Our subsidiaries that provide discretionary investment management services for our products and sub-advised products either perform or obtain investment research, and determine which securities the products will purchase, hold or sell under the supervision and oversight of the funds’ boards of directors or trustees, as applicable. In addition, these subsidiaries may take all appropriate steps to implement such decisions, including arranging for the selection of broker-dealers and the execution and settlement of trades in accordance with applicable criteria set forth in the management agreements, internal policies, and applicable law and practice. Our subsidiaries that provide non-discretionary investment management services perform investment research for our clients and make recommendations as to which securities the clients purchase, hold or sell, and may or may not perform trading activities for the products.

For our ~~U.S.-registered~~U.S. mutual funds, the board of directors or trustees of each fund and our management personnel regularly review the investment management fee structures for the funds in light of fund performance, the level and range of services provided, industry conditions and other relevant factors. Most of our investment management agreements between our subsidiaries and our U.S. mutual funds must be renewed each year ~~(after~~after an initial two-year ~~term),~~term, and must be specifically approved at least annually by a vote of each fund’s board of directors or trustees as a whole and separately by a majority of its directors or trustees who are not interested persons of the fund under the Investment Company Act of 1940 (the “Investment Company Act”), or by a vote of the holders of a majority of the fund’s outstanding voting securities. ~~Our~~In addition, our U.S. agreements ~~automatically terminate in the event of their “assignment,” as defined in the Investment Company Act. In addition,~~generally may be terminated by either party ~~may terminate such agreement~~ without penalty after prior written notice. ~~If agreements representing a significant portion of our AUM were terminated, it would have a material adverse impact on us.~~

Under our investment management agreements with our funds and accounts, our monthly and annual fee rates may vary by asset class and type of services provided. Our agreements generally permit us to provide services to more than one fund or account and to other clients so long as our ability to render services to each fund/account is not impaired, and so long as purchases and sales of portfolio securities for various advised funds/accounts are made on an equitable basis.

We use a “master/feeder” fund structure in certain situations. This structure allows an investment adviser to manage a single portfolio of securities at the “master fund” level and have multiple “feeder funds” that invest substantially all of their respective assets into the master fund. Individual and institutional shareholders generally invest in the “feeder funds,” which can offer a variety of tax, service and distribution options.

Our ~~non-U.S.-registered~~non-U.S. mutual funds, private funds, institutional and high-net-worth separate accounts, and the products for which we provide sub-advisory services, are typically subject to various termination rights and/or renewal ~~provisions.~~provisions, which often provide for termination upon relatively short notice with little or no penalty. Investment management fees are at times waived or voluntarily reduced when, for example, a new fund/account is established, and then increased to contractual levels within an established timeline or as net asset values reach certain levels.

2. Retail Separately Managed Account Programs

Certain of our specialist investment managers provide asset management services to ~~certain~~ retail separately managed account programs sponsored by various financial institutions. These programs typically allow securities brokers or other financial intermediaries to offer their clients the opportunity to choose from a number of asset management services pursuing different investment strategies provided by one or more ~~asset~~investment managers, and generally charge an all-inclusive fee that ~~covers~~can cover asset management, trade execution, asset allocation and custodial and administrative services.

3. Alternative Strategies

Certain of our specialist investment managers manage alternative investment ~~strategies. These~~ strategies which provide our clients with alternatives to traditional equity and fixed income products and services. Our alternative products include private credit funds and structured products, business development companies, hedge funds (funds of funds and custom advisory solutions), private equity funds, venture capital funds and real estate funds. These products employ various investment strategies and approaches, including loan origination, collateralized loan obligations, high-yield credit, hedge fund advisory, private equity and infrastructure transactions in emerging markets, global macro, financial technology, consumer loans, direct real estate investments, and custom-tailored investment programs.

~~Table of Contents~~

4. High-Net-Worth Investment Management, Trust and Custody

Through our ~~subsidiary~~ Fiduciary Trust ~~Company~~ International ~~(“Fiduciary Trust”),~~group, including its trust company and investment adviser subsidiaries, and through certain other of our subsidiaries, we provide investment management and related services to, among others, high-net-worth individuals and families, family offices, foundations and institutional clients. Fiduciary Trust International offers investment management and advisory services across different investment styles and asset classes. The majority of these client assets are actively managed by individual portfolio managers, while a significant number of clients also seek multi-manager, multi-asset class solutions. Through our trust company subsidiaries, including Fiduciary Trust International, we also may provide separately managed accounts, private funds, and trust, custody and related services, including administration, performance measurement, estate planning and tax planning. In addition, through our subsidiary Fiduciary Trust Company of Canada (“FTCC”), we provide investment management, wealth planning, and trust and estate services, and offer products to high-net-worth individuals and families and institutional clients in Canada.

5. Sales and Distribution

Our global distribution framework is organized into two groups. Our global advisory services group is responsible for sales, marketing and business development, and maintains a regional distribution model. Our global alliances and new business strategies group oversees our digital wealth management and distribution-related financial technology, joint ventures, seed capital allocations, and direct-to-consumer initiatives. Our groups work closely together to meet the needs of our advisors, clients and investors. There are many sales channels across each region, which may include retail, institutional, private wealth, retirement, insurance, and other specialty sales. Our global footprint and breadth of investment capability provides the opportunity for us to work with global financial institutions to add value through and beyond investing, including by building business relationships and global economic partnerships.

In addition, certain of our specialist investment managers have their own sales and marketing teams that distribute their products and services, primarily to institutional investors, both directly and through consultants. Consultants play a large role in institutional investment management by helping clients select and retain investment managers. Institutional investment management clients and their consultants tend to be highly sophisticated and investment performance-driven.

Table of Contents

Our sales and distribution capabilities and related efforts are critical components of our business and may be impacted by global distribution trends and changes within the financial services industry. In the U.S., our corporate distribution subsidiaries generally serve as the principal underwriters and distributors of shares of most of our ~~sponsored U.S.-registered open-end funds, or U.S.~~ mutual funds. Outside the U.S., certain of our non-U.S. subsidiaries provide sales, distribution and marketing services to our ~~non-U.S.-registered~~non-U.S. mutual funds. Some of our ~~non-U.S.-registered~~non-U.S. mutual funds, particularly our Luxembourg and Irish domiciled fund ranges, are distributed globally on a cross-border basis, while others are distributed exclusively in local markets.

We earn sales and distribution fees primarily by distributing our mutual funds pursuant to distribution agreements with the funds. ~~Our U.S. mutual funds generally pay us distribution fees in return for sales, marketing and distribution efforts on their behalf.~~ Under our distribution agreements with our U.S. mutual funds, we offer and sell the fund shares on a continuous basis and pay certain costs associated with selling, marketing and distributing the fund shares, including the costs of developing and producing sales literature, shareholder reports and prospectuses. ~~Sales~~Our 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 and may be reduced or eliminated depending on the amount invested and the type of investor. Therefore, our 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 mutual funds generally pay us distribution fees in return for sales, marketing and ~~marketing teams generally are housed in separate subsidiaries from our asset manager subsidiaries.~~

distribution efforts on their behalf. The majority of 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. 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 of ~~non-U.S.-registered~~non-U.S. mutual funds. The Rule 12b-1 Plans are established for one-year terms and must be approved annually by a vote of each fund’s board of directors or trustees as a whole and separately by a majority of its directors or trustees who are not interested persons of the fund under the Investment Company Act. The Rule 12b-1 Plans are subject to termination at any time by a majority vote of the disinterested fund directors or trustees or by the particular fund’s shareholders.

We pay substantially all of our sales and distribution fees earned as revenues, including fees earned under the Rule 12b-1 Plans, to the financial advisers and other intermediaries that sell our funds on our behalf. The distribution agreements with our U.S. mutual funds generally provide for us to pay commission expenses for sales of fund shares to qualifying broker-dealers and other independent financial intermediaries. These financial intermediaries receive various sales commissions and other fees for services in matching investors with funds whose asset classes match such investors’ goals and risk profiles. ~~Such~~The intermediaries also may receive fees for their assistance in explaining the operations of the funds and in servicing and maintaining investors’ accounts, and for reporting and various other distribution services. Other compensation may be offered to the extent not prohibited by federal or state laws or any self-regulatory agency, such as the Financial Industry Regulatory Authority (“FINRA”), applicable to our business. We are heavily dependent upon these third-party distribution and sales channels and business relationships. There is increasing competition for access to these channels, which has caused our distribution costs to rise and could cause further increases in the future as competition continues and service expectations increase.

~~Table of Contents~~

Similar arrangements exist with the distribution of our ~~non-U.S.-registered~~non-U.S. mutual funds where, generally, our subsidiary that distributes the funds receives maintenance fees from the funds and pays commissions and certain other fees to financial advisers, banks and other intermediaries.

In addition, our distribution subsidiaries may make additional payments to broker-dealers or other intermediaries that sell or arrange for the sale of shares of our U.S. mutual funds, including for marketing support. We also may make payments for other ancillary services, such as setting up funds on a broker-dealer’s fund trading system. Our non-U.S. subsidiaries may make similar marketing support and other payments to third-party intermediaries located outside the U.S. with respect to investments in, or the distribution of, our non-U.S.-registered funds.

~~Other compensation may be offered to the extent not prohibited by federal or state laws or any self-regulatory agency, such as the Financial Industry Regulatory Authority (“FINRA”).~~

6. Shareholder Servicing

We perform our shareholder servicing services directly or through third parties. Substantially all shareholder servicing fees are earned from our ~~sponsored~~ funds for providing transfer agency services, which include providing shareholder statements, transaction processing, ~~customer~~client service and tax reporting. Fees for U.S. funds are based on the level of AUM and the number of transactions in shareholder accounts, while outside of the U.S., the fees are based on the level of AUM and/or the number of shareholder accounts.

~~Our subsidiary Franklin Templeton Investor Services, LLC (“FTIS”) serves as~~ We outsource various transfer agency and other services for our ~~primary shareholder servicing and dividend-paying agent for certain of our U.S.-registered open-end funds. FTIS is registered with the SEC~~funds to third-party providers who serve as a ~~transfer agent under~~sub-agent or delegate, depending on the Securities Exchange Act of 1934 (the “Exchange Act”). FTIS may pay servicing fees to third-party intermediaries primarily to help offset costs associated with client account maintenance support, statement preparation and transaction processing. Such third parties maintain omnibus accounts with funds in the institution’s name on behalf of numerous beneficial owners of fund shares, or provide support for fund shareholder accounts. The funds reimburse FTIS for these third-party payments, subject to certain limitations, as well as other out-of-pocket expenses.

~~Our Range of Investment Products~~

Through our specialist investment managers, we offer active, passive and smart beta strategies and a broad range of products under our fixed income, equity, multi-asset, alternative and cash management asset classes and solutions. Our investment products are offered globally to retail, institutional and high-net-worth investors, which include individual investors, qualified groups, trustees, tax-deferred plans (such as individual retirement accounts, or IRAs, in the U.S. and registered retirement saving plans, or RRSPs, in Canada) or money purchase plans, employee benefit and profit sharing plans, trust companies, bank trust departments and institutional investors. Our products include portfolios managed for some of the world’s largest corporations, endowments, charitable foundations, pension funds and sovereign wealth funds, as well as wealthy individuals and other institutions. We use various investment techniques to focus on specific client objectives for these specialized portfolios.

The products and capabilities that we offer accommodate a variety of investment goals, spanning the spectrum of our clients’ risk tolerance from capital appreciation (with our more growth-oriented products) to capital preservation (with our fixed income offerings). In seeking to achieve such objectives, each portfolio emphasizes different strategies and invests in different types of instruments.

Our equity investment products include some that are considered value-oriented, others that are considered growth-oriented, and some that use a combination of growth and value characteristics, generally identified as blend or core products. Value investing focuses on identifying companies that our research analysts and portfolio managers believe are undervalued based on a number of different factors, usually put in the context of historical ratios such as price-to-earnings or price-to-book value; however, we also consider the future earnings potential of each individual company on a multi-year basis. Growth investing focuses on identifying companies that our research analysts and portfolio managers believe have sustainable growth characteristics, meeting our criteria for sustainable growth potential, quality and valuation. In this effort, the key variables we examine include: (i) market opportunity (overall size and growth), (ii) competitive positioning of the company, (iii) assessment of management (strength, breadth, depth, and integrity) and execution of plans, and (iv) the general financial strength and profitability of the enterprise, to determine whether the growth and quality aspects are properly reflected in the current share price. Paramount to all of our different equity products is the incorporation of independent, fundamental research through our own collaborative in-house group of investment professionals. Our approach across the variety of equity products we manage

jurisdiction.

108

Table of Contents

~~emphasizes bottom-up stock selection within a disciplined portfolio construction process, and is complemented by our ongoing assessment of risk at both the security and portfolio levels.~~

Portfolios seeking income generally focus on one or more of the following securities: (i) taxable and tax-exempt money market instruments, (ii) tax-exempt municipal bonds, (iii) global or regional fixed income securities, and (iv) fixed income debt securities of corporations, of the U.S. government and its sponsored agencies and instrumentalities, or of the various states in the U.S. Others focus on investments in particular countries and regions.

~~In addition, our alternative investment strategies provide our clients with alternatives to traditional equity and fixed income products and services.~~

COMPETITION

The financial services industry is a highly competitive global industry. Competition is based on various factors, including, among others, business reputation, investment performance, product mix and offerings, service quality and innovation, distribution relationships, and fees charged. We face strong competition from numerous investment management companies, securities brokerage and investment banking firms, insurance companies, banks and other financial institutions, which offer a wide range of financial and investment management services and products to the same retail, institutional and high-net-worth investors and accounts that we are seeking to attract. We offer a broad product mix that meets a variety of investment goals and needs for different investors, and we may periodically introduce new products to provide investors with additional investment options.

We primarily derive 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.

Due to our international presence and varied product mix, it is difficult to assess our market position relative to other investment managers on a worldwide basis, but we believe that we are one of the more widely diversified ~~asset~~investment managers based in the U.S. We believe that our fixed income, equity, alternative and ~~equity~~multi-asset asset mix, coupled with our global presence, will serve our competitive needs well over the long term. We continue to focus on the long-term performance of our investment products, service to clients and extensive marketing activities through our strong broker-dealer and other financial institution distribution network as well as with high-net-worth and institutional clients.

The establishment of new investment management firms and continuous development of investment products increases the competition that we face. Many of our competitors have long-standing and established relationships with broker-dealers, investment advisers and their clients, and some have affiliated brokerage businesses. Others have focused on, offer and market specific product lines that provide strong competition to certain of our asset classes. In addition, consolidation in the financial services industry has created stronger competitors, some with greater financial resources and broader distribution channels than our own.

~~FINANCIAL INFORMATION ABOUT SEGMENT AND GEOGRAPHIC AREAS~~

Incorporated herein by reference is certain financial information about our business segment and geographic areas contained in Note 19 – Segment and Geographic Information in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report.

REGULATION

General

We are subject to extensive regulation. Virtually all aspects of our business are subject to various U.S. federal and state, and/or international regulation and supervision. Our regulators have broad authority with respect to the regulation of investment management and other financial services, including among other things, the authority to grant or cancel required licenses or registrations, impose net capital and other financial or operational requirements on us, and other enforcement powers described below. The regulations to which we are subject continue to change and evolve over time. Consequently, there is uncertainty associated with the regulatory environments in which we operate. The rules and regulations applicable to investment management organizations are very detailed and technical. Accordingly, the discussion below is general in nature and does not purport to be ~~complete and is current only as of the date of this Annual Report.~~complete.

With our global operations, certain of our subsidiaries are registered with or licensed by various U.S. and/or non-U.S. regulators, and our funds are subject to various U.S. and/or non-U.S. laws. In particular, we are subject to various securities, compliance, corporate governance, disclosure, privacy, anti-bribery and anti-corruption, anti-money laundering, anti-terrorist financing, and economic, trade and sanctions laws and regulations, both domestically and internationally, as well as to various cross-border rules and regulations, such as the anti-bribery and anti-corruption rules under the Foreign Corrupt Practices Act of 1977 (“FCPA”) and the data protection rules under the General Data Protection Regulation (“GDPR”)

~~Table of Contents~~

of the European Union (“EU”). We are subject to sanctions programs administered by the Office of Foreign Assets Control of the U.S. Department of Treasury (“USDT”), as well as sanctions programs adopted and administered by non-U.S. jurisdictions where our services and products are offered. Our subsidiaries with custody of client assets or accounts are also subject to the applicable laws and regulations of U.S. states and other non-U.S. jurisdictions regarding the reporting and escheatment of unclaimed or abandoned property. We also must ~~also~~ comply with complex and changing tax regimes in the jurisdictions where we operate our business.

Failure to comply with applicable U.S. and non-U.S. laws, regulations, rules, codes, notices, directives, guidelines, orders, circulars and/or conditions in the various jurisdictions where we operate could result in a wide range of disciplinary actions against us, our subsidiaries and/or our business. Breaches of applicable laws and rules could result in regulatory

Table of Contents

enforcement, civil liability, criminal liability and/or the imposition of ~~various~~a range of sanctions ~~and~~or orders against us, including, as applicable, monetary damages, injunctions, disgorgements, fines, penalties, ~~including, among other things, fines, disgorgements,~~ cease and desist orders, censures, reprimands, and the revocation, cancellation, suspension or restriction of licenses, registration status or approvals held by us or our ~~business.~~business in a jurisdiction or market. In addition, a public regulatory issue can have a negative impact on our reputation, and as a result have indirect impacts on our business or growth.

See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this Annual Report, for financial information about our business, including certain regulatory financial impacts disclosed therein.

U.S. Regulation

U.S. Regulatory Framework. As a U.S. reporting company, we are subject to U.S. federal securities laws, state securities and corporate laws, state escheatment laws and regulations, and the rules and regulations of certain U.S. regulatory and self-regulatory organizations, such as the SEC and the NYSE. In particular, we are subject to various securities, compliance, corporate governance and disclosure rules adopted by the SEC. We are also subject to various other U.S. federal and state laws, including those affecting corporate governance and disclosure, such as the Securities Act of 1933, the Securities Exchange Act of 1934 (“Exchange Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, ~~(“Dodd-Frank”),~~ the Sarbanes-Oxley Act of 2002 and the USA PATRIOT Act of 2001. As a NYSE-listed company, we are also subject to NYSE listing and disclosure requirements.

As a global investment management organization, certain of our subsidiaries are also subject to the rules and regulations of various U.S. regulatory and self-regulatory organizations, including the SEC, FINRA, the U.S. Commodity Futures Trading Commission (“CFTC”), the National Futures Association, the U.S. Department of Justice (“DOJ”), the U.S. Department of Labor, and the USDT. Our non-U.S. operations also may be subject to regulation by U.S. regulators, including the SEC, the CFTC and the DOJ (for example with respect to the ~~Foreign Corrupt Practices Act of 1977)~~FCPA).

Certain of our subsidiaries are registered with the SEC under the Advisers Act and/or the CFTC, and many of our funds are registered with the SEC under the Investment Company Act. These registrations, licenses and authorizations impose numerous obligations, as well as detailed operational requirements, on such subsidiaries and funds. The Advisers Act imposes numerous obligations on our registered investment adviser subsidiaries, including record keeping, operating and marketing requirements, disclosure obligations and prohibitions against fraudulent activities. The Investment Company Act imposes similar obligations on the registered investment companies advised by our subsidiaries.

U.S. Regulatory Reforms. Over the years, the U.S. federal corporate governance and securities laws 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 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. Certain key regulatory reforms in the U.S. that impact or relate to our business, and may cause, or continue to cause, us to incur additional obligations, include:

~~Dodd-Frank.~~ Sustainable Investing and ESG. Sustainable investing and ESG have been the focus of increased regulatory scrutiny across jurisdictions. Globally, the International Sustainability Standards Board and applicable disclosure standards impact how national regulators approach these topics. In ~~July 2010, Dodd-Frank was adopted in~~ the U.S. ~~Dodd-Frank is expansive~~, the SEC has proposed rules to require public issuers to provide enhanced disclosure regarding climate-related information in ~~scope~~annual reports and registration statements. Also, the SEC has ~~required the adoption~~increased its focus on disclosure and compliance related to ESG strategies of ~~extensive regulations~~investment advisers and ~~the issuance~~funds.

