.S. tax-free	62.0		—		0.2		4.1		66.3
U.S. taxable	27.1		4.3		1.0		35.0		67.4
Emerging markets ¹	0.9		11.9		0.8		15.8		29.4
Global/international ²	40.1		32.0		2.0		24.8		98.9
Total fixed income	130.1		50.6		16.0		81.6		278.3
Cash Management	7.3		0.6		1.6		—		9.5
Total	$	379.8	$	93.7	$	44.8	$	174.3	$	692.6


¹	~~Emerging markets include developing countries worldwide.~~


~~Item 1.~~	~~Business.~~


~~Item 1A.~~	~~Risk Factors.~~


²	~~Global/international includes products that invest worldwide (including the U.S.) or only outside of the U.S.~~



	Benchmark Comparison^{1, 2}								Peer Group Comparison^{1, 3}
	% of AUM Exceeding Benchmark								% of AUM in Top Two Peer Group Quartiles
as of September 30, 2019	1-Year		3-Year		5-Year		10-Year		1-Year		3-Year		5-Year		10-Year
Equity
Global/international	27	%	24	%	24	%	23	%	37	%	29	%	28	%	29	%
United States	49	%	30	%	32	%	27	%	87	%	69	%	67	%	73	%
Total equity	37	%	27	%	27	%	25	%	59	%	47	%	45	%	49	%
Multi-Asset/Balanced	7	%	8	%	7	%	1	%	87	%	25	%	17	%	74	%
Fixed Income
Tax-free	47	%	39	%	44	%	41	%	49	%	46	%	45	%	45	%
Taxable
Global/international	8	%	78	%	7	%	76	%	16	%	74	%	52	%	80	%
United States	2	%	40	%	8	%	54	%	13	%	20	%	11	%	5	%
Total fixed income	17	%	61	%	18	%	60	%	24	%	58	%	43	%	55	%



(in basis points)	Industry Average ¹
for the fiscal years ended September 30,	2019	2018	2017
Equity
Global/international ²	43	47	50
United States	30	32	35
Multi-Asset/Balanced	45	47	49
Fixed Income
Tax-free	32	32	33
Taxable
Global/international ³	34	36	39
United States	28	30	31
Cash Management	16	16	15



	Accounting Classification¹								Total Direct Portfolio
(in millions)	Cash and Cash Equivalents and Other²		Equity Securities, at Fair Value		Equity Method Investments		Direct Investments in CIPs		Total Direct Portfolio
Cash and Cash Equivalents	$	5,803.4	$	—	$	—	$	—	$	5,803.4
Investments
Equity
Global/international	9.3		111.3		603.4		133.3		857.3
United States	8.1		5.5		13.2		48.1		74.9
Total equity	17.4		116.8		616.6		181.4		932.2
Multi-Asset/Balanced	3.1		19.9		39.5		109.7		172.2
Fixed Income
Tax-free	—		—		—		6.1		6.1
Taxable
Global/international	43.0		197.8		125.6		627.7		994.1
United States	28.9		195.5		151.7		206.7		582.8
Total fixed income	71.9		393.3		277.3		840.5		1,583.0
Total investments	92.4		530.0		933.4		1,131.6		2,687.4
Total Cash and Cash Equivalents and Investments	$	5,895.8	$	530.0	$	933.4	$	1,131.6	$	8,490.8



(in millions)	Payments Due by Fiscal Year
as of September 30, 2019	2020		2021		2022		2023		2024		There- after		Total
Debt
Principal ¹	$	0.2	$	—	$	300.0	$	—	$	—	$	400.0	$	700.2
Interest	19.8		19.8		19.8		11.4		11.4		5.7		87.9
Operating leases	49.5		45.3		40.9		39.1		36.7		149.1		360.6
Purchase obligations ²	158.6		75.6		28.9		16.8		17.1		0.6		297.6
Total Contractual Obligations	228.1		140.7		389.6		67.3		65.2		555.4		1,446.3
Committed capital contributions ³	267.8		—		—		—		—		—		267.8
Federal transition tax liability ⁴	49.9		74.1		74.1		74.1		138.9		416.8		827.9
Total Contractual Obligations and Commitments	$	545.8	$	214.8	$	463.7	$	141.4	$	204.1	$	972.2	$	2,542.0



(in millions, except per share data)
Quarter ended	December 31			March 31		June 30		September 30
Fiscal year 2019
Operating revenues	$	1,411.5		$	1,433.8	$	1,476.7	$	1,452.5
Operating income	411.5			379.5		374.9		391.5
Net income attributable to Franklin Resources, Inc.¹	275.9			367.5		245.9		306.4
Earnings per share
Basic	$	0.54		$	0.72	$	0.48	$	0.61
Diluted	0.54			0.72		0.48		0.61
Dividends declared per share	$	0.26		$	0.26	$	0.26	$	0.26
AUM (in billions)
Ending	$	649.9		$	712.3	$	715.2	$	692.6
Average	683.2			688.6		710.8		702.0