Table of ~~numerous regulatory decisions.~~Contents

Systemically Important Financial Institutions. ~~Dodd-Frank authorized the establishment~~The mandate of the Financial Stability Oversight Council (“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 Financial Stability Board (“FSB”) to identify and respond, in a coordinated manner, to threats to global financial stability. The FSOC may designate certain non-bank financial companies as systemically important financial institutions (“SIFIs”), which are subject to supervision and regulation by the Board of Governors of the Federal Reserve System. The FSB may designate certain non-bank financial companies as

~~Table of Contents~~

global systemically important financial institutions (“G-SIFIs”)~~; the additional regulatory requirements triggered by any such designation are not yet established.~~. The FSOC and the FSB, as well as other global regulators, are considering what threats to U.S. and global financial stability, if any, arise from asset management companies and/or the funds that they sponsor or manage, and whether such threats can be mitigated by treating such entities as SIFIs or G-SIFIs and/or subjecting them to additional regulation. To the extent that we or any of our funds are designated as a SIFI or G-SIFI, such designations would add additional supervision, review, monitoring and/or regulation ~~which could include requirements related to risk-based capital, leverage, liquidity, credit exposure, stress testing, resolution plans, early remediation,~~resulting in increased scrutiny and ~~certain risk management requirements,~~oversight that could impact our business.

Derivatives and Other Financial Products. ~~Dodd-Frank, as well as other legislation~~Regulators continue to review practices and regulations ~~impose~~relating to the use of futures, swaps and other derivatives, which could result in further restrictions and limitations on ~~us related~~the use of such products. In October 2020, the SEC adopted new rules governing the use of derivatives by certain registered investment companies, including certain mutual funds, designed to ~~our financial services and products, resulting in increased scrutiny and oversight. Under such regulations governing derivative transactions, certain categories~~address investor protection concerns. As of ~~swaps are subject to~~August 2022, key aspects of the ~~exchange of margin, while others are required to be submitted for clearing by a regulated clearing organization. In both cases, swaps must be reported~~new framework include, among other things, value at risk limits on a ~~swap execution facility.~~fund entering into derivatives transactions, required risk management program, and further fund board oversight, reporting and compliance requirements. The EU and other countries have adopted and implemented, or are in the process of adopting or implementing, similar and additional 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.

Money Market Funds. The ~~SEC has also proposed a rule that would~~regulatory structure governing U.S. money market funds was previously reformed to address perceived systemic risks of money market funds relating to fund stability and investor risks, including allowing certain funds to impose ~~restrictions on the use of derivatives by registered funds.~~

liquidity fees and redemption gates under certain circumstances. In addition, ~~SEC rules have changed~~regulatory authorities remain focused on whether to implement further reform measures to improve the ~~structure and operation for certain types~~resiliency of money market funds and ~~certain U.S.-registered funds are required to adopt liquidity management programs.~~the broader short-term funding markets, which, if adopted, could significantly impact the money market fund industry.

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, personnel and others’ information. A majority of the jurisdictions where we operate are covered, or we expect will be ~~soon~~ covered, by privacy and data protection laws and regulations. As the regulatory focus on privacy continues to intensify and laws and regulations concerning the management of personal data continue to expand, risks related to privacy and data collection within our business will increase. In addition to the EU’s GDPR data protection rules, ~~(discussed below),~~ we also are or may become subject to or affected by additional country, federal and state laws, regulations and guidance impacting consumer privacy, such as the California Consumer Privacy Act (“CCPA”) that ~~took effect in January 2020, and~~ provides for enhanced consumer protections for California residents, enforcement authority by the California Attorney General and/or the California Privacy Protection Agency for CCPA violations, and the potential for private litigation, including statutory damages for data security breaches. The EU’s GDPR strengthened and unified data protection rules for individuals within the 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 ongoing review of our global data processing systems. There are also new laws that have been adopted ~~this year,~~in recent years, including, for example, Brazil’s Lei Geral de Proteção de Dados with regulatory enforcement ~~commencing in~~as of August 2021, and the California Privacy Rights Act with an effective date of January 1, 2023. Noncompliance with our legal obligations relating to privacy and data protection could result in fines, penalties, legal proceedings by governmental entities or affected individuals, prohibitions on our use of personal data in one or more countries, and other significant legal and financial exposure.

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. ~~Effective~~Since June ~~30,~~ 2020, such rules, 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 broker-dealers and registered investment advisers to provide their retail clients with a new relationship summary disclosure document to inform such clients of the nature of their relationships with the clients’ investment professionals, including a description of services offered, the legal standards of conduct that apply to such services, the fees a client might pay, and conflicts of interest that may exist.

Table of Contents

U.S. and Global Tax Compliance.Our business may be directly or indirectly affected by tax legislation and regulation, or the modification of existing tax laws, by applicable tax and other governmental authorities. The U.S. Tax Cuts and Jobs Act includes various changes to the tax law, including a permanent reduction in the corporate income tax rate and one-time transition tax on certain non-U.S. earnings. See Note 14 – Taxes on Income in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report for more information. Further, pursuant to ongoing efforts to encourage global tax compliance, the Organization for Economic Co-operation and Development, ~~(“OECD”)~~an intergovernmental organization, has ~~adopted a global common reporting standard for~~focused on addressing the ~~automatic exchange of financial information among participating countries (“CRS”), aimed at ensuring that persons with financial assets located outside of their~~ tax ~~residence country pay required taxes. In many cases, intergovernmental agreements between the participating countries will govern implementation~~challenges 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.

~~Table of Contents~~

~~The OECD has also undertaken a new project focused on “Addressing the Tax Challenges~~digitalization of the ~~Digitalization of the Economy.” This project~~economy, which may further 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~~We will continue to monitor developments regarding such ~~proposal~~matters and any ~~unfavorable resolution could have an adverse effect~~significant impacts on our effective tax rate.

Non-U.S. Regulation

Our operations outside the U.S. are subject to the laws and regulations of various non-U.S. jurisdictions and non-U.S. regulatory agencies and bodies. Our international operations are subject to regulatory systems in various jurisdictions, comparable to those covering our operations in the U.S.

European Markets and Regulation. In Luxembourg, the Commission de Surveillance du Secteur Financier (“CSSF”) currently regulates our substantial activities in Luxembourg, including our subsidiary Franklin Templeton International Services S.à r.l. (“FTIS Lux”). FTIS Lux is licensed as a management company for both the Undertakings for Collective Investment in Transferable Securities Directive (“UCITS”) and alternative investment funds (“AIFs”) and, as such, it manages our Luxembourg-domiciled UCITS and our EU-domiciled AIFs. FTIS Lux’s license also covers certain MiFID (as defined below) investment services, such as discretionary portfolio management, investment advice and reception and transmission of orders in relation to financial instruments. The CSSF’s rules include capital resource, governance and risk management requirements, business conduct rules, remuneration rules and oversight of systems and controls.

In Ireland, the Central Bank of Ireland (“CBI”) currently regulates our Irish business activities, including our Irish- licensed UCITS and AIF management company and our Irish-domiciled UCITS range. The CBI’s rules include capital resource, governance and risk management requirements, business conduct rules, remuneration rules and oversight of systems and controls.

Our international funds include two broad ranges of cross-border UCITS that are domiciled in Luxembourg and Ireland, respectively, and thereby subject to regulation by the CSSF and ~~CBI.~~the Central Bank of Ireland. Both UCITS are also registered for public sale in many countries around the world, both in the EU and beyond, and thus are also subject to the laws of, and certain supervision by, the governmental authorities of those countries.

In the U.K., the Financial Conduct Authority (the “FCA”) and the Prudential Regulation Authority (the “PRA”) currently regulate certain of our subsidiaries. Authorization by the FCA and the PRA is required to conduct any financial services-related business in the U.K. pursuant to the Financial Services and Markets Act 2000. The FCA’s and PRA’s rules under that act govern a firm’s capital resources requirements, senior management arrangements, business conduct, interaction with clients, and systems and controls.

In addition to the above, certain of our other European subsidiaries and branches, must comply with the pan-European regime established by the EU Markets in Financial Instruments Directive (“MiFID”), which regulates the provision of investment services and conduct of investment activities throughout the European Economic Area (“EEA”). MiFID sets out detailed requirements governing the organization and business conduct of investment firms and regulated markets. It also includes pre- and post-trade transparency requirements for equity markets and extensive transaction reporting requirements. Luxembourg and the U.K. have adopted the MiFID rules into national legislation, as have those other EU member states in which we have a presence.

A review of MiFID by the European Commission led to the creation of a replacement directive and ~~a new~~ regulation (together “MiFID II”) that extend the scope of the original ~~MiFID in response to issues raised by the financial crisis.~~MiFID. Changes apply to pre- and post-trade reporting obligations and there is an expansion of the types of instruments subject to these requirements, such as bonds, structured products and derivatives. A ~~new~~ concept of trading venue ~~has been~~was created and algorithmic trading is subject to specific regulations. There ~~are~~were also changes to business conduct requirements, including selling practices, intermediary inducements and client categorization, as well as the provision of investment advice and management within the EU by non-EU advisers, including ours. Powers have also been given to EU national regulators to ban certain services and products and to the European Securities and Markets Authority to restrict temporarily certain financial activities within the EU.

~~Table of Contents~~

~~One of the most significant developments in~~ MiFID II ~~is the~~also includes a ban on commission and other payments (“inducements”) to independent advisers and discretionary managers, which has changed the commercial relationships between fund providers and distributors. Arrangements with non-independent advisers have also been affected, as narrower rules around the requirement that any commission 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 finance investment research with many firms, including ours, opting to pay for third-party investment research for client accounts covered by MiFID II.

Table of Contents

The European Market Infrastructure Regulation sets out rules in relation to the central clearing of specified derivatives. Mutual recognition of central counterparties has been achieved between the EU regulatory authorities and other important jurisdictions including the U.S. In addition, there are rules relating to margin requirements for uncleared over-the-counter derivatives. Future regulatory policy reviews will decide whether these rules are extended to other types of derivative instruments, which could increase operational costs for our business and transactional costs for our clients.

The EU’s Alternative Investment Fund Managers Directive (“AIFMD”) regulates managers of, and service providers to, AIFs that are domiciled and offered in the EU and that are not authorized as retail funds under UCITS. The AIFMD also regulates the marketing within the EU of all AIFs, including those domiciled outside the EU. The introduction of a third-country passport to non-EU AIFs/AIF managers has been delayed until further positive advice is delivered to the European Commission regarding a sufficient number of non-EU countries to better evaluate the impact, including with respect to the ~~proposed~~ withdrawal of the U.K. from the EU. Compliance with the AIFMD’s requirements may restrict AIF marketing and imposes compliance obligations in the form of remuneration policies, capital requirements, reporting requirements, leverage oversight, valuation, stakes in EU companies, the domicile, duties and liability of custodians and liquidity management.

The EU’s Market Abuse Regulation’s (“MAR”) primary aim is to increase market integrity and investor protection, enhancing the attractiveness of securities markets for raising capital. Under MAR, EU market abuse rules become extra-territorial as long as the instrument has a listing on an EEA regulated market.

The EU regulation on packaged retail investment and insurance products (“PRIIPs”) imposed new pre-contractual disclosure requirements under the form of a Key Information Document (“KID”) for the benefit of retail investors when they are considering the purchase of packaged retail investment products or insurance-based products. It requires PRIIP manufacturers to draw up a KID that can be no longer than three pages in length and must be written in simple language. The regulation allows UCITS providers, who are already required to produce the UCITS Key Investor Information Document, a transitional period until December 2021, during which they will be exempt from its terms.

The EU’s ~~GDPR strengthened~~Sustainable Finance Disclosure Regulation (“SFDR”) imposes mandatory ESG disclosure obligations on asset managers and ~~unified data protection rules~~other financial markets participants. It requires all covered firms to disclose how financial products integrate sustainability risks in the investment process, including whether they consider adverse sustainability impacts, and, for ~~individuals within~~those products promoting sustainable objectives, the ~~EU. GDPR also addresses export~~provision of ~~personal data outside~~sustainability-related information. Related amendments to the ~~EU.~~MiFID, UCITS and AIFMD legislation require that all covered investment managers must consider in their investment process any ESG risks which are likely to have a material impact on the value of the investment, and require investment advisers to inquire as to the investor’s desire for ESG-focused products in their portfolio when assessing suitability. The ~~primary objectives~~availability of ~~GDPR are to give citizens control~~these sustainability disclosures may impact the investment decisions 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 of up to 20 million Euros or 4% of our annual global revenues, whichever is higher.European investors.

British Exit from the EU (“Brexit”). The U.K. withdrew from the EU onin January ~~31, 2020. The timeline to conclude~~2020, and a ~~new~~post-Brexit U.K./EU trade agreement ~~by December 31, 2020 has been challenged in recent months~~was approved by the ~~global economic and health crisis caused by the coronavirus disease 2019 (“COVID-19”), and the final terms and implementation date of a new trade agreement remain uncertain.~~EU in April 2021. While we are ~~monitoring~~continuing to monitor the ~~consequences very closely~~impact and related developments for our clients from an investment perspective, we believe that Brexit will not have a material impact on the way our firm operates in the U.K. or within the EU. Our long-standing U.K. businesses are expected to continue to provide their services to U.K. and certain non-EU customers. Furthermore, we have regulated subsidiaries and branch offices across continental Europe ~~such that, in the event of a future restriction on cross-border trade in financial services and products between the U.K. and the EU, Brexit would be likely~~ to ~~have a limited effect on~~manage our EU business. Moreover, our primary cross-border UCITS, the Franklin Templeton Investment Funds Société d’Investissement à Capital Variable, or SICAV, investment fund range, which is the most widely-distributed such range in the world, is based in Luxembourg, and a smaller cross-border UCITS, also distributed throughout the EU and beyond, is based in Ireland. We have separate, U.K.-domiciled fund ranges that are, and will continue to be, distributed mainly in the U.K.

~~Table of Contents~~

Australia. In Australia, our subsidiaries are subject to various Australian federal and state laws and are regulated by the Australian Securities and Investments Commission (“ASIC”). ASIC regulates companies, financial markets and financial services in Australia. ASIC imposes certain conditions on licensed financial services organizations that apply to our subsidiaries, including requirements relating to capital resources, operational capability and controls.

Canada. In Canada, our subsidiaries are subject to provincial and territorial laws and are registered with and regulated by provincial and territorial securities regulatory authorities. The mandate of Canadian securities regulatory authorities is generally to protect investors and to foster fair and efficient capital markets. Securities regulatory authorities impose certain requirements on registrants, including a standard of conduct, capital and insurance, record keeping, regulatory financial reporting, conflict of interest management, compliance systems and security holder reporting. In addition, as a federally licensed trust company, ~~FTCC~~our subsidiary Fiduciary Trust Company of Canada is subject to regulation and supervision by the Office of the Superintendent of Financial Institutions ~~Canada~~ and another subsidiary, FTC Investor Services Inc., is a member of and regulated by the Mutual Fund Dealers Association of Canada. These regulatory bodies have similar requirements to those of the securities regulatory authorities with a view to ensuring the capital adequacy and sound business practices of the subsidiaries and the appropriate treatment of their clients.

~~In December 2019, rule amendments to implement the client focused reforms initiative~~

Table of the Canadian Securities Administrators (“CSA”), the umbrella organization of provincial and territorial securities regulatory authorities, became effective and will be phased in during a two-year transition period. These rule amendments, among other things, enhance current registrant requirements in the areas of know your client, know your product, suitability, conflicts of interest and relationship disclosure information. The purposes of such amendments are to better align the interests of Canadian registrants with the interests of their clients, to improve outcomes for clients and to make clearer to clients the nature and the terms of their relationship with registrants. In addition, in 2020, the CSA published final rule amendments regarding certain of its previously proposed policy changes from June 2018 in connection with its mutual fund fee reform project. The final amendments prohibit: (i) all forms of deferred sales charges (“DSC”) in connection with the purchase of mutual fund securities (except in Ontario which is proposing restrictions on the use of DSC), and (ii) the payment of trailing commissions to discount brokers in respect of their distribution of mutual fund securities. These rule amendments will become effective in June 2022.Contents

Cayman Islands. In the Cayman Islands, the Cayman Islands Monetary Authority (“CIMA”) is responsible for the regulation and supervision of financial services, the monitoring of compliance with anti-money laundering regulations, and the issuance of statements of principle and guidance. In February 2020, the Cayman Islands enacted the Private Funds Law 2020 (the “Private Funds Law”), which requires private funds that engage in business in or from the Cayman Islands to register with CIMA, unless an exemption applies. The Private Funds Law applies to any Cayman Islands closed-end fund. Open-end funds such as hedge funds continue to be regulated by the Mutual Funds Law in the Cayman Islands. The ~~new~~ registration requirements applicable to our private funds domiciled in the Cayman Islands have posed, and may continue to pose, additional compliance costs and burdens on our business.

Hong Kong. In Hong Kong, our ~~subsidiary is~~applicable subsidiaries are subject to the Securities and Futures Ordinance (“SFO”) and its subsidiary legislation, which governs the securities and futures markets and regulates, among others, offers of investments to the public and provides for the licensing of dealing in securities and asset management activities and intermediaries. This legislation is administered by the Securities and Futures Commission (“SFC”). The SFC is also empowered under the SFO to establish standards for compliance as well as codes and guidelines. Our ~~subsidiary~~subsidiaries and ~~its~~ employees conducting any of the regulated activities specified in the SFO are required to be licensed with the SFC, and are subject to the rules, codes and guidelines issued by the SFC from time to time.

India. The Securities and Exchange Board of India, Reserve Bank of India, the Ministry of Corporate Affairs and the Department of Industrial Policy and Promotion are the major regulatory authorities that are capable of issuing directions of a binding nature to our subsidiaries in India.

Japan. In Japan, our subsidiaries are subject to the Financial Instruments and Exchange Act and the Act on Investment Trusts and Investment Corporations. These laws are administered and enforced by the Japanese Financial Services Agency, which establishes standards for compliance, including capital adequacy and financial soundness requirements, customer protection requirements, and business conduct rules.

Singapore. In Singapore, our subsidiaries are subject to, among others, the Securities and Futures Act (“SFA”), the Financial Advisers Act (“FAA”) and the subsidiary legislation promulgated pursuant to these Acts, which are administered by the Monetary Authority of Singapore (“MAS”). Our asset management subsidiaries and their employees conducting regulated activities specified in the SFA and/or the FAA are required to be licensed with the MAS.

~~Table of Contents~~

Other Non-U.S. Jurisdictions. There are similar legal and regulatory arrangements in effect in many other non-U.S. jurisdictions where our subsidiaries, branches and representative offices, as well as certain joint ventures or companies in which we own minority stakes, are authorized to conduct business. We are also subject to regulation and supervision by, among others, the Securities Commission of The Bahamas, the Central Bank of Brazil and the Comissão de Valores Mobiliários in Brazil, the China Securities Regulatory Commission in the People’s Republic of China, the Financial Services Commission and the Financial Supervisory Service in South Korea, the Securities Commission in Malaysia, the Comision Nacional Bancaria y de Valores in Mexico, the Polish Securities and Exchange Commission, the Romanian Financial Services Authority, the Swiss Federal Banking Commission, the Financial Supervisory Commission in the Republic of China, the Dubai Financial Services Authority in the United Arab Emirates, and the State Securities Commission of Vietnam.

INTELLECTUAL PROPERTY

We have used, registered, and/or applied to register certain trademarks, service marks and trade names to distinguish our sponsored products and services from those of our competitors in the U.S. and in other countries and jurisdictions, including, but not limited to, Franklin^®, Templeton^®, Legg Mason^®, ~~Balanced Equity Management~~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^® ~~and LibertyShares~~^®~~. In addition, pursuant to our Legg Mason acquisition, our additional brand names include Brandywine Global Investment Management~~^®, ~~Clarion~~Lexington Partners^®~~, ClearBridge Investments~~^®, Martin Currie^®, ~~QS Investors~~O’Shaughnessy^®,Asset Management, Royce^® Investment Partners and Western Asset Management Company^®. Our trademarks, service marks and trade names are important to us and, accordingly, we enforce our trademark, service mark and trade name rights. The Franklin Templeton^® brand has been, and continues to be, extremely well received both in our industry and with our clients, reflecting the fact that our brand, like our business, is based in part on trust and confidence. If our brand is harmed, our future business prospects may be adversely affected.

Table of Contents

HUMAN CAPITAL RESOURCES

As of September 30, ~~2020~~,2022, we employed approximately ~~11,800~~9,800 employees and operated offices in over 30 countries. We depend upon our key personnel to manage our business, including our portfolio managers, investment analysts, investment advisers, sales and management personnel and other professionals as well as our executive officers and business unit heads. Competition for experienced personnel is significant and from time to time we may experience a loss of valuable personnel. The retention of our key investment personnel is material to the management of our business. ~~The departure~~

At an enterprise level, we use employee surveys to understand sentiment and engagement in the organization. At a team level, our performance management system supports ongoing, active discussion about goals and objectives. We also host live forums for leaders to engage directly with employees to help reinforce our culture of open feedback. Our employees have access to a valuable set of equitable and competitive total rewards, which consists of a mix of monetary and non-monetary rewards designed to recognize their time, talents and results.

We believe that our ability to attract, develop and cultivate a sense of belonging and retain a diverse, highly skilled workforce is important to our long-term success and that creating and maintaining all aspects of diversity, including backgrounds and perspectives, makes us a better place to work and a more resilient business. To accomplish this, we have developed strategies and initiatives to diversify talent within our organization. We consider an inclusive culture that actively leverages the expertise and perspectives of our ~~key investment personnel could cause us~~diverse workforce an important factor in our ability to ~~lose clients, which could adversely affect our business.~~deliver innovative and relevant client solutions in a dynamic marketplace.

AVAILABLE INFORMATION

The SEC maintains a website that contains current and periodic reports, proxy and information statements, and other information regarding issuers, including Franklin, that file electronically with the SEC, at www.sec.gov. Additional information about Franklin’s filings can also be obtained through our website at www.franklinresources.com under “Investor Relations.” We make available free of charge on our website Franklin’s Annual Report on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Franklin periodically provides other information for investors on its website, such as press releases, presentations and other information about financial performance. The information on our website is not incorporated by reference into, and is not a part of, this Annual Report.

~~Table of Contents~~


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

Item 1A.Risk Factors.

PANDEMIC-RELATED RISKS

Our business and operations are subject to adverse effects from the outbreak and spread of contagious diseases such as COVID-19, ~~and we expect such~~which adverse effects tomay continue.

The outbreak and spread of contagious diseases such as COVID-19 ~~a highly transmissible and pathogenic disease,~~ has adversely affected, and ~~we expect will~~may continue to adversely affect, our business, financial condition and results of operations. The COVID-19 pandemic ~~has~~ resulted ~~and will likely continue to result~~ in a widespread ~~national and~~ global public health crisis. Such infectious illness outbreaks or other adverse public health developments in countries where we operate, as well as local, state and/or national government restrictive measures implemented to control such outbreaks, could adversely affect the economies of many nations or the entire global economy, the financial condition of individual issuers or companies and capital markets, in ways that cannot necessarily be foreseen, and such impacts could be significant and long term. Such extraordinary events and their aftermaths can cause investor fear and panic, which can further adversely affect the operations and performance of companies, sectors, nations, regions and financial markets in general and in ways that cannot necessarily be foreseen. The COVID-19 pandemic has already adversely affected and will likely continue to adversely affect global economies and markets, and has resulted in a global economic downturn and disruptions in commerce that will continue to evolve, including with respect to financial and other economic activities, services, travel and supply chains. Global and national health concerns, and uncertainty regarding the impact of COVID-19, could lead to further and/or increased volatility in global capital and credit markets, adversely affect our key executives and other personnel, clients, investors, providers, suppliers, lessees, and other third parties, and negatively impact our AUM, revenues, income, business and operations.

Our business has been and will likely continue to be negatively impacted by the current COVID-19 pandemic, including by the potential reoccurrence of periods of increased spread of COVID-19, and ensuing economic downturn in global financial markets. The global spread of COVID-19, and the various governmental actions and economic effects related to the pandemic, have had, and are expected to continue to have, negative impacts on our business and operations, including volatility in asset values, reduced demand for our products and services, concerns for and restrictions on our personnel (including health concerns, quarantines, shelter-in-place orders and restrictions on travel), and increased privacy and cybersecurity risks. Past economic downturns have caused, and the current economic downturn is causing and is expected to continue to cause, periods of significant volatility in our stock price, decreases and fluctuations in our AUM, revenues and income, increased liquidity risks and redemptions from our funds and other products, resulting in difficulties obtaining cash to settle redemptions, fund closures, poor investment performance of our products and corporate investments, increased focus on expense management, capital resources and related planning, and could cause reputational harm, legal claims, and other factors that may arise or develop. Current increased liquidity risks and redemptions in our funds and other products have required, and may continue to require, increased cash in the form of loans or other lines of credit for them to draw on to help settle redemptions and for other related purposes. We have in some cases voluntarily determined to, and without obligation could in the future, extend such loans. In addition, such increased liquidity risks and redemptions have caused, and could continue to cause, fund closures and related regulatory and governmental reviews or investigations and legal claims or actions, subjecting us to legal and regulatory risks and potential financial exposure.

~~Our business operations are complex and conducted in numerous countries around the globe, and in~~ order to remain competitive, we must continue to perform our asset management and related business responsibilities for our clients and investors properly and effectively, ~~throughout the course of the COVID-19 pandemic,~~ which, among other matters, is dependent on the health and safety of our personnel, the ability of our personnel to work remotely successfully, and our ability to continue to have our personnel return to work at our offices safely and effectively in compliance with applicable requirements. ~~We have implemented our business continuity plans globally to manage our business~~Moreover, since implementing broad work-from-home measures during ~~this~~the pandemic, ~~including broad and extended work-from-home capabilities for our personnel where feasible and, as governmental shelter-in-place restrictions have been lifted in various jurisdictions,~~ we have implemented measures for the return of a portion of our personnel to certain of our offices. We can provide no assurance that our efforts and planning for either environment will be sufficient to protect the health and safety of our personnel and maintain the success of our business. Further, we depend on a number of third-party providers to support our operations, and any failure of our providers to fulfill their obligations could adversely impact our business. Moreover, we now have an increased dependency on remote equipment and connectivity infrastructure to access critical business systems that may be subject to failure, disruption or unavailability that could negatively impact our business operations. Additionally, multiple regions in which we operate have shelter-in-place movement restrictions on our personnel and third-party vendors and service providers that may impact our ability to satisfy or respond timely to potential technology issues or needs impacting our business and operations. Further, we, like many others, ~~during this time,~~ have been subject to

~~Table of Contents~~

~~an increase in~~ increased phishing and other social engineering attempts by malicious actors to manipulate individuals into

Table of Contents

divulging confidential or personal information. If our cybersecurity diligence and efforts to offset the increased risks associated with greater reliance on mobile, collaborative and remote technologies ~~during this pandemic~~ are not effective or successful, we will be at increased risk for cybersecurity or data privacy incidents.

Any inability to recover successfully following the COVID-19 pandemic with respect to the economic, investment or operational impacts to our company or industry could further negatively impact our business and operations. As of the time of this filing, as the COVID-19 pandemic continues to evolve, itIt is not possible to predict the full extent to which the ~~coronavirus will~~pandemic may continue to evolve and/or adversely impact our business, liquidity, capital resources, financial results and operations, which impacts will depend on numerous developing factors that ~~are highly~~remain uncertain and ~~rapidly changing. The impacts and risks described herein relating~~subject to ~~COVID-19 augment the discussion of overlapping risks in our risk factors below, which may be heightened by COVID-19.~~change.

MARKET AND VOLATILITY RISKS

Volatility and disruption of our business and ~~the capital and credit~~financial markets and adverse changes in the global economy may significantly affect our results of operations and ~~may~~ put pressure on our financial results.

We derive substantially all of our operating revenues and income from providing investment management and related services to investors in jurisdictions worldwide through our investment products, which include our funds, as well as institutional and high-net-worth separate accounts, retail separately managed account programs, sub-advised products, and other investment vehicles. Related services include fund administration, sales and distribution, and shareholder servicing. We may perform services directly or through third parties. The asset management industry continues to experience disruption and challenges, including ~~a shift to lower-fee passively managed products,~~ increased fee pressure, regulatory changes, an increasing and changing role of technology in asset management services, the continuous introduction of new products and services, and the consolidation of financial services firms through mergers and acquisitions. Further, ~~the capital and credit~~financial markets have currently and in the past experienced and may continue, from time to time, to experience volatility and disruption worldwide. Declines in global ~~financial market~~economic conditions have currently and in the past resulted, and may continue to result, in significant decreases in our AUM, revenues and income, and future declines may further negatively impact our financial results. Such declines have had, and may in the future have, a material adverse impact on our ~~results of operations.~~business. We may need to modify our business, strategies or operations and we may be subject to additional constraints or costs in order to compete in a changing global economy and business environment.

Individual financial, equity, debt and commodity markets may be adversely affected by financial, economic, political, electoral, diplomatic or other instabilities that are particular to the country or region in which a market is located, including without limitation local acts of terrorism, economic crises, political protests, war, insurrection or other business, social or political crises. For example, the Russian invasion of Ukraine, and the threat that Russia’s military aggression may expand beyond Ukraine, has significantly impacted the global economy and financial markets, which has had, and may continue to have, an adverse effect on our investment performance and flows in certain products. Global economic conditions, exacerbated by war, terrorism, social, civil or political unrest, natural disasters, public health crises, such as epidemics or pandemics, or financial crises, changes in the equity, debt or commodity marketplaces, changes in currency exchange rates, interest rates, inflation rates, the yield curve, defaults by trading counterparties, bond defaults, revaluation and bond market liquidity risks, geopolitical risks, the imposition of economic sanctions and other factors that are difficult to predict, affect the mix, market values and levels of our AUM. Changing market conditions could also cause an impairment to the value of our goodwill and other intangible assets.

The amount and mix of our AUM are subject to significant fluctuations, and a shift in our asset mix toward lower-fee products may negatively impact our revenues and income.

Fluctuations in the amount and mix of our AUM may be attributable in part to market conditions outside of our control that have had, and in the future could have, a negative impact on our revenues and income. We derive substantially all of our operating revenues and net income from providing investment management and related services to investors in jurisdictions worldwide through our investment products, which include our sponsored funds, as well as institutional and high-net-worth separate accounts, retail separately managed account programs, sub-advised products, and other investment vehicles. In addition to investment management, our services include fund administration, sales and distribution, and shareholder servicing. We may perform services directly or through third parties. The level of our revenues depends largely on the level and relative mix of AUM. Our investment management fee revenues are based primarily on a percentage of AUM and vary with the nature and strategies of our products. Any decrease in the value or amount of our AUM because of market volatility or other factors, such as asset outflows or a decline in the price of stocks, in particular market segments or in the securities market generally, negatively impacts our revenues and income.

~~We are subject to significant risk of~~ Changing market conditions and investor preferences may cause a shift in our asset ~~volatility from changes in the global financial, equity, debt and commodity markets.~~

Individual financial, equity, debt and commodity markets may be adversely affected by financial, economic, political, electoral, diplomatic or other instabilities that are particular to the country or region in which a market is located, including without limitation local acts of terrorism, economic crises, political protests, war, insurrection or other business, social or political crises. Global economic conditions, exacerbated by war, terrorism, social, civil or political unrest, natural disasters, public health crises,mix toward certain lower fee products, such as ~~epidemics or pandemics, or financial crises, changes~~fixed income products and ETFs, and away from higher fee equity and multi-asset products, which may cause a related decline in ~~the equity, debt or commodity marketplaces, changes~~our revenues and income. In addition, increases in ~~currency exchange rates,~~ interest rates, inflation rates, the yield curve, defaults by trading counterparties, bond defaults, revaluation and bond market liquidity risks, geopolitical risks, the imposition of economic sanctions and other factors that are difficult to predict, affect the mix, market values and levels of our AUM. For example, changes in financial market prices, currency exchange rates and/or interest rates have in the past caused, and couldparticularly if rapid, as well as uncertainty in the future direction of interest rates, may have a negative impact on our fixed income products and decrease the total return on bond investments due to lower market valuations of existing bonds. Moreover, we generally derive higher investment management and distribution fees from our international products than from our U.S. products, and higher sales fees from our U.S. products than from our international products. Changing market conditions may cause a shift in our asset mix

Table of Contents

between international and U.S. products, potentially resulting in a decline in our revenues and income depending upon the ~~value~~nature of our AUM ~~to decline, which would result in lower investment management fee revenues. Changing market conditions could also cause an impairment to~~and the ~~value~~level of ~~our goodwill and other intangible assets.~~fees we earn on that AUM.

~~Table of Contents~~

Our funds may be subject to liquidity risks or an unanticipated large number of redemptions and fund closures.

Due to market volatility or other events or conditions described above, our funds may need to sell securities or instruments that they hold, possibly at a loss, or draw on any available lines of credit, to obtain cash to maintain sufficient liquidity or settle these redemptions, or settle in-kind with securities held in the applicable fund. While we have no legal or contractual obligation to do so, we have in the past provided, and may in the future at our discretion provide, financial support to our funds to enable them to maintain sufficient liquidity in any such event. Changes in investor preferences regarding our more popular products have in the past caused, and could in the future cause, sizable redemptions and lower the value of our AUM, which would result in lower revenue and operating results. Increased market volatility and changes in investor preferences also increase the risk of fund closures. Any decrease in the level of our AUM resulting from market declines, credit or interest rate volatility or uncertainty, increased redemptions or other factors could negatively impact our revenues and income.

~~A shift in our asset mix toward lower fee products may negatively impact our revenues.~~

Changing market conditions and investor preferences may cause a shift in our asset mix toward certain lower fee products, such as fixed income products, and away from equity and multi-asset products. This may cause a related decline in our revenues and income, as we generally derive higher fee revenues and income from our equity and certain multi-asset products than from our fixed income products. Increases in interest rates, particularly if rapid, as well as uncertainty in the future direction of interest rates, may have a negative impact on our fixed income products. Although the shorter duration of the bond investments in many of these products may help mitigate interest rate risk, rising interest rates or interest rate uncertainty typically decrease the total return on many bond investments due to lower market valuations of existing bonds. Further, changing market conditions and investor preferences also may cause a shift in our asset mix toward lower fee ETFs. Moreover, we generally derive higher investment management and distribution fees from our international products than from our U.S. products, and higher sales fees from our U.S. products than from our international products. Changing market conditions may cause a shift in our asset mix between international and U.S. products, potentially resulting in a decline in our revenues and income depending upon the nature of our AUM and the level of fees we earn on that AUM.

We may not effectively manage risks associated with the replacement of benchmark indices.

The withdrawal and replacement of widely used benchmark indices such as the London Interbank Offered Rate (“LIBOR”) with alternative benchmark rates may introduce a number of risks for our business, our clients and the financial services industry more widely. These include financial risks arising from ~~potential~~ changes in the valuation of financial instruments linked to benchmark indices, pricing and operational risks, and legal implementation and revised documentation risks. The ~~FCA in the U.K., which regulates LIBOR, has announced that it will no longer compel panel banks to submit rates for LIBOR after 2021. The publication of~~global transition away from LIBOR is ~~therefore not guaranteed beyond 2021, and it appears highly likely that~~continuing to progress, with LIBOR ~~will be discontinued or modified~~being replaced by the end of 2021. At this time, no consensus exists as to which reference rate or rates or benchmarks may become acceptable alternatives to LIBOR, although the Alternative Reference Rates Committee, a group of market participants convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has identified the Secured Overnight Financing Rate ~~(“SOFR”)~~and other alternatives as ~~the recommend alternative~~of June 30, 2023, subject to ~~LIBOR.~~LIBOR’s ongoing phase-out. The selection of SOFR as the alternative reference rate, however, currently presents certain market concerns because a term structure for SOFR has not yet developed, and there is not yet a generally accepted methodology for adjusting SOFR. Accordingly, theongoing withdrawal and replacement of LIBOR may pose financial risks and uncertainties to our business. We also may face operational challenges adopting successor benchmarks.

INVESTMENT PERFORMANCE AND ~~PERFORMANCE~~REPUTATIONAL RISKS

Poor investment performance of our products could reduce the level of our AUM or affect our sales, and negatively impact our revenues and income.

Our investment performance, along with achieving and maintaining superior distribution and client service, is critical to the success of our business. Strong investment performance often stimulates sales of our products. Poor investment performance, as currently experienced by certain of our products, as compared to third-party benchmarks or competitive products, has led, and could in the future lead, to a decrease in sales of our products and stimulate redemptions from existing products, generally lowering the overall level of AUM and reducing the management fees we earn. We can provide no assurance that past or present investment performance in our products will be indicative of future performance. If we fail, or appear to fail, to address successfully and promptly the underlying causes of poor investment performance, ~~we may be unsuccessful in repairing any existing or continuing harm to our performance and~~ our future business prospects would likely be negatively affected.

~~Table of Contents~~

Harm to our reputation may negatively impact our revenues and income.

Our reputation is critical to the success of our business. We believe that our brand names have been, and continue to be, well received both in our industry and with our clients, reflecting the fact that our brands, like our business, are based in part on trust and confidence. If our brands or reputation are harmed, existing clients may reduce amounts held in, or withdraw entirely from, our products, or our clients and products may terminate their management agreements with us, which could reduce the amount of our AUM and cause us to suffer a corresponding loss in our revenues and income. In addition, reputational harm may prevent us from attracting new clients or developing new business. Moreover, ESG topics and activities have been the subject of increased focus by certain investors and regulators in the asset management industry, and any inability to meet applicable requirements or expectations may adversely impact our reputation and business.

Table of Contents

GLOBAL OPERATIONAL RISKS

~~Our completed acquisition of Legg Mason, Inc. remains subject to integration risks.~~

~~On July 31, 2020, we completed our acquisition of Legg Mason, Inc. pursuant to the terms~~We may review and ~~conditions of the Merger Agreement, and Legg Mason became a wholly-owned subsidiary of Franklin. Important ongoing integration-related~~pursue strategic transactions that could pose risks ~~related~~ to our ~~completed acquisition~~business and global operations.

As part of ~~Legg Mason include~~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 ~~risks~~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 ~~the transaction,~~an acquisition, including ~~the realization of~~with respect to revenue, tax benefits, financial benefits or returns, and expense and other ~~synergies,~~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 ~~be fully realized, or~~have control. These investments may ~~take longer to realize than expected, and~~involve risks, including the risk that the ~~integration~~controlling stakeholder or joint venture partner may ~~cost more than expected. In addition,~~have business interests, strategies or goals that are inconsistent with ours. The business decisions or other actions or omissions of the ~~COVID-19 pandemic-related risks~~controlling stakeholder, joint venture partner or the entity itself may result in ~~unanticipated regulatory, planning and/~~liability to us or ~~operational delays that may~~harm to our reputation, or adversely ~~impact~~affect the ~~anticipated timeline and achievement~~value of our ongoing integration goals. The ongoing integration of Legg Mason is a time-consuming and expensive process that, without adequate planning and effective and timely implementation, could significantly disrupt our business. Our failure to meetinvestment in the challenges involved in successfully integrating the operations of Legg Mason or to otherwise realize any of the anticipated benefits of the acquisition could adversely impair our business and operations as noted above.entity.