Fiscal year 2018
Operating revenues	$	1,615.5		$	1,617.8	$	1,558.6	$	1,527.2
Operating income	581.1			555.7		503.1		478.7
Net income (loss) attributable to Franklin Resources, Inc.¹	(583.3		)	443.2		402.0		502.5
Earnings (loss) per share
Basic	$	(1.06	)	$	0.79	$	0.75	$	0.96
Diluted	(1.06		)	0.78		0.75		0.96
Dividends declared per share	$	0.23		$	3.23	$	0.23	$	0.23
AUM (in billions)
Ending	$	753.8		$	737.5	$	724.1	$	717.1
Average	752.7			751.8		731.7		724.3



(in millions)	As Reported		Adoption Impact			Amount Without Adoption
for the fiscal year ended September 30, 2019	As Reported		Adoption Impact			Amount Without Adoption
Operating Revenues
Investment management fees	$	3,985.2	$	59.6		$	4,044.8
Sales and distribution fees	1,444.6		(59.6		)	1,385.0
Shareholder servicing fees	216.3		(8.6		)	207.7

Operating Expenses
General, administrative and other	$	420.7	$	(8.6	)	$	412.1



(in millions)	Initial Estimated Fair Value			Adjustments			Revised Estimated Fair Value
as of February 1, 2019	Initial Estimated Fair Value			Adjustments			Revised Estimated Fair Value
Cash	$	33.2		$	—		$	33.2
Investments	138.8			—			138.8
Investments of consolidated investment products	84.9			—			84.9
Indefinite-lived intangible assets	307.5			(27.4		)	280.1
Definite-lived intangible assets	75.8			—			75.8
Goodwill	315.8			29.9			345.7
Other assets	35.7			(0.5		)	35.2
Other liabilities	(58.2		)	0.7			(57.5		)
Nonredeemable noncontrolling interests	(216.1		)	—			(216.1		)
Total Identifiable Net Assets	$	717.4		$	2.7		$	720.1


(in millions)	Initial Estimated Fair Value		Adjustments		Revised Estimated Fair Value
as of April 1, 2022
Goodwill	$	1,105.3	$	(9.3)	$	1,096.0
Definite-lived intangible assets	552.0		—		552.0
Investments	163.0				163.0
Operating lease right-of-use assets	84.4				84.4
Other assets and liabilities, net	28.1		9.3		37.4
Operating lease liabilities	(91.8)				(91.8)
Nonredeemable noncontrolling interests	(149.9)		—		(149.9)
Total Identifiable Net Assets	$	1,691.1	$	—	$	1,691.1


(in millions)	United States		Luxembourg		Asia-Pacific		Americas Excluding United States		Europe, Middle East and Africa, Excluding Luxembourg		Total
for the fiscal year ended September 30, 2022
Investment management fees	$	4,926.6	$	901.1	$	309.6	$	246.5	$	233.0	$	6,616.8
Sales and distribution fees	997.7		341.8		25.5		50.0		—		1,415.0
Shareholder servicing fees	153.8		36.0		1.4		0.2		1.6		193.0
Other	48.1		1.0		0.7		0.5		0.2		50.5
Total	$	6,126.2	$	1,279.9	$	337.2	$	297.2	$	234.8	$	8,275.3


	Earned From Contracts With Customers										Not Earned From Contracts With Customers¹		Total
(in millions)	United States		Luxembourg		Americas Excluding United States		Asia-Pacific		Europe, Middle East and Africa, Excluding Luxembourg						(in millions)	United States		Luxembourg		Asia-Pacific		Americas Excluding United States		Europe, Middle East and Africa, Excluding Luxembourg		Total
for the fiscal year ended September 30, 2019
for the fiscal year ended September 30, 2021															for the fiscal year ended September 30, 2021	United States		Luxembourg		Asia-Pacific		Americas Excluding United States		Europe, Middle East and Africa, Excluding Luxembourg		Total
Investment management fees	$	2,260.6	$	1,064.7	$	325.4	$	241.8	$	92.7	$	—	$	3,985.2	Investment management fees
Sales and distribution fees	941.3		437.2		63.3		1.3		1.5		—		1,444.6		Sales and distribution fees	1,137.4		395.8		46.1		52.5		3.7		1,635.5
Shareholder servicing fees	175.7		30.1		0.1		10.4		—		—		216.3		Shareholder servicing fees	164.7		36.1		6.6		0.2		3.6		211.2
Other	18.6		1.5		—		1.0		2.2		105.1		128.4		Other	29.2		1.0		1.9		—		5.1		37.2
Total	$	3,396.2	$	1,533.5	$	388.8	$	254.5	$	96.4	$	105.1	$	5,774.5	Total	$	5,979.0	$	1,507.9	$	387.9	$	338.3	$	212.4	$	8,425.5