Our business operations are complex and a failure to perform operational tasks properly or 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 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 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

Table of Contents

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

~~Table of Contents~~

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. 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 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, with respect to Brexit, although the U.K. has now formally left the EU as of January 31, 2020, it is still unclear what final terms may be agreed to among the parties through the December 31, 2020 implementation period, and the ultimate impact on us.

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 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,~~Asia-Pacific; Europe, Middle East and ~~Africa,~~Africa; Latin ~~America~~America; and 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. 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 have

~~Table of Contents~~

a 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.

Table of Contents

COMPETITION AND DISTRIBUTION RISKS

~~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, including our recent acquisition of Legg Mason, and related transactions pose the risk that any business we acquire may lose 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.

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 including increased 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; and advances 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 ETFs, to the extent that there is a trend among existing or potential clients in favor of ~~lower fee~~lower-fee index and other 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 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.

~~Table of Contents~~

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.

Table of Contents

Moreover, 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 have outsourced certain administration services for our funds to third-party providers.~~ 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

~~Table of Contents~~

our business. Our third-party applications may include confidential and proprietary data provided by vendors and by 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, including in connection with our recent Legg Mason acquisition.~~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

Table of Contents

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, as well as attempts to 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, we can provide 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 our personnel or 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, including the third-party applications we use, could result in: (i) 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, (iv) loss of valuable information, (v) breach of client and vendor contracts, (vi) liability for stolen assets, information or identity, (vii) remediation costs to repair damage caused by the failure or breach, (viii) additional security and organizational costs to mitigate against future incidents, (ix) reputational harm, (x) loss of confidence in our business and products, (xi) liability for failure to review and disclose applicable incidents or provide relevant updated disclosure properly and timely, (xii) regulatory investigations or actions, and/or (xiii) legal claims, litigation, and liability 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

~~Table of Contents~~

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.

Table of Contents

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. ~~See “Pandemic-Related Risks” above for risks relating to COVID-19.~~ 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 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, 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.

CASH MANAGEMENT RISKS

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 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.

Table of Contents

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 certain laws, regulations (including certain pending regulatory reforms) and regulators to which we are subject, see “Item 1 – Business – Regulation” in Part I of this Annual Report.

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, 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 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. 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.

Table of Contents

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

~~Table of Contents~~

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 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.

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 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.~~

~~Further, pursuant to ongoing efforts to encourage global tax compliance, the OECD has adopted certain common reporting standards aimed at ensuring that persons with~~ financial assets located outside of their tax residence country pay required taxes. Such standards may subject us to additional reporting, compliance and administrative costs, and burdens in jurisdictions where we operate as a qualifying financial institution.

~~Table of Contents~~

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

Table of Contents

business activities. Further, regulatory or governmental examinations or investigations that have been inactive could become active. In addition, ~~from time to time,~~ we are named as a party in ~~litigation. We~~litigation in the ordinary course of business. Even if claims made against us are without merit, they can result in reputational harm and 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 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 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/or~~and negatively impact our reputation, profitability, and financial results. Examinations, investigations, allegations, findings or judgments of wrongdoing by regulatory or governmental authorities or in litigation against us, or settlements with respect thereto, could affect our regulatory licenses, reputation, increase our costs of doing business and/or negatively impact our revenues,revenue any of which could have a 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 ~~16 –~~15 - Commitments and Contingencies in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report.

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

In the ordinary course of business, we 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.

Failure to protect our intellectual property may negatively impact our business.

Although we take steps to safeguard and protect our intellectual property, including but not limited to our trademarks, patents, copyrights and trade secrets, there can be no assurance that we will be able effectively to protect our rights. If our intellectual property rights were violated, we could be subject to economic and reputational harm that could negatively impact our business and competitiveness in the marketplace. Conversely, while we take efforts to avoid infringement of 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 risks, license fees, liability and reputational harm.


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

Item 1B.Unresolved Staff Comments.

None.

Table of Contents


~~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 ~~2030.~~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
357,383
St. Petersburg, Florida 560,948
314,685
Rancho Cordova, California 445,023
62,660
Hyderabad, India 379,052
—
Poznan, Poland 284,436
—
Ft. Lauderdale, Florida 102,246
20,264
Edinburgh, Scotland 87,016
26,210
Other 90,891
12,091
Total 2,693,405
793,293

We lease office space in 16 states in the U.S. and Washington, D.C., and internationally, including ~~for example, 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, ~~2020~~,2022, we leased and occupied approximately ~~2,175,000~~1,971,000 square feet of office space worldwide, and subleased to third parties approximately ~~417,000~~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.


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

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 under “Legal Proceedings” contained in Note 1615 – Commitments and Contingencies in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report.


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

Item 4.Mine Safety Disclosures.

Not applicable.

Table of Contents

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The following description of our executive officers is included as an unnumbered item in this Part I of this 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 the filing date of this Annual Report. ~~Each~~Generally, each executive officer is appointed by our board of directors and holds his or her office until the earlier of his or her death, resignation, retirement, disqualification or removal.

Jennifer M. Johnson

Age 5658

President of Franklin since December 2016, and Chief Executive Officer and director of Franklin since February 2020; formerly, Chief Operating Officer of Franklin from February 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, including certain of the specialist investment managers acquired through the Legg Mason transaction;~~Franklin; officer, director and/or trustee of certain funds registered as investment companies managed or advised by subsidiaries of Franklin.

Gregory E. Johnson

Age 5961

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 8082

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.

Table of Contents

Matthew Nicholls

Age 4850

Executive Vice President and Chief Financial Officer of Franklin since May ~~2019;~~2019 and Chief Operating Officer since April 2022; officer and/or director of certain subsidiaries of ~~Franklin, including certain of the specialist investment managers acquired through the Legg Mason transaction since August 2020.~~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, North America, Financial Institutions Corporate Banking from 2007 to 2011, and as Managing Director and Co-Head of Asset Management Banking from 2006 to 2007.

~~Jed A. Plafker~~Alok Sethi

Age 4961

Executive Vice President, Technology and Operations, of Franklin since ~~April 2019, formerly, Senior Vice President from June 2018 to April 2019;~~October 2021; officer and/or director of certain subsidiaries of Franklin, including certain of the specialist investment managers acquired through the Legg Mason transaction, for example, as Manager of Brandywine Global Investment Management, LLC and Clarion Partners Holdings LLC since August 2020, and Director of ClearBridge Investments, LLC and Western Asset Management Company, LLC since August 2020; as well 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.

~~Table of Contents~~

~~Alok Sethi~~

~~Age 59~~

~~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 5860

Chief Accounting Officer of Franklin since April 2019; officer and/or director of certain subsidiaries of Franklin, including ~~certain of the specialist investment managers acquired through the Legg Mason transaction, including, for example,~~ 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 5254

Executive Vice President, Global Advisory Services, of Franklin since October 1, 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 ~~a specialist investment manager acquired through the Legg Mason transaction,~~ 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.

~~Craig S. Tyle~~

~~Age 60~~

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.

Family Relationships

Jennifer M. Johnson and Gregory E. Johnson are siblings, and their uncle is Rupert H. Johnson, Jr. Each serves as both a director and an executive officer of Franklin.

Table of Contents

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, ~~2020,~~2022, there were ~~2,731~~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, ~~2020~~.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 2020 —
$ —
—
39,722,462
August 2020 669,887
21.06
669,887
39,052,575
September 2020 838,451
20.26
838,451
38,214,124
Total 1,508,338
1,508,338


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,

2020¹
2019 2018 2017 2016
Summary of Operations² (in millions)

Operating revenues $ 5,566.5
$ 5,669.4
$ 6,204.5
$ 6,305.0
$ 6,534.6
Operating income 1,048.9
1,466.9
2,028.2
2,199.6
2,295.1
Operating margin 18.8 % 25.9 % 32.7 % 34.9 % 35.1 %
Net income attributable to Franklin Resources, Inc. 798.9
³
1,195.7
⁴
764.4
⁵
1,696.7
1,726.7
Financial Data (in millions)

Total assets $ 20,220.9
$ 14,532.2
$ 14,383.5
$ 17,534.0
$ 16,098.8
Debt 3,017.1
696.9
695.9
1,044.2
1,401.2
Debt of consolidated investment products 1,333.4
50.8
32.6
53.4
682.2
Franklin Resources, Inc. stockholders’ equity 10,114.5
9,906.5
9,899.2
12,620.0
11,935.8
Operating cash flows 1,021.4
201.6
2,229.7
1,135.4
1,727.7
Investing cash flows (3,243.1 ) (1,077.1 ) (290.4 ) 52.0
192.2
Financing cash flows 194.2
(40.5 ) (3,761.7 ) (956.0 ) (1,800.7 )
Assets Under Management (in billions)

Ending $ 1,418.9
$ 692.6
$ 717.1
$ 753.2
$ 733.3
Average⁶
832.9
697.0
740.5
736.9
749.3
Per Common Share
Earnings
Basic $ 1.59
$ 2.35
$ 1.39
$ 3.01
$ 2.94
Diluted 1.59
2.35
1.39
3.01
2.94
Cash dividends declared 1.08
1.04
3.92
0.80
0.72
Book value 20.43
19.84
19.07
22.74
20.93

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


¹	~~Includes the impact of the Company’s acquisition of Legg Mason, Inc. which was effective~~ ~~July 31, 2020. See Note 3 – Acquisitions in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10‑K for more information.~~

In fiscal year 2020, the Company changed the presentation of its consolidated statements of income to include dividend and interest income and other expenses from consolidated investment products in non-operating income. Amounts for the comparative prior fiscal years have been reclassified to conform to the current presentation. These reclassifications had no impact on previously reported net income attributable to Franklin Resources, Inc.


³	~~Includes an income tax benefit of $27.0 million, net of valuation allowance, from capital losses subsequent to the change in corporate tax structure of a foreign holding company to a U.S. branch.~~


⁴	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”).


⁵	~~Includes an estimated income tax charge of $968.8 million resulting from enactment of the Tax Act.~~


⁶	~~Represents simple monthly average AUM.~~

~~Table of Contents~~


~~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 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, retail separately managed account programs, sub-advised products, and other investment vehicles. ~~In addition to investment management, our~~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^®, Legg Mason^®, ~~Balanced Equity Management~~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^® ~~and LibertyShares~~^®~~. In addition, pursuant to our acquisition of Legg Mason, Inc. (“Legg Mason”) on July 31, 2020, we acquired certain additional brand names including Brandywine Global Investment Management~~^®, ~~Clarion~~Lexington Partners^®~~, ClearBridge Investments~~^®, Martin Currie^®, ~~QS Investors~~O’Shaughnessy^®, Asset Management, Royce^® Investment Partners and Western Asset Management Company^®. We offer a broad product mix of fixed income, equity, alternative, multi-asset, ~~alternative~~ and cash management asset classes and solutions 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.

Table of Contents

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, 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.

As further noted in the “Risk Factors” section, the outbreak and spread of contagious diseases such as the coronavirus disease 2019 (“COVID-19”), a highly transmissible and pathogenic disease, has adversely affected, and we expect will continue to adversely affect, our business, financial condition and results of operations. Global health concerns, and uncertainty regarding the impact of COVID-19, could lead to further and/or increased volatility in global capital and credit markets, adversely affect our key executives and other personnel, clients, investors, providers, suppliers, lessees, and other third parties, and negatively impact our AUM, revenues, income, business and operations. As of the time of this filing, as the COVID-19 pandemic continues to evolve, it is not possible to predict the full extent to which COVID-19 will adversely impact our business, liquidity, capital resources, financial results and operations due to numerous developing factors that are highly uncertain and rapidly changing.

During the fiscal year ended September 30, ~~2020~~2022 (“fiscal year ~~2020~~”2022”), ~~the~~ global equity markets experienced ~~volatility reflecting, among~~significant declines driven by the economic impacts of inflationary pressures, interest rate increases by the Federal Reserve and other ~~things, ongoing global~~developed market central banks in an effort to combat inflation, central banks’ tightened monetary policies, the Russian invasion of Ukraine, and concerns about the ~~COVID-19 pandemic, but provided overall strong positive returns. Despite easing~~risk of shutdown measures and some signs of economic recovery following significant accommodative economic efforts by governments and central banks, concerns about the severe economic impact of the ongoing COVID-19 pandemic persist.recession. The S&P 500 Index and MSCI World Index ~~increased~~ ~~15.2%~~decreased 15.5% and ~~11.0%~~19.3% for the fiscal year. The global bond markets also declined as the Bloomberg Barclays Global Aggregate Index decreased 20.4% for the fiscal year driven by the interest rate increases.

Our total AUM was ~~$1,418.9~~$1,297.4 billion at September 30, ~~2020,~~2022, which was ~~105%~~ ~~higher~~15% lower than at September 30, ~~2019~~ ~~reflecting an increase~~2021 driven by the negative impact of ~~$806.5~~$269.0 billion ~~from acquisitions, partially offset by $61.6~~of net market change, distributions and other, $27.8 billion of long-term net outflows ~~$9.9~~and $0.8 billion of cash management net outflows, ~~and $8.7~~partially offset by $64.9 billion from ~~net market change, distributions and other.~~acquisitions. Simple monthly average AUM (“average AUM”) ~~increased 19%~~decreased 2% during fiscal year ~~2020~~.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.

~~Table of Contents~~

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 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.

Table of Contents

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) 2020 vs. 2019 2019 vs. 2018
for the fiscal years ended September 30,
2020¹
2019 2018
Operating revenues²
$ 5,566.5
$ 5,669.4
$ 6,204.5
(2 %) (9 %)
Operating income²
1,048.9
1,466.9
2,028.2
(28 %) (28 %)
Operating margin³
18.8 % 25.9 % 32.7 %

Net income attributable to Franklin Resources, Inc. $ 798.9
$ 1,195.7
$ 764.4
(33 %) 56 %
Diluted earnings per share $ 1.59
$ 2.35
$ 1.39
(32 %) 69 %

As adjusted (non-GAAP):⁴

Adjusted operating income $ 1,491.1
$ 1,654.2
$ 2,093.5
(10 %) (21 %)
Adjusted operating margin 38.5 % 42.6 % 49.8 %

Adjusted net income $ 1,311.0
$ 1,331.3
$ 798.1
(2 %) 67 %
Adjusted diluted earnings per share $ 2.61
$ 2.62
$ 1.45
0 % 81 %

1^{___________________}Defined as operating income divided by total operating revenues.


¹	~~Includes the impact of the Company’s acquisition of Legg Mason, Inc. which was effective~~ 2~~July 31, 2020. See Note 3 – Acquisitions in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report for information.~~

~~In fiscal year 2020~~, the Company changed the presentation of its consolidated statements of income to include dividend and interest income and other expenses from consolidated investment products in non-operating income (expense). Amounts for the comparative prior fiscal years have been reclassified to conform to the current presentation. These reclassifications had no impact on previously reported net income attributable to Franklin Resources, Inc.


³	~~Defined as operating income divided by total operating revenues.~~


⁴	“Adjusted operating income,” “adjusted operating margin,” “adjusted net income” and “adjusted diluted earnings per share” are based on methodologies other than generally accepted accounting principles. See “Supplemental Non-GAAP Financial Measures” for definitions and reconciliations of these measures.

~~The Company acquired Legg Mason effective~~ ~~July 31, 2020, and the results of operations for fiscal year 2020 include two months of Legg Mason’s results. Operating income decreased $418.0 million in fiscal year~~ ~~2020~~ due to a 2% decrease in operating revenues and a 7% increase in operating expenses which reflected higher levels of compensation and benefits expense, including acquisition-related retention costs, other acquisition-related expenses, and amortization and impairments of intangible assets and goodwill. Net income attributable to Franklin Resources, Inc. decreased $396.8 million primarily due to the decrease in operating income, as the impact of declines in market valuations amid global concerns about the COVID-19 pandemic resulted in net investment and other losses of $38.4 million, as compared to net gains of $141.4 million in the prior year, less the portion attributable to noncontrolling interests, was largely offset by lower taxes on income.

Operating income decreased $561.3 million in the fiscal year ended September 30, 2019 (“fiscal year 2019”) due to a 9% decrease in operating revenues and a 1% increase in operating expenses. 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.~~

~~Diluted earnings per share decreased in fiscal year~~ ~~2020~~ and increased in fiscal year 2019, consistent with the changes in net income and the impacts of 2% and 6% decreases in diluted average common shares outstanding primarily resulting from repurchases of shares of our common stock.

~~Table of Contents~~

~~Adjusted operating income decreased $163.1 millionin fiscal year~~ ~~2020~~ primarily due to a 10% increase in compensation and benefits expense, excluding non-GAAP adjustments. Adjusted net income decreased $20.3 million primarily due to the decrease in adjusted operating income substantially offset by lower taxes on income, excluding the net income tax expense of non-GAAP adjustments.

Adjusted operating income decreased $439.3 million in fiscal year 2019 primarily due to an 8% decrease in adjusted operating revenues and a 6% increase in compensation and benefits expense, excluding non-GAAP adjustments. Adjusted net income attributable to Franklin Resources, Inc. increased $533.2 million primarily due to a prior-year estimated income tax charge of $968.8 million~~resulting from enactment of the Tax Act, partially offset by the decrease in adjusted operating income.~~

~~Adjusted~~ diluted earnings per ~~share decreased in fiscal year~~ ~~2020~~share” are based on methodologies other than generally accepted accounting principles. See “Supplemental Non-GAAP Financial Measures” for definitions and ~~increased in fiscal year 2019, consistent with the changes in adjusted net income and the impacts~~reconciliations of ~~the decreases in diluted average common shares outstanding.~~these measures.

ASSETS UNDER MANAGEMENT

In the fourth quarter of fiscal year 2020, we revised our presentation of AUM to disclose AUM by asset class and introduced a simplified presentation of long-term net flows to incorporate all client-driven flow activity, which is defined as long-term inflows net of long-term outflows. Additionally, we report cash management net flows as a separate component of total net flows. These changes reflect the new breadth of our business and the expansion of our client base and investment vehicle offerings, both of which expanded significantly beyond retail mutual funds following the acquisition of Legg Mason.

AUM by 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	%

Table of Contents

(in billions) 2020 vs. 2019 2019 vs. 2018
as of September 30, 2020 2019 2018
Fixed Income $ 656.7
$ 250.6
$ 258.5
162 % (3 %)
Equity 432.0
263.9
304.6
64 % (13 %)
Multi-Asset 133.8
123.6
126.7
8 % (2 %)
Alternative 124.0
45.0
18.0
176 % 150 %
Cash Management 72.4
9.5
9.3
662 % 2 %
Total $ 1,418.9
$ 692.6
$ 717.1
105 % (3 %)
Average for the Year $ 832.9
$ 697.0
$ 740.5
19 % (6 %)

AUM at September 30, 2020 increased 105% from September 30, 2019 driven by $806.5 billion from acquisitions, partially offset by $61.6 billion of long-term net outflows, $9.9 billion of cash management net outflows and $8.7 billion from net market change, distributions and other.

AUM at September 30, 2019 decreased 3% from September 30, 2018 as $31.8 billion of long-term net outflows and $20.0 billion of net market change, distributions and other, were partially offset by $26.4 billion from an acquisition and $0.9 billion of cash management net inflows.

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

~~Table of Contents~~

Average AUM and the mix of average AUM by 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 2020 vs. 2019 2019 vs. 2018
for the fiscal years ended September 30, 2020 2019 2018
Fixed Income $ 330.5
$ 256.1
$ 275.2
29 % (7 %)
Equity 290.3
275.5
310.8
5 % (11 %)
Multi-Asset 123.0
122.2
129.3
1 % (5 %)
Alternative 63.8
33.7
17.2
89 % 96 %
Cash Management 25.3
9.5
8.0
166 % 19 %
Total $ 832.9
$ 697.0
$ 740.5
19 % (6 %)


	Mix of Average AUM							Mix of Average AUM
for the fiscal years ended September 30,	2020		2019		2018		for the fiscal years ended September 30,	2022		2021		2020
Fixed Income	39	%	37	%	37	%	Fixed Income	40	%	44	%	39	%
Equity	35	%	40	%	42	%	Equity	33	%	33	%	35	%
Alternative							Alternative	13	%	9	%	8	%
Multi-Asset	15	%	17	%	18	%	Multi-Asset	10	%	10	%	15	%
Alternative	8	%	5	%	2	%
Cash Management	3	%	1	%	1	%	Cash Management	4	%	4	%	3	%
Total	100	%	100	%	100	%	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.

(in billions) 2020 vs. 2019 2019 vs. 2018
for the fiscal years ended September 30, 2020 2019 2018
Beginning AUM $ 692.6
$ 717.1
$ 753.2
(3 %) (5 %)
Long-term inflows 182.4
175.0
165.5
4 % 6 %
Long-term outflows (244.0 ) (206.8 ) (203.5 ) 18 % 2 %
Long-term net flows (61.6 ) (31.8 ) (38.0 ) 94 % (16 %)
Cash management net flows (9.9 ) 0.9
3.5
NM
(74 %)
Total net flows (71.5 ) (30.9 ) (34.5 ) 131 % (10 %)
Acquisitions 806.5
26.4
9.8
NM
169 %
Net market change, distributions and other (8.7 ) (20.0 ) (11.4 ) (57 %) 75 %
Ending AUM $ 1,418.9
$ 692.6
$ 717.1
105 % (3 %)


(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	%

3833

Table of Contents

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


(in billions)																			(in billions)
for the fiscal year ended September 30, 2020	Fixed Income			Equity			Multi-Asset			Alternative			Cash Management			Total
AUM at October 1, 2019	$	250.6		$	263.9		$	123.6		$	45.0		$	9.5		$	692.6
for the fiscal year ended September 30, 2022																			for the fiscal year ended September 30, 2022	Fixed Income		Equity		Alternative		Multi-Asset		Cash Management		Total
AUM at October 1, 2021																			AUM at October 1, 2021	$	650.3	$	523.6	$	145.2	$	152.4	$	58.6	$	1,530.1
Long-term inflows	79.7			64.3			27.8			10.6			—			182.4			Long-term inflows	138.4		123.0		22.4		36.6		—		320.4
Long-term outflows	(112.9		)	(90.2		)	(33.6		)	(7.3		)	—			(244.0		)	Long-term outflows	(168.6)		(131.6)		(16.1)		(31.9)		—		(348.2)
Long-term net flows	(33.2		)	(25.9		)	(5.8		)	3.3			—			(61.6		)	Long-term net flows	(30.2)		(8.6)		6.3		4.7		—		(27.8)
Cash management net flows	—			—			—			—			(9.9		)	(9.9		)	Cash management net flows	—		—		—		—		(0.8)		(0.8)
Total net flows	(33.2		)	(25.9		)	(5.8		)	3.3			(9.9		)	(71.5		)	Total net flows	(30.2)		(8.6)		6.3		4.7		(0.8)		(28.6)
Acquisitions	449.4			183.2			22.5			75.8			75.6			806.5			Acquisitions	—		4.6		58.0		2.3		—		64.9
Net market change, distributions and other	(10.1		)	10.8			(6.5		)	(0.1		)	(2.8		)	(8.7		)	Net market change, distributions and other	(129.2)		(127.3)		15.6		(27.9)		(0.2)		(269.0)
AUM at September 30, 2020	$	656.7		$	432.0		$	133.8		$	124.0		$	72.4		$	1,418.9
AUM at September 30, 2022																			AUM at September 30, 2022	$	490.9	$	392.3	$	225.1	$	131.5	$	57.6	$	1,297.4

(in billions)
for the fiscal year ended
September 30, 2019
Fixed
Income
Equity Multi-Asset Alternative
Cash
Management
Total
AUM at October 1, 2018 $ 258.5
$ 304.6
$ 126.7
$ 18.0
$ 9.3
$ 717.1
Long-term inflows 75.6
58.5
34.8
6.1
—
175.0
Long-term outflows (81.9 ) (83.5 ) (35.9 ) (5.5 ) —
(206.8 )
Long-term net flows (6.3 )
(25.0 )
(1.1 )
0.6

—

(31.8 )
Cash management net flows —
—
—
—
0.9
0.9
Total net flows (6.3 ) (25.0 ) (1.1 ) 0.6
0.9
(30.9 )
Acquisition —
—
—
26.4
—
26.4
Net market change, distributions and other (1.6 ) (15.7 ) (2.0 ) —
(0.7 ) (20.0 )
AUM at September 30, 2019 $ 250.6
$ 263.9
$ 123.6
$ 45.0
$ 9.5
$ 692.6

(in billions)
for the fiscal year ended
September 30, 2018
Fixed
Income
Equity Multi-Asset Alternative
Cash
Management
Total
AUM at October 1, 2017 $ 286.0
$ 311.7
$ 132.5
$ 16.7
$ 6.3
$ 753.2
Long-term inflows 71.2
63.9
25.6
4.8
—
165.5
Long-term outflows (82.4 ) (88.5 ) (29.0 ) (3.6 ) —
(203.5 )
Long-term net flows (11.2 )
(24.6 )
(3.4 )
1.2

—
(38.0 )
Cash management net flows —
—
—
—
3.5
3.5
Total net flows (11.2 ) (24.6 ) (3.4 ) 1.2
3.5
(34.5 )
Acquisition —
9.8
—
—
—
9.8
Net market change, distributions and other (16.3 ) 7.7
(2.4 ) 0.1
(0.5 ) (11.4 )
AUM at September 30, 2018 $ 258.5
$ 304.6
$ 126.7
$ 18.0
$ 9.3
$ 717.1

AUM ~~increased $726.3~~decreased $232.7 billion or ~~105%~~15% during fiscal year ~~2020 as $806.5 billion from acquisitions was partially offset by $61.6 billion~~2022 due to the negative impact of ~~long-term net outflows, $9.9 billion of cash management net outflows and $8.7~~$269.0 billion of net market change, distributions and ~~other. Acquisitions included $797.4~~other, $27.8 billion of long-term net outflows and $0.8 billion of cash management net outflows, partially offset by acquisitions of $64.9 billion. Net market change, distributions and other primarily consists of $199.2 billion of market depreciation, $48.7 billion of long-term distributions and a $21.1 billion decrease from foreign exchange revaluation. The market depreciation occurred in all asset classes with the ~~acquisition~~exception of ~~Legg Mason~~the alternative asset class. Foreign exchange revaluation from AUM in products that are not U.S. dollar denominated was primarily due to a stronger U.S. dollar compared to the Japanese Yen, Euro, Pound Sterling and ~~$9.1 billion from other acquisitions.~~ Australian dollar.

Long-term inflows ~~increased 4%~~decreased 12% to ~~$182.4~~$320.4 billion, as compared to the prior year, driven by lower inflows in fixed income institutional separate accounts, open-end funds, and 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 fixed income institutional separate accounts, equity and multi-asset open-end funds, and equity sub-advised mutual funds, partially offset by higher equity outflows in retail separately managed accounts and 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 increased $111.2 billion or 8% during fiscal year 2021 due to the positive impact of $148.0 billion of net market change, distributions and other, and $3.5 billion from an acquisition, partially offset by $25.2 billion of long-term net outflows and $15.1 billion of cash management net outflows. Net market change, distributions and other primarily consists of $176.3 billion of market appreciation, partially offset by $29.1 billion of long-term distributions. The market appreciation occurred in all asset classes, most significantly in the equity and multi-asset classes and reflected positive returns in global equity markets.

Long-term inflows increased 100% to $364.7 billion, as compared to the prior year, and long-term outflows increased 60% to $389.9 billion due to higher inflows ~~in all long-term asset classes except multi-asset. Long-term outflows increased 18% to $244.0 billion due to higher~~and outflows in all long-term asset classes ~~except multi-asset, most significantly in fixed income products.~~primarily due to the acquisition of Legg Mason. Long-term net outflows included outflows of ~~$27.6~~$35.7 billion from ~~six~~sixteen institutional products, including two fixed income redemptions of $5.9 billion and $2.0 billion and two equity redemptions of $3.7 billion and

Table of Contents

$2.2 billion, $12.5 billion from seven fixed income funds, ~~$7.3~~including $3.3 billion from ~~seven institutional products, $6.2~~five India credit funds that were non-management fee earning which are in the process of winding up, $5.4 billion from ~~three~~a 529 plan redemption, $3.9 billion from two equity funds and ~~$3.6~~$3.1 billion from a multi-asset fund, partially offset by inflows of ~~$6.0 billion in two equity funds, $4.0~~$12.3 billion in three fixed income funds, ~~$2.0~~$6.7 billion in ~~two~~three institutional products, ~~and $1.3 billion in a private open-end product. Net~~

~~Table of Contents~~

market change, distributions and other primarily consists of $24.8 billion of long-term distributions, partially offset by $15.8 billion of market appreciation. The market appreciation occurred primarily in the equity asset class, and reflected positive returns in global equity markets as evidenced by increases of 15.2% and 11.0% in the S&P 500 Index and MSCI World Index.

AUM decreased $24.5 billion or 3% during fiscal year 2019 due to $31.8 billion of long-term net outflows and $20.0 billion of net market change, distributions and other, partially offset by $26.4 billion from an acquisition. Long-term inflows increased 6% to $175.0 billion due to higher inflows in all the long-term asset classes except the equity asset class, and long-term outflows increased 2% to $206.8 billion due to higher outflows in the multi-asset and alternative asset classes, partially offset by lower outflows in the equity asset class. Long-term net outflows included outflows 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 equity funds; $2.7 billion from a fixed income fund; $1.4 billion from an institutional fixed income product; $1.3 billion from a multi-asset 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 fixed income fund and $1.8$3.7 billion in an equity ~~fund. Net market change, distributions~~fund, $3.1 billion in a multi-asset fund and ~~other primarily consists of $31.5~~$3.0 billion ~~of long-term distributions and a $2.9 billion decrease from foreign exchange revaluation, partially offset by $14.4 billion of market appreciation. The 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 U.S. dollar against the Euro, Canadian dollar, Australian dollar and Pound Sterling. The market appreciation occurred in all long-term asset classes except equity, and reflected positive returns in global fixed income markets as evidenced by a 7.6% increase 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

AUM by sales region was as follows:

(in billions) 2020 vs. 2019 2019 vs. 2018
as of September 30, 2020 2019 2018
United States $ 1,024.0
$ 477.9
$ 482.0
114 % (1 %)
International
Asia-Pacific 168.6
89.0
91.4
89 % (3 %)
Europe, Middle East and Africa 141.8
87.9
98.3
61 % (11 %)
Latin America¹
59.4
13.5
15.6
340 % (13 %)
Canada 25.1
24.3
29.8
3 % (18 %)
Total international $ 394.9
$ 214.7
$ 235.1
84 % (9 %)
Total $ 1,418.9
$ 692.6
$ 717.1
105 % (3 %)

^{______________}


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

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

(in billions) 2020 vs. 2019 2019 vs. 2018
for the fiscal years ended September 30, 2020 2019 2018
United States $ 587.2
$ 473.3
$ 491.1
24 % (4 %)
International

Asia-Pacific 102.4
90.4
95.2
13 % (5 %)
Europe, Middle East and Africa 97.8
91.5
105.8
7 % (14 %)
Latin America¹
23.1
14.6
17.3
58 % (16 %)
Canada 22.4
27.2
31.1
(18 %) (13 %)
Total international $ 245.7
$ 223.7
$ 249.4
10 % (10 %)
Total $ 832.9
$ 697.0
$ 740.5
19 % (6 %)

^{______________}


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

~~The percentage of average AUM in the United States sales region was 70%, 68% and 66% for fiscal years 2020, 2019 and 2018.~~

~~Table of Contents~~


(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 measure of the performance of these products is the percentage of AUM exceeding peer group medians and benchmarks. We compare the relative performance of our mutual funds against peers, and of our ~~institutional products~~strategy composites against benchmarks. ~~Approximately half~~

Table of our mutual fund AUM exceeded the peer group median comparisons for all periods presented. Our institutional products generated strong long-term results with at least 63% of AUM exceeding the benchmark comparisons for all periods presented, primarily driven by the performance of our fixed income products which had at least 73% of AUM exceeding the benchmark comparisons.Contents

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


																		Peer Group Comparison1								Benchmark Comparison2
	Peer Group Comparison¹								Benchmark Comparison²									% of Mutual Fund AUM in Top Two Peer Group Quartiles								% of Strategy Composite AUM Exceeding Benchmark
	% of Mutual Fund AUM in Top Two Peer Group Quartiles								% of Institutional AUM Exceeding Benchmark
as of September 30, 2020	1-Year		3-Year		5-Year		10-Year		1-Year		3-Year		5-Year		10-Year
as of September 30, 2022																	as of September 30, 2022	1-Year		3-Year		5-Year		10-Year		1-Year		3-Year		5-Year		10-Year
Fixed Income	58	%	53	%	51	%	56	%	73	%	80	%	92	%	97	%	Fixed Income	40	%	42	%	32	%	69	%	26	%	49	%	58	%	92	%
Equity	48	%	56	%	56	%	47	%	28	%	33	%	27	%	50	%	Equity	44	%	34	%	49	%	64	%	39	%	29	%	44	%	37	%
Total AUM³	47	%	48	%	47	%	58	%	63	%	69	%	73	%	84	%	Total AUM3	52	%	47	%	51	%	57	%	41	%	48	%	58	%	70	%

Table of Contents

~~Selected Quarterly Financial Data (Unaudited)~~

(in millions, except per share data)
Quarter ended December 31 March 31 June 30 September 30
Fiscal year 2020¹

Operating revenues $ 1,389.2
$ 1,311.2
$ 1,161.1
$ 1,705.0
Operating income 372.9
339.9
232.5
103.6
Net income attributable to Franklin Resources, Inc.²
350.5
79.1
290.4
78.9
Earnings per share
Basic $ 0.70
$ 0.16
$ 0.58
$ 0.15
Diluted 0.70
0.16
0.58
0.15
Dividends declared per share $ 0.27
$ 0.27
$ 0.27
$ 0.27
AUM (in billions)

Ending $ 698.3
$ 580.3
$ 622.8
$ 1,418.9
Average 693.8
655.8
605.0
1,227.8

Fiscal year 2019¹

Operating revenues $ 1,385.4
$ 1,412.8
$ 1,448.4
$ 1,422.8
Operating income 385.3
367.3
349.2
365.1
Net income attributable to Franklin Resources, Inc.³
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

^{__________________}

In the quarter ended September 30, 2020, the Company changed the presentation of its consolidated statements of income to include dividend and interest income and other expenses from consolidated investment products in non-operating income. Amounts for the comparative prior fiscal quarters have been reclassified to conform to the current presentation. These reclassifications had no impact on previously reported net income attributable to Franklin Resources, Inc.


²	~~Information presented for the quarter ended September 30, 2020 includes the impact of the Legg Mason, Inc. acquisition effective~~ ~~July 31, 2020. See Note 3 – Acquisitions in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report for more information.~~


³	The quarter ended June 30, 2019 includes an income tax charge of $86.4 million 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 Annual Report, which is incorporated herein by reference.

~~Table of Contents~~


~~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, ~~2020~~2022 would have resulted in an increase or decrease in ~~pre-tax earnings~~operating revenues of ~~$366.5 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 ~~$1,338.4~~$1,918.3 million at September 30, ~~2020~~.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, ~~2020~~2022 as substantially all of our outstanding debt was issued at fixed rates.

As of September 30, ~~2020~~,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 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, Middle East and Africa, Asia-Pacific and 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 ~~Indian Rupee~~ and ~~Canadian~~Australian dollar. These assets accounted for 19% of the total cash and cash equivalents and investments at September 30, ~~2020~~. 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 6% of the total cash and cash equivalents and investments at ~~September 30, 2020. Changes in the values of these assets resulting from changes in U.S. dollar exchange rates are recorded in earnings.~~

~~Table of Contents~~

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, ~~2020~~2022 would result in a ~~$76.7~~$109.1 million ~~increase~~decrease in accumulated other comprehensive ~~income~~loss and a ~~$23.0~~$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).

Table of Contents

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, ~~2020~~.2022. If such a 10% increase or decrease in carrying values were to occur, the changes from investments measured at fair value and direct investments in CIPs would result in a ~~$129.0~~$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
Investments, at fair value $ 504.8
$ 555.3
$ 454.3
Direct investments in CIPs 785.3
863.8
706.8
Total $ 1,290.1
$ 1,419.1
$ 1,161.1

Table of Contents


~~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, ~~2020~~, ~~2019~~2022, 2021 and ~~2018~~.2020.



CONTENTS						Page
Management’s Report on Internal Control Over Financial Reporting						66 58
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)						67 59
Consolidated Financial Statements of Franklin Resources, Inc. and its consolidated subsidiaries:
Consolidated Statements of Income for the fiscal years ended September 30, ~~2020, 2019~~2022 , 2021 and ~~2018~~2 020						70 62
Consolidated Statements of Comprehensive Income for the fiscal years ended September 30, ~~2020, 2019~~2022 , 2021 and ~~2018~~202 0						71 63
Consolidated Balance Sheets as of September 30, ~~2020~~2022 and ~~2019~~2 021						72 64
Consolidated Statements of Stockholders’ Equity as of and for the fiscal years ended September 30, ~~2020, 2019~~2022 , 2021 and ~~2018~~2 020						73 65
Consolidated Statements of Cash Flows for the fiscal years ended September 30, ~~2020, 2019~~2022 , 2021 and ~~2018~~2 020						74 66
Notes to Consolidated Financial Statements						76 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 Annual Report under the heading “Selected Quarterly Financial Data (Unaudited)” and incorporated herein by reference.

6557

Table of Contents

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 ~~July 31, 2020,~~April 1, 2022, Franklin Resources, Inc. completed ~~its~~the acquisition of ~~Legg Mason, Inc.~~Lexington Partners L.P. (“~~Legg Mason”~~Lexington”). Consistent with guidance issued by the ~~Securities and Exchange Commission~~SEC that an assessment of a recently acquired business may be omitted from management’s report on internal control over financial reporting infor one year following the ~~year of~~ acquisition, management excluded an assessment of the effectiveness of the Company’s internal control over financial reporting related to ~~Legg Mason. Total assets and~~Lexington. Lexington represents approximately 2% of the Company’s consolidated total operating revenues ~~of Legg Mason that were excluded from management’s assessment constitute 12%~~and approximately 1% of the Company’s consolidated total assets, excluding associated goodwill and intangible assets, as of ~~September 30, 2020~~ and ~~9% of consolidated total operating revenues~~ for the fiscal year ended September 30, ~~2020. Management’s basis for exclusion~~2022. The recognition of goodwill and intangible assets, however, is covered by our internal controls over business combinations, which were included ~~the size and complexity~~in management's assessment of the ~~acquired business,~~effectiveness of the ~~timing between acquisition and fiscal year end, and expected integration plans during the fiscal year ending~~Company's internal control over financial reporting as of September 30, ~~2021.~~2022.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, ~~2020,~~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, ~~2020,~~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, ~~2020~~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, 2022.

~~2020~~.

Table of Contents

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, ~~2020~~2022 and ~~2019~~,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, ~~2020~~,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, ~~2020~~,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, ~~2020~~2022 and ~~2019~~,2021, and the results of its operations and its cash flows for each of the three years in the period ended September 30, ~~2020~~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, ~~2020~~,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 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 ~~Legg Mason, Inc.~~Lexington Partners L.P. from its assessment of internal control over financial reporting as of September 30, ~~2020~~2022 because ~~Legg Mason, Inc.~~Lexington Partners L.P. was acquired by the Company in a purchase business combination during ~~2020.~~2022. We have also excluded ~~Legg Mason, Inc.~~Lexington Partners L.P. from our audit of internal control over financial reporting. ~~Legg Mason, Inc.~~Lexington Partners L.P. is a ~~wholly-owned~~ subsidiary whose total assets and total operating revenues excluded from management’s assessment and our audit of internal control over financial reporting represent ~~12%~~1% and 9%2%, respectively, of the related consolidated financial statement amounts as of and for the year ended September 30, ~~2020.~~2022.