¹	~~Consists of interest and dividend income from consolidated investment products.~~



			Gross Unrealized
(in millions)	Cost Basis		Gains		Losses			Fair Value
as of September 30, 2019
Debt securities	$	4.0	$	—	$	—		$	4.0

as of September 30, 2018
Sponsored funds	$	172.9	$	8.3	$	(2.6	)	$	178.6
Debt and other equity securities	16.8		0.5		(1.8		)	15.5
Total	$	189.7	$	8.8	$	(4.4	)	$	194.1



	Less Than 12 Months					12 Months or Greater					Total
(in millions)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
as of September 30, 2018	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Sponsored funds	$	48.8	$	(2.1	)	$	21.0	$	(0.5	)	$	69.8	$	(2.6	)
Debt and other equity securities	10.9		(1.8		)	—		—			10.9		(1.8		)
Total	$	59.7	$	(3.9	)	$	21.0	$	(0.5	)	$	80.7	$	(4.4	)


	Fair Value Level	2022				2021
(in millions)		Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
as of September 30,
Financial Assets
Cash and cash equivalents	1	$	4,134.9	$	4,134.9	$	4,357.8	$	4,357.8
Other investments
Time deposits	2	9.4		9.4		13.2		13.2
Equity securities	3	256.9		256.9		94.5		99.1

Financial Liability
Debt	2	$	3,376.4	$	2,750.1	$	3,399.4	$	3,434.1



(in millions)							Useful Lives In Years
as of September 30,	2019			2018			Useful Lives In Years
Furniture, software and equipment	$	846.7		$	798.6		3 – 10
Premises and leasehold improvements	789.2			628.1			5 – 35
Land	80.1			74.1			N/A
Total cost	1,716.0			1,500.8
Less: accumulated depreciation and amortization	(1,032.3		)	(965.8		)
Property and Equipment, Net	$	683.7		$	535.0



(in millions)	2019			Effective Interest Rate		2018			Effective Interest Rate
as of September 30,	2019			Effective Interest Rate		2018			Effective Interest Rate
Senior Notes
$300 million 2.80% notes due September 2022	$	299.8		2.93	%	$	299.7		2.93	%
$400 million 2.85% notes due March 2025	399.6			2.97	%	399.6			2.97	%
Total senior notes	699.4					699.3
Other
Loan due December 2019	0.2			9.30	%	—			N/A
Debt issuance costs	(2.7		)			(3.4		)
Total	$	696.9				$	695.9


(in millions)	Equity Securities			Debt Securities			Real Estate		Loans			Total Level 3 Assets			(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
for the fiscal year ended September 30, 2019
for the fiscal year ended September 30, 2022															for the fiscal year ended September 30, 2022	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
Balance at beginning of year	$	199.7		$	118.0		$	—	$	32.3		$	350.0		Balance at beginning of year
Acquisition	45.2			39.7			—		—			84.9
Realized and unrealized gains (losses) included in investment and other income, net	8.0			(13.9		)	5.0		(3.3		)	(4.2		)
Realized and unrealized gains included in investment and other income (losses) of consolidated investment products, net															Realized and unrealized gains included in investment and other income (losses) of consolidated investment products, net	106.0		29.2		0.1		135.3
Purchases	155.5			12.0			147.0		9.2			323.7			Purchases	177.5		150.0		14.0		341.5
Sales and settlements	(81.4		)	(20.2		)	—		(21.6		)	(123.2		)
Sales															Sales	(119.7)		—		(1.3)		(121.0)
Consolidations (deconsolidations)															Consolidations (deconsolidations)	(52.1)		—		200.4		148.3
Transfers into Level 3	0.1			0.4			—		—			0.5			Transfers into Level 3	0.1		—		5.7		5.8
Transfers out of Level 3	(25.4		)	(3.6		)	—		—			(29.0		)	Transfers out of Level 3	(9.3)		—		—		(9.3)
Foreign exchange revaluation	(5.3		)	(1.0		)	0.7		—			(5.6		)
Balance at End of Year	$	296.4		$	131.4		$	152.7	$	16.6		$	597.1		Balance at End of Year	$	555.8	$	268.6	$	239.4	$	1,063.8
Change in unrealized gains (losses) included in net income relating to assets held at end of year	$	(6.3	)	$	(5.7	)	$	5.0	$	(0.6	)	$	(7.6	)
Change in unrealized gains included in net income relating to assets held at end of year															Change in unrealized gains included in net income relating to assets held at end of year	$	101.1	$	29.2	$	—	$	130.3