Table of Contents

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.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

~~Acquisition~~Realizability of ~~Legg Mason, Inc. - Fair Value of Indefinite-lived and Definite-lived Investment Management Contract Intangible~~Deferred Tax Assets ~~and One Redeemable Noncontrolling Interest~~

As described in ~~Notes 1 and 3~~Note 13 to the consolidated financial statements, ~~in July 2020,~~ the Company ~~completed its acquisition~~had gross deferred tax assets of ~~Legg Mason, Inc. for~~$1,014.7 million as of September 30, 2022, reduced by a purchase consideration of $4.7 billion, which resulted in management recording $2.7 billion of indefinite-lived investment management contract intangible assets, $1.1 billion of definite-lived investment management contract intangible assets, and $186.4$258.3 million ~~of redeemable noncontrolling interests. Fair~~valuation allowance. Management records a valuation allowance to reduce the carrying values of ~~acquired indefinite-lived and definite-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, discount rate, average effective fee rate~~statute, and ~~effective~~effectiveness of prudent and feasible tax rate. Fair values of redeemable noncontrolling interests 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.planning strategies.

The principal considerations for our determination that performing procedures relating to the ~~fair value~~realizability of ~~indefinite-lived and definite-lived investment management contract intangible~~deferred tax assets ~~and redeemable noncontrolling interest from the acquisition of Legg Mason, Inc.~~ is a critical audit matter are the significant judgment by management when ~~developing~~assessing the ~~estimated fair value~~realizability of ~~indefinite-lived and definite-lived investment management contract intangible~~deferred tax assets, ~~and redeemable noncontrolling interest; this~~which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence ~~related~~relating to ~~(i) the AUM growth rate and discount rate assumptions utilized within the net present value of estimated future cash flows for the valuation~~management’s assessment of the ~~investment management contract intangible~~realizability of deferred tax assets and ~~redeemable noncontrolling interest~~significant assumptions relating to the timing of expiration, projected sources of taxable income, limitations on utilization under the statute, and ~~(ii) the public company earnings multiples utilized within the guideline public company method for the valuation~~effectiveness of ~~the redeemable noncontrolling interest. In addition, the audit effort involved the use~~prudent and feasible tax planning strategies.

Table of ~~professionals with specialized skill and knowledge.~~Contents

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 and definite-lived investment management contract intangible~~deferred tax assets, ~~and redeemable noncontrolling interest in the acquisition of Legg Mason, Inc.,~~ including controls over ~~development~~the completeness and accuracy of ~~(i)~~data relevant to the ~~AUM growth rate~~analysis, determination of projected sources of taxable income and ~~discount rate assumptions utilized within the net present value~~expected utilization of ~~estimated future cash flows and (ii) the public company earnings multiples utilized within the guideline public company method.~~deferred tax assets. These procedures also included, among ~~others, identifying the acquired contracts by reading the purchase agreement and testing~~others: (i) evaluating management’s ~~process for estimating the fair value~~assessment of the ~~acquired indefinite-lived~~realizability of deferred tax assets and ~~definite-lived investment management contract intangible assets and~~

~~Table of Contents~~

~~redeemable noncontrolling interest. Testing management’s process included (i)~~the need for a valuation allowance, (ii) evaluating the ~~appropriateness~~reasonableness of ~~the methods, (ii) testing the completeness, accuracy, and relevance of underlying data used in the methods, and (iii) evaluating~~ management’s significant assumptions related to timing of expiration, projected sources of taxable income, limitations on utilization under the ~~AUM growth rate~~statute and ~~discount rate for~~effectiveness of prudent and feasible tax planning strategies, (iii) evaluating the ~~valuation~~prudence and feasibility of the ~~investment management contract intangible assets~~implementation of available tax planning strategies, and ~~redeemable noncontrolling interest,~~(iv) testing the completeness and ~~the public company earnings multiples for the valuation~~accuracy of the ~~redeemable noncontrolling interest. Evaluating~~data utilized in the ~~reasonableness~~assessment of the ~~AUM growth rate and public company earnings multiples involved considering the past performance~~realizability 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. Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Company’s discounted cash flow method and guideline public company method and the reasonableness of the discount rate.deferred tax assets.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

November ~~20, 2020~~

14, 2022

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

6961

Table of Contents

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,	2020			2019			2018			for the fiscal years ended September 30,	2022		2021		2020
Operating Revenues										Operating Revenues
Investment management fees	$	3,981.7		$	3,985.2		$	4,367.5		Investment management fees	$	6,616.8	$	6,541.6	$	3,981.7
Sales and distribution fees	1,362.0			1,444.6			1,599.8			Sales and distribution fees	1,415.0		1,635.5		1,362.0
Shareholder servicing fees	195.1			216.3			221.9			Shareholder servicing fees	193.0		211.2		195.1
Other	27.7			23.3			15.3			Other	50.5		37.2		27.7
Total operating revenues	5,566.5			5,669.4			6,204.5			Total operating revenues	8,275.3		8,425.5		5,566.5
Operating Expenses										Operating Expenses
Compensation and benefits	1,873.9			1,584.7			1,390.6			Compensation and benefits	3,089.8		2,971.3		1,873.9
Sales, distribution and marketing	1,703.1			1,819.6			2,039.7			Sales, distribution and marketing	1,845.6		2,105.8		1,703.1
Information systems and technology	288.4			258.5			243.9			Information systems and technology	500.2		486.1		288.4
Occupancy	147.9			133.6			128.6			Occupancy	218.9		218.1		147.9
Amortization of intangible assets	54.0			14.7			1.8			Amortization of intangible assets	282.0		232.0		54.0
General, administrative and other	450.3			391.4			371.7			General, administrative and other	564.9		537.2		450.3
Total operating expenses	4,517.6			4,202.5			4,176.3			Total operating expenses	6,501.4		6,550.5		4,517.6
Operating Income	1,048.9			1,466.9			2,028.2			Operating Income	1,773.9		1,875.0		1,048.9
Other Income (Expenses)										Other Income (Expenses)
Investment and other income (losses), net	(38.4		)	141.4			200.3			Investment and other income (losses), net	91.1		264.7		(38.4)
Interest expense	(33.4		)	(22.4		)	(46.3		)	Interest expense	(98.2)		(85.4)		(33.4)
Investment and other income of consolidated investment products, net	70.2			78.8			59.6
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	(29.4		)	(16.9		)	(26.6		)	Expenses of consolidated investment products	(19.7)		(31.2)		(29.4)
Other income (expenses), net	(31.0		)	180.9			187.0			Other income (expenses), net	(44.5)		569.2		(31.0)
Income before taxes	1,017.9			1,647.8			2,215.2			Income before taxes	1,729.4		2,444.2		1,017.9
Taxes on income	230.8			442.3			1,472.5			Taxes on income	396.2		349.6		230.8
Net income	787.1			1,205.5			742.7			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	48.6			6.2			(12.8		)	Redeemable noncontrolling interests	(46.9)		94.1		48.6
Nonredeemable noncontrolling interests	(60.4		)	3.6			(8.9		)	Nonredeemable noncontrolling interests	88.2		169.3		(60.4)
Net Income Attributable to Franklin Resources, Inc.	$	798.9		$	1,195.7		$	764.4		Net Income Attributable to Franklin Resources, Inc.	$	1,291.9	$	1,831.2	$	798.9

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

See Notes to Consolidated Financial Statements.

7062

Table of Contents

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,	2020			2019			2018			for the fiscal years ended September 30,	2022		2021		2020
Net Income	$	787.1		$	1,205.5		$	742.7		Net Income	$	1,333.2	$	2,094.6	$	787.1
Other Comprehensive Income (Loss)										Other Comprehensive Income (Loss)
Currency translation adjustments, net of tax	25.8			(52.5		)	(91.9		)	Currency translation adjustments, net of tax	(244.6)		29.1		25.8
Net unrealized gains (losses) on defined benefit plans, net of tax	(1.8		)	(2.0		)	1.9			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	0			1.5			4.3			Net unrealized gains on investments, net of tax	0.4		—		—
Total other comprehensive income (loss)	24.0			(53.0		)	(85.7		)	Total other comprehensive income (loss)	(243.4)		30.0		24.0
Total comprehensive income	811.1			1,152.5			657.0			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	48.6			6.2			(12.8		)	Redeemable noncontrolling interests	(46.9)		94.1		48.6
Nonredeemable noncontrolling interests	(60.4		)	3.6			(8.9		)	Nonredeemable noncontrolling interests	88.2		169.3		(60.4)
Comprehensive Income Attributable to Franklin Resources, Inc.	$	822.9		$	1,142.7		$	678.7		Comprehensive Income Attributable to Franklin Resources, Inc.	$	1,048.5	$	1,861.2	$	822.9

See Notes to Consolidated Financial Statements.

7163

Table of Contents

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,	2020			2019			as of September 30,	2022		2021
Assets							Assets
Cash and cash equivalents	$	3,026.8		$	5,803.4		Cash and cash equivalents	$	4,134.9	$	4,357.8
Receivables	1,114.8			740.0			Receivables	1,264.8		1,428.2
Investments (including $504.8 and $589.7 at fair value at September 30, 2020 and 2019)	1,270.5			1,555.8
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	930.7			154.2			Cash and cash equivalents	647.6		289.4
Receivables	85.8			99.0
Investments, at fair value	2,709.2			2,303.9			Investments, at fair value	7,898.1		5,820.1
Property and equipment, net	813.8			683.7			Property and equipment, net	743.3		770.0
Goodwill	4,500.8			2,130.3			Goodwill	5,778.6		4,457.7
Intangible assets, net	4,914.2			864.2			Intangible assets, net	5,082.1		4,710.2
Operating lease right-of-use assets	534.8			0			Operating lease right-of-use assets	464.5		448.4
Other	319.5			197.7			Other	395.4		376.3
Total Assets	$	20,220.9		$	14,532.2		Total Assets	$	28,060.6	$	24,168.4

Liabilities							Liabilities
Compensation and benefits	$	1,064.0		$	502.4		Compensation and benefits	$	1,464.4	$	1,179.3
Accounts payable and accrued expenses	283.7			222.9			Accounts payable and accrued expenses	466.2		479.3
Dividends	143.2			137.4
Commissions	268.0			254.0
Income taxes	703.3			824.7			Income taxes	523.1		693.6
Debt	3,017.1			696.9			Debt	3,376.4		3,399.4
Liabilities of consolidated investment products							Liabilities of consolidated investment products
Accounts payable and accrued expenses	510.1			81.5			Accounts payable and accrued expenses	646.9		558.0
Debt	1,333.4			50.8			Debt	5,457.7		3,671.0
Deferred tax liabilities	305.3			120.1			Deferred tax liabilities	347.8		311.7
Operating lease liabilities	621.0			0			Operating lease liabilities	528.4		518.4
Other	456.1			270.6			Other	1,425.0		614.1
Total liabilities	8,705.2			3,161.3			Total liabilities	14,235.9		11,424.8
Commitments and Contingencies (Note 16)
Commitments and Contingencies (Note 15)							Commitments and Contingencies (Note 15)
Redeemable Noncontrolling Interests	541.9			746.7			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	0			0			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; 495,116,677 and 499,303,269 shares issued and outstanding at September 30, 2020 and 2019	49.5			49.9
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	10,472.6			10,288.2			Retained earnings	12,045.6		11,550.8
Accumulated other comprehensive loss	(407.6		)	(431.6		)	Accumulated other comprehensive loss	(621.0)		(377.6)
Total Franklin Resources, Inc. stockholders’ equity	10,114.5			9,906.5			Total Franklin Resources, Inc. stockholders’ equity	11,474.6		11,223.4
Nonredeemable noncontrolling interests	859.3			717.7			Nonredeemable noncontrolling interests	824.3		587.2
Total stockholders’ equity	10,973.8			10,624.2			Total stockholders’ equity	12,298.9		11,810.6
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	20,220.9		$	14,532.2		Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	28,060.6	$	24,168.4

See Notes to Consolidated Financial Statements.

7264

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Significant Accounting Policies

Business. Franklin ~~Resources, Inc. (“Franklin”)~~ is a holding company with subsidiaries ~~(collectively, the “Company”)~~ operating under its Franklin 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, retail separately managed account programs, sub-advised products, and other investment vehicles. ~~In addition to investment management, the~~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, ~~2020~~2022 (“fiscal year ~~2020~~”2022”).

In the quarter ended September 30, 2020, the Company changed the presentation of its consolidated statements of income to include dividend and investment income and expenses of consolidated investment products in other income, net. Amounts for the comparative prior fiscal year periods have been reclassified to conform to the current year presentation. These reclassifications had no impact on previously reported net income or financial position. Management believes the revised presentation is more useful to readers of its financial statements and more accurately portrays the nature of the consolidated investment products (“CIP”) revenue and expenses as the operations of CIPs are not related to the Company’s core business.

The following table presents the effects of the change in the presentation of operating revenues, operating expenses and other income, net to the Company’s previously reported consolidated statements of income:

2019 2018
(in millions)
for the fiscal years ended September

As
Reported
Adjustments
As
Amended
As
Reported Adjustments As
Amended
Operating Revenues
Other $ 128.4
$ (105.1 ) $ 23.3
$ 129.9
$ (114.6 ) $ 15.3

Operating Expenses
General, administrative and other¹
420.7
(14.6 ) 406.1
397.7
(24.2 ) 373.5

Other Income (Expenses)
Investment and other income (losses), net 115.1
26.3
141.4
145.3
55.0
200.3
Interest expense (24.7 ) 2.3
(22.4 ) (48.7 ) 2.4
(46.3 )
Investment and other income of consolidated investment products, net 0
78.8
78.8
0
59.6
59.6
Expenses of consolidated investment products 0
(16.9 ) (16.9 ) 0
(26.6 ) (26.6 )
Other income (expenses), net $ 90.4

$ 90.5

$ 180.9

$ 96.6

$ 90.4

$ 187.0

^{______________}


¹	~~General, administrative and other includes amortization of intangible assets.~~

~~Table of Contents~~

Consolidation. The consolidated financial statements include the accounts of Franklin and its subsidiaries and ~~CIPs~~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 and trade names. The fair values of the acquired 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 effective tax rate. The management contract

Table of Contents

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. 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.

~~Table of Contents~~

If a quantitative goodwill impairment test indicates that the carrying value of the goodwill exceeds the fair value of the reporting unit, impairment is recognized in the amount of the excess of the carrying value over the implied fair value of the goodwill, which considers the fair value assigned 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, discount rate, average effective fee rate and effective tax rate.

If a quantitative goodwill impairment test indicates that the carrying value of the reporting unit exceeds its fair value, impairment is recognized in the amount of the difference in values not to exceed the total amount of goodwill allocated to the reporting unit.

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 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, quoted prices for identical or similar assets or liabilities in inactive markets, or model-based valuation methodologies that utilize significant assumptions that are observable or corroborated by observable market data.

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.

~~A substantial amount~~

Table of ~~the~~Contents

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.

~~Table of Contents~~

Investments consist of investments in sponsored funds and separate accounts, investments related to long-term incentive plans, other equity and debt securities, investments in equity method investees and other investments.

Sponsored funds and separate accounts consist primarily of nonconsolidated sponsored funds and to a lesser extent, separate accounts. Sponsored funds and separate accounts are carried at fair value with changes in the fair value 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 the underlying investments of the separate accounts are determined using quoted market prices, or independent third-party broker or dealer price quotes if 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 the sponsored funds’ published NAV or estimated using NAV as a practical expedient.

Other equity and debt securities consist of equity investment securities and debt securities ~~classified as trading or available-for-sale and are~~ 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 ~~securities are determined using independent third-party broker or dealer price quotes or based on discounted cash flows using significant unobservable inputs. The fair values of~~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. 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, which were disposed during fiscal year 2020, were carried at fair value, 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.

Table of Contents

Cash and Cash Equivalents of CIPs consist of highly liquid investments, including money market funds, which are readily convertible into cash, 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.

Receivables of CIPs consist of investment and share transaction related receivables and are carried at transacted amounts. Due to the short-term nature and liquidity of the receivables, their carrying values approximate fair value.

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. 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.

~~Table of Contents~~

The investments that are not generally traded in active markets consist of equity and debt securities of entities in emerging markets, fund products, other equity and debt instruments, real estate and loans. 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.

Property and Equipment, net are recorded at cost and depreciated using the straight-line method over their estimated useful lives which range from three to 35 years. Expenditures for repairs and maintenance are charged to expense when incurred. Leasehold improvements are amortized using the straight-line method over their estimated useful lives or the lease term, whichever is shorter.

Internal and external costs incurred in connection with developing or obtaining software for internal use are capitalized and amortized over the shorter of the estimated useful lives of the software or the license terms, beginning when the software project is complete and the application is put into production.

Property and equipment are tested for impairment when there is an indication that the carrying value of an asset may not be recoverable. Carrying values are not recoverable when the undiscounted cash flows estimated to be generated by the assets are less than their carrying values. When an asset is determined to not be recoverable, the impairment is measured based on the excess, if any, of the carrying value of the asset over its respective fair value. Fair value is determined by discounted future cash flows models, appraisals or other applicable methods.

Leases consist primarily of operating leases relating to real estate. At the inception of a contract, the Company determines whether it is or contains a lease, which includes consideration of whether there are identified assets in the contract and if the Company has control over such assets. Right-of-use (“ROU”) assets and lease liabilities are recognized for all arrangements that qualify as a lease, except for those with original lease terms of twelve months or less.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments using an incremental borrowing rate estimated on a collateralized basis with similar terms for the specific interest rate environment. Leases with fixed payments are expensed on a straight-line basis over the lease term. Variable lease payments based on usage, changes in an index or market rate are expensed as incurred. The lease terms include options to extend or terminate the lease when it is reasonably certain they will be exercised.

Lease and nonlease payment components are accounted for separately. ROU assets are tested for impairment when there is an indication that the carrying value of an asset may not be recoverable.

~~Deferred Sales Commissions~~ consist of upfront commissions paid to financial advisers and broker-dealers on shares of sponsored funds sold without a front-end sales charge, and are amortized over the periods in which they are generally recovered from related revenues, which range from 18 months to seven years. Deferred sales commissions are included in other assets in the consolidated balance sheet.

Debt consists of senior ~~notes and junior~~ notes which are carried at amortized cost. The fair value is estimated using quoted market prices, independent third-party broker or dealer price quotes, or prices of publicly traded debt with similar maturities, credit risk and interest rates. Amortization of debt premium and discount are recognized over the terms of the notes in interest expense.

Debt of CIPs is carried at amortized cost. The fair value is estimated using a discounted cash flow model that considers current interest rate levels, the quality of the underlying collateral and current economic conditions. ~~At September 30, 2020, debt~~Debt of CIPs also included debt of consolidated collateralized loan obligations (“CLOs”) which was measured primarily based on the fair value of the assets of the CLOs less the fair value of the Company’s own economic interests in the CLOs.

Table of Contents

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 holder are classified as temporary equity at the higher of fair value on reporting date or issuance-date fair value. Changes in fair value of redeemable noncontrolling interest is recognized as an adjustment to retained earnings. Nonredeemable noncontrolling interests are classified as a component of equity. Net income (loss) attributable to third-party investors is reflected as net income (loss) attributable to nonredeemable and redeemable noncontrolling interests in the consolidated statements of income. Sales and redemptions of shares of CIPs by third-party investors are a component of the change in noncontrolling interests included in financing activities in the consolidated statements of cash flows.

~~Table of Contents~~

The fair values 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. The Company earns revenue primarily from providing investment management and related services to its customers, which are generally investment products or investors in separate accounts. Related services include fund administration, sales and distribution, and shareholder servicing. Revenues are recognized when the Company’s 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.

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 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.

Shareholder servicing fees are primarily determined based on a percentage of AUM on a monthly basis using daily average AUM and either the number of transactions in shareholder accounts or the number of shareholder accounts, while fees from certain investment products are based only on AUM. The fees are recognized as the services are performed over time.

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 in accordance with the Company’s global valuation and pricing policy. 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 and represent an insignificant percentage of total AUM.

Revenue is recorded gross of payments made to third-party service providers in the Company’s role as principal as it controls the delegated services provided to customers.

Costs of obtaining a contract with a customer include internal and external sales commissions paid upon inception of a contract. The cost to obtain a contract is capitalized if it is incremental and would not have been incurred if the contract had not been obtained. Capitalized contract costs are amortized based on average investor tenure, which range from five to 10 years.

Stock-Based Compensation. The fair value of stock-based payment awards is estimated on the date of grant based on the market price of the underlying shares of the Company’s common stock and is amortized to compensation expense on a straight-line basis over the related vesting period, which is generally three years. Expense relating to awards subject to performance conditions is recognized if it is probable that the conditions will be achieved. The probability of achievement is assessed on a quarterly basis. Forfeitures are accounted for as they occur. The fair value of cash-settled phantom stock

Table of Contents

awards is amortized to compensation expense on a straight-line basis over the related vesting period, which is generally four years, and the related liability is carried at fair value.

Postretirement Benefits. Defined contribution plan costs are expensed as incurred.

~~Table of Contents~~

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, the Company considers 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, the Company ~~determines~~utilizes 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. Interest on tax matters is recognized in interest expense and penalties in other operating expenses.

~~As a multinational corporation, the~~The Company operates 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 ~~generates earnings worldwide.~~the relevant taxing authorities. Significant judgment is required in the determination of the Company’s 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. The Company repatriates ~~its~~ foreign earnings that are in excess of regulatory, capital or operational requirements of all of its non-U.S. subsidiaries.

Foreign Currency Translation and Transactions. Assets and liabilities of non-U.S. subsidiaries for which the local currency is the functional currency are translated at current exchange rates as of the end of the accounting period. The related revenues and expenses are translated at average exchange rates in effect during the period. Net exchange gains and losses resulting from translation are excluded from income and are recorded as part of accumulated other comprehensive income (loss). Transactions denominated in a foreign currency are revalued at the current exchange rate at the transaction date and any related gains and losses are recognized in earnings.

~~Note 2 – New Accounting Guidance~~

~~Recently Adopted Accounting Guidance~~

On October 1, 2019, the Company adopted new guidance issued by the Financial Accounting Standards Board (“FASB”) for leases. The new guidance requires lessees to recognize assets and liabilities arising from substantially all leases. The guidance also requires an evaluation at the inception of a contract to determine whether the contract is or contains a lease. The Company adopted the new guidance using the modified retrospective approach and recognized right-of-use assets of $274.5 million and lease liabilities of $315.2 million, substantially all of which relate to real estate leases. The right-of-use assets recognized as of October 1, 2019 were net of $40.7 million of deferred rent previously included in other liabilities on the consolidated balance sheet. See Note 15 – Leases for additional disclosures.

~~Accounting Guidance Not Yet Adopted~~

The FASB issued new guidance for the accounting for credit losses in June 2016. The new guidance requires the application of a current expected credit loss model for financial assets measured at amortized cost, including receivables, and an allowance for credit loss model for available-for-sale debt securities. The Company will adopt the guidance on October 1, 2020 and expects to recognize a cumulative effect adjustment to retained earnings of approximately $6 million.

Note 32 – Acquisitions

~~Legg Mason, Inc.~~Lexington Partners L.P.

On ~~July 31, 2020,~~April 1, 2022, the Company acquired all of the outstanding ~~shares~~ownership interests in Lexington Partners L.P. (“Lexington”), a leading global manager of ~~Legg Mason, Inc. (“Legg Mason”) common stock~~secondary private equity and co-investment funds, for ~~a purchase~~cash consideration of ~~$4.5 billion in~~$984.7 million paid at the time of close and deferred consideration of $750.0 million that has an acquisition-date fair value of $706.4 million. The consideration paid at close was funded from existing cash and ~~$0.2 billion related~~the deferred consideration is included in other liabilities in the consolidated balance sheets. In connection with the acquisition, the Company granted a 25% profits interest in Lexington and performance-based cash retention awards to ~~the settlement of historical compensation arrangements. Legg Mason has outstanding debt with an aggregate principal amount due of $2.0 billion.~~certain employees that vest over approximately five years. The acquisition ~~of Legg Mason, a global investment management organization, establishes the Company as of one of the world’s largest independent, specialized global investment managers,~~ ~~significantly deepens~~bolsters the Company’s ~~presence~~alternative asset capabilities, complementing its existing strengths in ~~key geographies~~real estate, private credit, and creates an expansive investment platform that is well balanced between institutional and retail client AUM. The EnTrust business was acquired by its management concurrent with the closing of the acquisition.hedge fund strategies.

The ~~purchase price allocation is preliminary~~initial and subject to change during the measurement period, which is not to exceed one year from the acquisition date. At this time, the Company does not expect material changes to the assets acquired or liabilities assumed with the exception of deferred tax assets and liabilities which were valued using preliminary assumptions.

~~Table of Contents~~

~~The initial~~revised estimated fair values of the assets acquired and liabilities and noncontrolling interests assumed ~~were~~was as follows:

(in millions)
Estimated
Fair Value
as of July 31, 2020
Cash and cash equivalents $ 681.1
Cash and cash equivalents of consolidated investment products 253.4
Investments 471.8
Investments of consolidated investment products 402.9
Receivables 525.7
Indefinite-lived intangible assets 2,727.8
Definite-lived intangible assets¹
1,353.8
Goodwill 2,325.0
Deferred tax assets 148.4
Other assets 530.7
Debt (2,324.4 )
Debt of consolidated investment products (330.8 )
Compensation and benefits (579.9 )
Deferred tax liabilities (315.4 )
Other liabilities (926.4 )
Redeemable noncontrolling interests (186.4 )
Nonredeemable noncontrolling interests (20.1 )
Total Identifiable Net Assets $ 4,737.2

(in millions) 2020
Effective
Interest Rate
2019
Effective
Interest Rate
as of September 30,
Notes issued by Franklin Resources, Inc.
$300 million 2.800% senior notes due September 2022 $ 299.8
2.93 % $ 299.8
2.93 %
$400 million 2.850% senior notes due March 2025 399.7
2.97 % 399.6
2.97 %
Total notes issued by Franklin Resources, Inc. 699.5
699.4

Notes issued by Legg Mason (a subsidiary of Franklin)
$250 million 3.950% senior notes due July 2024 272.4
1.53 % 0
N/A
$450 million 4.750% senior notes due March 2026 523.0
1.80 % 0
N/A
$550 million 5.625% senior notes due January 2044 747.5
3.38 % 0
N/A
$250 million 6.375% junior notes due March 2056 260.7
6.08 % 0
N/A
$500 million 5.450% junior notes due September 2056 516.1
5.25 % 0
N/A
Total notes issued by Legg Mason 2,319.7
0

Other

Loan due December 2019 0
N/A
0.2
9.30 %
Debt issuance costs (2.1 ) (2.7 )
Total $ 3,017.1
$ 696.9

Table of Contents


(in millions)	2022		Effective Interest Rate		2021		Effective Interest Rate
as of September 30,
Debt of Franklin Resources, Inc.
$300 million 2.800% senior notes due September 2022	$	—	N/A		$	299.9	2.93	%
$400 million 2.850% senior notes due March 2025	399.8		2.97	%	399.7		2.97	%
$850 million 1.600% senior notes due October 2030	846.7		1.74	%	846.3		1.74	%
$350 million 2.950% senior notes due August 2051	347.9		3.00	%	347.8		3.00	%
$300 million term loan due September 2025	300.0		3.50	%	—		N/A
Total debt of Franklin Resources, Inc.	1,894.4				1,893.7
Debt of Legg Mason (a subsidiary of Franklin)
$250 million 3.950% senior notes due July 2024	260.6		1.53	%	266.5		1.53	%
$450 million 4.750% senior notes due March 2026	496.2		1.80	%	509.6		1.80	%
$550 million 5.625% senior notes due January 2044	736.3		3.38	%	742.2		3.38	%
Total debt of Legg Mason	1,493.1				1,518.3
Debt issuance costs	(11.1)				(12.6)
Total	$	3,376.4			$	3,399.4

On September 15, 2022, the Company 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, the Company 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.

On January 10, 2022, the Company 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, the Company amended and restated the credit facility to, among other things, extend its maturity to September 7, 2023. As of September 30, ~~2020~~,2022, there were no amounts outstanding.

At September 30, 2022, the Company had $500.0 million of short-term commercial paper available for issuance under an uncommitted private placement program which has been inactive since 2012.

At September 30, 2022, Franklin’s outstanding senior unsecured unsubordinated notes had an aggregate principal amount due of ~~$700.0~~$1,600.0 million. The notes have fixed interest rates with interest payable semi-annually.

At September 30, ~~2020,~~2022, Legg Mason’s outstanding senior ~~and junior~~ unsecured unsubordinated notes had an aggregate principal amount due of ~~$2,000.0~~$1,250.0 million. The notes have fixed interest rates with interest payable ~~semi-annually for senior~~semi-annually. Effective August 2, 2021, Franklin agreed to unconditionally and irrevocably guarantee all of the outstanding notes ~~and quarterly for junior notes.~~issued by Legg Mason.

The Franklin and Legg Mason senior notes contain an optional redemption feature that allows the Company to redeem each series of notes prior to maturity in whole or in part at any time, at a make-whole redemption price. ~~The junior notes due March 2056 and September 2056 may only be redeemed in whole prior to March 2021 and September 2021, respectively.~~ The indentures governing the senior notes contain limitations on the Company’s ability and the ability of its subsidiaries to pledge voting stock or profit participating equity interests in its subsidiaries to secure other debt without similarly securing the notes equally and ratably. In addition, the indentures include requirements that must be met if the Company consolidates or merges with, or sells all or substantially all of its 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. The Company was in compliance with all ~~debt~~ covenants at September 30, ~~2020.~~2022.

~~At September 30, 2020, the Company had $500.0 million~~

Table of ~~short-term commercial paper available for issuance under an uncommitted private placement program which has been inactive since~~ ~~2012~~.Contents

~~On October 19, 2020, the Company completed its offering and sale of the 1.600% Notes due 2030 with a principal amount of $750.0 million. See Note 22 – Subsequent Event for additional information.~~

Note 1110 – Consolidated Investment Products

CIPs consist of mutual and other investment funds, limited partnerships and similar structures, and CLOs, all of which are sponsored by the Company, and include both VOEs and VIEs. ~~CLOs are asset-backed financing entities collateralized by a pool of corporate loans.~~ The Company had 7259 CIPs, including 415 CLOs, as of September 30, ~~2020~~2022 and 60 CIPs, ~~none of which were~~including 10 CLOs, as of September 30, ~~2019~~.2021.

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

(in millions)
as of September 30, 2020 2019
Assets
Cash and cash equivalents $ 930.7
$ 154.2
Receivables 85.8
99.0
Investments, at fair value 2,709.2
2,303.9
Total Assets $ 3,725.7
$ 2,557.1

Liabilities
Accounts payable and accrued expenses $ 510.1
$ 81.5
Debt 1,333.4
50.8
Other liabilities 12.1
0
Total liabilities 1,855.6
132.3
Redeemable Noncontrolling Interests 397.3
746.7
Stockholders’ Equity

Franklin Resources, Inc.’s interests 788.4
1,129.6
Nonredeemable noncontrolling interests 684.4
548.5
Total stockholders’ equity 1,472.8
1,678.1
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity
$ 3,725.7
$ 2,557.1


(in millions)
as of September 30,	2022		2021
Assets
Cash and cash equivalents	$	647.6	$	289.4
Receivables	134.0		127.8
Investments, at fair value	7,898.1		5,820.1
Total Assets	$	8,679.7	$	6,237.3

Liabilities
Accounts payable and accrued expenses	$	646.9	$	558.0
Debt	5,457.7		3,671.0
Other liabilities	175.0		13.8
Total liabilities	6,279.6		4,242.8
Redeemable Noncontrolling Interests	942.2		622.5
Stockholders’ Equity
Franklin Resources, Inc.’s interests	960.8		1,000.7
Nonredeemable noncontrolling interests	497.1		371.3
Total stockholders’ equity	1,457.9		1,372.0
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	8,679.7	$	6,237.3

The CIPs did not have a significant impact on net income attributable to the Company in fiscal years ~~2020~~, ~~2019~~2022, 2021 and ~~2018~~.

~~Table of Contents~~

2020.

The Company has no right to the CIPs’ assets, other than its direct equity investments in them and investment management and other fees earned from them. The debt holders of the CIPs have no recourse to the Company’s assets beyond the level of its direct investment, therefore the Company bears no other risks associated with the CIPs’ liabilities.

Fair Value Measurements

Assets ~~and liabilities~~ of CIPs measured at fair value on a recurring basis were as follows:


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

Table of Contents

(in millions) Level 1 Level 2 Level 3
NAV as a
Practical
Expedient
Total
as of September 30, 2020
Assets
Cash and cash equivalents of CLOs $ 488.8
$ 0
$ 0
$ —
$ 488.8
Receivables of CLOs 0
21.2
0
—
21.2
Investments

Equity and debt securities 177.6
285.7
469.7
261.1
1,194.1
Loans 0
1,151.0
24.9
—
1,175.9
Real Estate 0
0
339.2
—
339.2
Total Assets Measured at Fair Value $ 666.4
$ 1,457.9
$ 833.8

$ 261.1
$ 3,219.2

(in millions) Level 1 Level 2 Level 3
NAV as a
Practical
Expedient
Total
as of September 30, 2019
Assets
Investments
Equity and debt securities $ 195.2
$ 1,307.5
$ 427.8
$ 204.1
$ 2,134.6
Real estate 0
0
152.7
—
152.7
Loans 0
0
16.6
—
16.6
Total Assets Measured at Fair Value $ 195.2
$ 1,307.5
$ 597.1
$ 204.1
$ 2,303.9


(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
as of September 30, 2021
Assets
Cash and cash equivalents of CLOs	$	145.4	$	—	$	—	$	—	$	145.4
Receivables of CLOs	—		84.0		—		—		84.0
Investments
Equity and debt securities	310.8		647.3		453.3		343.5		1,754.9
Loans	—		3,955.3		20.5		—		3,975.8
Real estate	—		—		89.4		—		89.4
Total Assets Measured at Fair Value	$	456.2	$	4,686.6	$	563.2	$	343.5	$	6,049.5

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


(in millions)
as of September 30,	2022		2021
Nonredeemable investments1
Investments with known liquidation periods	$	19.5	$	141.4
Investments with unknown liquidation periods	12.0		—

Redeemable investments2	142.0		202.1

Unfunded commitments3	0.2		0.5

_______________

1The investments are expected to be returned through distributions over the life of the funds as a result of liquidations of the funds’ underlying ~~assets over a~~assets. Investments with known liquidation have an expected weighted-average ~~period~~life of ~~4.2~~0.3 years and ~~4.4~~1.3 years at September 30, ~~2020~~2022 and ~~2019. The CIPs’~~2021.

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

3Of the total unfunded commitments, ~~to these funds totaled $94.0 million and $168.7 million, of which~~ the Company was contractually obligated to fund ~~$11.4~~$0.1 million and ~~$20.6~~$0.2 million based on its ownership percentage in the CIPs, at September 30, ~~2020~~2022 and ~~2019.~~

~~Table of Contents~~2021.

Changes in Level 3 assets were as follows:

(in millions)
Equity and Debt
Securities
Real Estate Loans
Total
Level 3
Assets
for the fiscal year ended September 30, 2020
Balance at beginning of year $ 427.8
$ 152.7
$ 16.6
$ 597.1
Acquisition 0
20.3
17.6
37.9
Realized and unrealized losses included in investment and other income of consolidated investment products, net (57.9 ) (5.2 ) (1.8 ) (64.9 )
Purchases 200.5
154.9
0
355.4
Sales and settlements (57.4 ) 0
(7.5 ) (64.9 )
Deconsolidations (47.8 ) 0
0
(47.8 )
Transfers into Level 3 2.2
0
0
2.2
Transfers out of Level 3 (1.1 ) 0
0
(1.1 )
Foreign exchange revaluation 3.4
16.5
0
19.9
Balance at End of Year $ 469.7
$ 339.2
$ 24.9
833.8
Change in unrealized losses included in net income relating to assets held at end of year $ (57.9 ) $ (5.2 ) $ (0.7 ) $ (63.8 )


(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
for the fiscal year ended September 30, 2022
Balance at beginning of year	$	453.3	$	89.4	$	20.5	$	563.2
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	177.5		150.0		14.0		341.5
Sales	(119.7)		—		(1.3)		(121.0)
Consolidations (deconsolidations)	(52.1)		—		200.4		148.3
Transfers into Level 3	0.1		—		5.7		5.8
Transfers out of Level 3	(9.3)		—		—		(9.3)
Balance at End of Year	$	555.8	$	268.6	$	239.4	$	1,063.8
Change in unrealized gains included in net income relating to assets held at end of year	$	101.1	$	29.2	$	—	$	130.3

(in millions) Equity and Debt Securities Real Estate Loans
Total
Level 3
Assets
for the fiscal year ended September 30, 2019
Balance at beginning of year $ 317.7
$ 0
$ 32.3
$ 350.0
Acquisition 84.9
0
0
84.9
Realized and unrealized gains (losses) included in investment and other income of consolidated investment products, net (5.9 ) 5.0
(3.3 ) (4.2 )
Purchases 167.5
147.0
9.2
323.7
Sales and settlements (101.6 ) 0
(21.6 ) (123.2 )
Transfers into Level 3 0.5
0
0
0.5
Transfers out of Level 3 (29.0 ) 0
0
(29.0 )
Foreign exchange revaluation (6.3 ) 0.7
0
(5.6 )
Balance at End of Year $ 427.8
$ 152.7

$ 16.6
$ 597.1
Change in unrealized gains (losses) included in net income relating to assets held at end of year $ (12.0 ) $ 5.0
$ (0.6 ) $ (7.6 )

Table of Contents


(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
for the fiscal year ended September 30, 2021
Balance at beginning of year	$	322.3	$	339.2	$	24.9	$	686.4

Realized and unrealized gains included in investment and other income (losses) of consolidated investment products, net	122.8		8.3		0.3		131.4
Purchases	105.7		161.7		—		267.4
Sales	(62.8)		—		(4.7)		(67.5)
Deconsolidations	(36.2)		(448.8)		—		(485.0)
Transfers into Level 3	2.7		18.5		—		21.2
Transfers out of Level 3	(1.9)		—		—		(1.9)
Foreign exchange revaluation	0.7		10.5		—		11.2
Balance at End of Year	$	453.3	$	89.4	$	20.5	$	563.2
Change in unrealized gains included in net income relating to assets held at end of year	$	123.9	$	5.4	$	0.5	$	129.8

Table of Contents

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

(in millions)
as of September 30, 2020 Fair Value Valuation Technique Significant Unobservable Inputs
Range (Weighted Average¹)
Equity and debt securities $ 244.9
Discounted cash flow Discount rate 4.0%–23.0% (11.5%)
Discount for lack of marketability 17.0%
Risk premium 9.7%–19.3% (16.7%)
116.3
Market pricing Private sale pricing $0.02–$100.00 ($13.01) per share
108.5
Market comparable companies Enterprise value/
EBITDA multiple 7.0–19.1 (10.8)
Discount for lack of marketability 20.0%–25.2% (21.9%)
Risk premium 55.0%
Enterprise value/
Revenue multiple 7.5
Price-to-earnings ratio 9.4–10.0 (9.7)

Real estate 231.8
Discounted cash flow Discount rate 4.5%–6.5% (5.2%)
Exit capitalization rate 6.0%
107.4
Yield capitalization Equivalent yield 4.3%–6.1% (5.2%)

(in millions)
as of September 30, 2019 Fair Value Valuation Technique Significant Unobservable Inputs
Range (Weighted Average¹)
Equity and debt securities $ 212.7
Discounted cash flow Discount rate 4.8%–17.4% (10.0%)
Discount for lack of marketability 17.0%–24.7% (20.0%)
192.8
Market comparable companies Enterprise value/
EBITDA multiple 4.5–21.9 (10.8)
Discount for lack of marketability 15.0%–30.0% (23.1%)
Risk premium 18.9%
Enterprise value/
Revenue multiple 3.7
22.3
Market pricing Private sale pricing $0.25–$20.13 ($2.06) per share

Real estate 84.7
Discounted cash flow Discount rate 6.4%–7.4% (7.1%)
68.0
Yield capitalization Equivalent yield 4.3%–6.1% (5.4%)

^{__________________}

(in millions)

as of September 30, 2022

Fair Value

Valuation Technique

Significant Unobservable Inputs

Range (Weighted Average1)

Equity and debt securities

555.8

Market pricing

Private sale pricing

$0.01–$558.45 ($33.31) per share

Discount for lack of liquidity

23.5%–25.1% (24.9%)

Real estate

268.6

Discounted cash flow

Discount rate

4.5%–6.3% (5.1%)

Exit capitalization rate

5.5%–6.8% (6.0%)

Loans

147.2

Market pricing

Price

$0.97–$0.98 ($0.98)

60.4

Discounted cash flow

Discount rate

9.9%

31.9

Yield capitalization

Credit spread

6.3%

Loan-to-value ratio

79.1%–88.1% (83.1%)

(in millions)

as of September 30, 2021

Fair Value

Valuation Technique

Significant Unobservable Inputs

^{Range (Weighted Average}1)

~~Based on the relative fair~~Equity and debt securities

301.1

Market pricing

Private sale pricing

$0.39–$100.00 ($19.34) per share

102.3

Market comparable companies

Enterprise value/
EBITDA multiple

6.0–20.6 (13.7)

Discount for lack of marketability

6.0%–25.5% (17.6%)

Enterprise value/
Revenue multiple

0.6–7.2 (5.1)

Price-to-book value ~~of the instruments.~~ratio

0.7–1.8 (1.4)

Control Premium

20.0%

Price-to-earnings ratio

28.8

49.9

Discounted cash flow

Discount rate

3.3%–6.3% (4.3%)

Real estate

89.4

Discounted cash flow

Discount rate

5.8%–6.0% (5.9%)

Exit capitalization rate

5.0%–5.3% (5.1%)

__________________

1Based on the relative fair value of the instruments.

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, 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, ~~2020,~~2022, the resulting fair value of the assets would be lower (higher).

Table of Contents

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
2020 2019
Carrying
Value

Estimated
Fair Value
Carrying
Value

Estimated
Fair Value
as of September 30,
Financial Asset
Cash and cash equivalents 1 $ 441.9
$ 441.9
$ 154.2
$ 154.2
Financial Liabilities
Debt of CLOs 2 1,179.7
1,225.0
0
0
Other debt 3 153.7
155.2
50.8
51.0
__________________

1Substantially all was Level 2.

Debt

Debt of CIPs consisted of the following:

(in millions) 2020 2019
as of September 30, Amount
Weighted-
Average
Effective
Interest
Rate
Amount Weighted-
Average
Effective
Interest Rate
Debt of CLOs $ 1,179.7
2.85% $ 0
N/A
Other debt 153.7
2.97% 50.8
5.09%
Total $ 1,333.4
$ 50.8


(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 ~~floating interest rates based on LIBOR ranging from 1.48% to 8.19% at September 30, 2020. The other debt had~~ fixed and floating interest rates ranging from 1.42% to 8.51% at September 30, 2022 and from 1.00% to 8.22% at September 30, 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 ranging from 1.00% to 5.81% at September 30, 2020, and from 2.08% to 7.94% at September 30, 2019.~~LIBOR.

The contractual maturities for debt of CIPs at September 30, ~~2020~~2022 were as follows:

(in millions)
for the fiscal years ending September 30, Amount
2021 $ 76.4
2022 0
2023 0
2024 35.1
2025 39.3
Thereafter 1,182.6
Total $ 1,333.4


(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

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

(in millions)
as of September 30, 2020
Unpaid principal balance $ 1,196.5
Difference between unpaid principal balance and fair value (45.5 )
Fair Value $ 1,151.0

Table of Contents

Investments 90 days or more past due were ~~$3.9 million~~immaterial at September 30, ~~2020.~~2022. There were no investments were 90 days or more past due at September 30, 2021.

~~Table of Contents~~

~~The~~During fiscal years 2022 and 2021, the Company recognized ~~$1.3~~$22.6 million of net ~~losses during fiscal year 2020~~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 ~~$1,235.8~~$5,781.3 million and $3,629.9 million at September 30, ~~2020.~~2022 and 2021.

Note 1211 – Redeemable Noncontrolling Interests

Changes in redeemable noncontrolling interests 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,
2020
2019¹

2018¹
CIPs Minority Interests Total
Balance at beginning of year $ 746.7
$ 0
$ 746.7
$ 1,043.6
$ 1,941.9
Acquisition 22.1
164.3
186.4
0
0
Business divestiture 0
(21.3 ) (21.3 ) 0
0
Net income (loss) 45.0
3.6
48.6
6.2
(12.8 )
Net subscriptions (distributions) and other 247.1
(2.0 ) 245.1
1,046.6
170.9
Net deconsolidations (663.6 ) 0
(663.6 ) (1,349.7 ) (1,056.4 )
Balance at End of Year $ 397.3

$ 144.6

$ 541.9
$ 746.7
$ 1,043.6

^{______________}


¹	~~Represents redeemable noncontrolling interests of CIPs.~~

Note 1312 – Nonconsolidated Variable Interest Entities

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

(in millions)
as of September 30, 2020 2019
Investments $ 439.2
$ 458.1
Receivables 168.0
149.5
Loans receivable 42.4
0
Total $ 649.6
$ 607.6


(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. 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. In April 2020, the Company authorized loans aggregating up to 5.0 billion Indian Rupees (approximately $66.2 million) to certain sponsored funds in India that had experienced increased liquidity risks and redemptions. The funds are subject to the decision of the funds’ trustee to wind up the funds. See Note 16 – Commitments and Contingencies for further information. The loans have a fixed interest rate of 8.0% per annum, are secured by the funds’ assets and are due upon demand. At September 30, 2020, the loans have an aggregate outstanding balance of $42.4 million, and the remaining authorization available is approximately $4.9 million. 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.~~2021.

Table of Contents

Note 1413 – 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.

~~Table of Contents~~

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 $757.2 million at September 30, 2020, and will be paid over the next six years, with 8% of the original liability payable in each of the next three years, 15% in year four, 20% in year five and 25% in year six.

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 April 1, 2020 to repatriate earnings of 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, 2020. 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.

The Coronavirus Aid, Relief, and Economic Security Act, which includes several corporate tax provisions and was signed into law on March 27, 2020, did not have a material impact on the Company’s income taxes.

Taxes on income were as follows:

(in millions)
for the fiscal years ended September 30, 2020 2019 2018
Current expense
Federal $ 154.9
$ 343.4
$ 1,343.7
State 28.8
37.0
38.0
Non-U.S. 54.2
66.8
141.1
Deferred benefit (7.1 ) (4.9 ) (50.3 )
Total $ 230.8
$ 442.3
$ 1,472.5


(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, 2020 2019 2018
U.S. $ 771.7
$ 1,151.1
$ 1,458.1
Non-U.S. 246.2
496.7
757.1
Total $ 1,017.9
$ 1,647.8
$ 2,215.2

~~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~~ ~~$2.7 million~~ or ~~$0.01~~ ~~per diluted share for fiscal year~~ ~~2020~~, ~~$4.1 million~~ or ~~$0.01~~ ~~per diluted share for fiscal year~~ ~~2019, and~~ ~~$31.3 million~~ or ~~$0.06~~ ~~per diluted share for fiscal year~~ ~~2018. One tax incentive remained in effect at September 30, 2020 which will expire in December 2023.~~

~~Table of Contents~~


(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, 2020 2019
Deferred Tax Assets
Capitalized mixed service costs $ 326.1
$ 0
Net operating loss and state credit carry-forwards 317.0
31.9
Deferred compensation and benefits 160.6
39.7
Foreign tax credit carry-forwards 103.0
0
Debt premium 81.9
0
Stock-based compensation 26.6
19.6
Unrealized foreign exchange losses 1.2
11.0
Other 120.9
30.4
Total deferred tax assets 1,137.3
132.6
Valuation allowance (320.6 ) (26.9 )
Deferred tax assets, net of valuation allowance 816.7
105.7
Deferred Tax Liabilities
Goodwill and other purchased intangibles 1,009.4
159.5
Depreciation on property and equipment 23.6
22.5
Other 44.9
23.0
Total deferred tax liabilities 1,077.9
205.0
Net Deferred Tax Liability $ 261.2
$ 99.3


(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, 2020 2019
Other assets $ 44.1
$ 20.8
Deferred tax liabilities 305.3
120.1
Net Deferred Tax Liability $ 261.2
$ 99.3

~~The Company recorded on a preliminary basis~~87

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, ~~2020~~,2022, there were ~~$107.3~~$72.5 million of non-U.S. tax effected net operating loss carry-forwards which ~~expire~~expires between fiscal years ~~2021~~2022 and ~~2040~~.2041. In addition, there were ~~$199.4~~$172.1 million in tax effected state net operating loss carry-forwards that expire between fiscal years ~~2021~~2023 and ~~2041~~,2042, with some having an indefinite carry-forward period. The Company also has federal net operating losses of ~~$9.3~~$10.3 million, the majority of which will carry-forward indefinitely and ~~$103.0~~$109.4 million of foreign tax credit carry-forwards that expire between fiscal years ~~2021~~2023 and ~~2028.~~2029.

The Company recognizes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized based on timing of expiration, nature, projected sources of income and limitations on utilization under the statute. The valuation allowance ~~increased~~ ~~$293.7~~decreased $61.0 million in fiscal year ~~2020~~2022, primarily related to 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, and decreased~~ ~~$0.6 million~~ ~~in fiscal year~~ ~~2019~~.Mason. At September 30, ~~2020, a~~2022, the valuation allowance of ~~$320.6~~$258.3 million was ~~recorded for the following items: $202.2~~related to $147.9 million for federal, state, and foreign net operating loss carry-forwards, ~~$45.0~~$63.6 million due to uncertainty of realizing the benefit of foreign tax credits, ~~$38.4~~$37.8 million for capital losses, and $9.0 million for other foreign deferred ~~taxes including carried forward U.K. interest deductions, and $35.0 million for capital losses.~~

~~Table of Contents~~

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, 2020 2019 2018
Federal taxes at statutory rate $ 213.8
21.0 % $ 346.0
21.0 % $ 542.7
24.5 %
Transition tax on deemed repatriation of undistributed foreign earnings 0
0
86.0
5.2 % 983.2
44.4 %
Revaluation of net deferred tax liabilities 0
0
0
0
(53.3 ) (2.4 %)
Other Tax Act impacts 0
0
0.4
0
38.9
1.8 %
State taxes, net of federal tax effect 28.2
2.8 % 29.7
1.8 % 16.6
0.7 %
Capital loss on investments, net of valuation allowance (27.0 ) (2.7 %) 0
0
0
0
Effect of non-U.S. operations 6.9
0.7 % (21.3 ) (1.3 %) (61.9 ) (2.8 %)
Effect of net loss (income) attributable to noncontrolling interests 2.5
0.2 % (2.1 ) (0.1 %) 5.3
0.2 %
Other 6.4
0.7 % 3.6
0.2 % 1.0
0.1 %
Tax Provision $ 230.8
22.7 % $ 442.3
26.8 % $ 1,472.5
66.5 %

______________



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



(in millions)	Payments Due by Fiscal Year
as of September 30, 2020	2021		2022		2023		2024		2025		There- after		Total
Debt¹
Principal	$	—	$	300.0	$	—	$	250.0	$	400.0	$	1,750.0	$	2,700.0
Interest	125.2		125.2		116.8		116.8		101.2		1,913.9		2,499.1
Operating leases	134.8		131.5		125.4		89.0		50.2		153.5		684.4
Purchase obligations²	186.7		112.4		60.9		46.2		28.7		8.2		443.1
Purchase consideration obligation³	47.9		31.9		—		—		—		—		79.8
Total Contractual Obligations	494.6		701.0		303.1		502.0		580.1		3,825.6		6,406.4
Committed capital contributions⁴	335.6		—		—		—		—		—		335.6
Contingent consideration liabilities⁵	1.7		10.2		8.1		7.1		—		—		27.1
Federal transition tax liability⁶	53.3		74.1		74.1		138.9		185.2		231.6		757.2
Total Contractual Obligations, Commitments, and Contingent Liabilities	$	885.2	$	785.3	$	385.3	$	648.0	$	765.3	$	4,057.2	$	7,526.3



☒			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


Asset Class	Value in Billions		Percentage of Total AUM
(in billions) as of September 30, 2022					(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	$	656.7	46	%	Fixed Income	$	146.9	$	35.6	$	238.2	$	28.0	$	42.2	$	490.9	38	%
Equity	432.0		31	%	Equity	188.9		68.1		35.5		66.7		33.1		392.3		30	%
Alternative					Alternative	5.7		6.0		32.1		—		181.3		225.1		17	%
Multi-Asset	133.8		9	%	Multi-Asset	82.2		7.5		6.8		5.4		29.6		131.5		10	%
Alternative	124.0		9	%
Cash Management	72.4		5	%	Cash Management	28.6		27.9		1.1		—		—		57.6		5	%
Total	$	1,418.9	100	%	Total	$	452.3	$	145.1	$	313.7	$	100.1	$	286.2	$	1,297.4	100	%



(in billions) Asset Class	U.S. Funds		Non-U.S. Funds		Institutional Separate Accounts		Retail Separately Managed Accounts		Other Accounts, Alternative Investment Products and Trusts		Total
Fixed Income	$	199.1	$	69.0	$	342.8	$	30.1	$	15.7	$	656.7
Equity	215.4		71.2		57.2		65.4		22.8		432.0
Multi-Asset	81.9		8.0		6.4		7.8		29.7		133.8
Alternative	6.0		9.0		33.1		—		75.9		124.0
Cash Management	36.4		35.0		1.0		—		—		72.4
Total	$	538.8	$	192.2	$	440.5	$	103.3	$	144.1	$	1,418.9



as of and for the fiscal years ended September 30,	2020¹				2019				2018				2017			2016
Summary of Operations² (in millions)
Operating revenues	$	5,566.5			$	5,669.4			$	6,204.5			$	6,305.0		$	6,534.6
Operating income	1,048.9				1,466.9				2,028.2				2,199.6			2,295.1
Operating margin	18.8		%		25.9		%		32.7		%		34.9		%	35.1		%
Net income attributable to Franklin Resources, Inc.	798.9			³	1,195.7			⁴	764.4			⁵	1,696.7			1,726.7
Financial Data (in millions)
Total assets	$	20,220.9			$	14,532.2			$	14,383.5			$	17,534.0		$	16,098.8
Debt	3,017.1				696.9				695.9				1,044.2			1,401.2
Debt of consolidated investment products	1,333.4				50.8				32.6				53.4			682.2
Franklin Resources, Inc. stockholders’ equity	10,114.5				9,906.5				9,899.2				12,620.0			11,935.8
Operating cash flows	1,021.4				201.6				2,229.7				1,135.4			1,727.7
Investing cash flows	(3,243.1		)		(1,077.1		)		(290.4		)		52.0			192.2
Financing cash flows	194.2				(40.5		)		(3,761.7		)		(956.0		)	(1,800.7		)
Assets Under Management (in billions)
Ending	$	1,418.9			$	692.6			$	717.1			$	753.2		$	733.3
Average⁶	832.9				697.0				740.5				736.9			749.3
Per Common Share
Earnings
Basic	$	1.59			$	2.35			$	1.39			$	3.01		$	2.94
Diluted	1.59				2.35				1.39				3.01			2.94
Cash dividends declared	1.08				1.04				3.92				0.80			0.72
Book value	20.43				19.84				19.07				22.74			20.93



(in millions, except per share data)										2020 vs. 2019		2019 vs. 2018
for the fiscal years ended September 30,	2020¹			2019			2018			2020 vs. 2019		2019 vs. 2018
Operating revenues²	$	5,566.5		$	5,669.4		$	6,204.5		(2	%)	(9	%)
Operating income²	1,048.9			1,466.9			2,028.2			(28	%)	(28	%)
Operating margin³	18.8		%	25.9		%	32.7		%

Net income attributable to Franklin Resources, Inc.	$	798.9		$	1,195.7		$	764.4		(33	%)	56	%
Diluted earnings per share	$	1.59		$	2.35		$	1.39		(32	%)	69	%

As adjusted (non-GAAP):⁴
Adjusted operating income	$	1,491.1		$	1,654.2		$	2,093.5		(10	%)	(21	%)
Adjusted operating margin	38.5		%	42.6		%	49.8		%

Adjusted net income	$	1,311.0		$	1,331.3		$	798.1		(2	%)	67	%
Adjusted diluted earnings per share	$	2.61		$	2.62		$	1.45		0	%	81	%


¹	Mutual 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 39%, 38%, 38% and 36% of our total AUM as of September 30, 2020.


³	~~Total AUM includes performance of our multi-asset and alternative AUM, which each represent 9% of our total AUM at September 30, 2020.~~



(in basis points)	Industry Average¹
for the fiscal years ended September 30,	2020	2019	2018
Fixed Income²	27	29	30
Equity³	32	33	36
Multi-Asset	37	38	40
Alternative⁴	62	72	77
Cash Management	16	16	16


²	~~The decreases in the average rate in fiscal years~~ ~~2020~~ ~~and~~ ~~2019~~ ~~reflect higher weightings of two large low-fee passive funds and lower weightings of two large higher-fee actively managed funds.~~


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


	Accounting Classification¹										Total Direct Portfolio			Accounting Classification 1										Total
(in millions)	Cash and Cash Equivalents		Investments, at Fair Value		Equity Method Investments		Other Investments		Direct Investments in CIPs				(in millions)	Cash and Cash Equivalents		Investments, at Fair Value		Equity Method Investments		Other Investments		Direct Investments in CIPs
Cash and Cash Equivalents	$	3,026.8	$	—	$	—	$	—	$	—	$	3,026.8	Cash and Cash Equivalents	$	4,134.9	$	—	$	—	$	—	$	—	$	4,134.9
Investments													Investments
Alternative													Alternative	—		167.2		510.9		78.3		580.3		1,336.7
Equity													Equity	—		229.8		235.5		152.0		82.9		700.2
Fixed Income	—		198.7		139.7		40.8		242.9		622.1		Fixed Income	—		172.7		10.2		36.0		232.4		451.3
Equity	—		209.4		308.9		22.8		67.9		609.0
Multi-Asset	—		64.4		50.2		—		64.3		178.9		Multi-Asset	—		43.8		14.9		—		71.6		130.3
Alternative	—		32.3		183.4		19.9		410.2		645.8
Total investments	—		504.8		682.2		83.5		785.3		2,055.8		Total investments	—		613.5		771.5		266.3		967.2		2,618.5
Total Cash and Cash Equivalents and Investments	$	3,026.8	$	504.8	$	682.2	$	83.5	$	785.3	$	5,082.6
Total Cash and Cash Equivalents and Investments 2, 3													Total Cash and Cash Equivalents and Investments 2, 3	$	4,134.9	$	613.5	$	771.5	$	266.3	$	967.2	$	6,753.4


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


¹	Debt principal represents amounts due on maturity. Excludes 1.600% notes with a principal amount of $750.0 million due 2030 which were issued on October 19, 2020. See Note 22 – Subsequent Event in the notes to consolidated financial statements in Item 8 of Part II of this Annual Report.


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	~~Represents purchase consideration payments to be made in connection with the acquisition of Legg Mason.~~


⁴	Committed capital contributions relate to discretionary commitments to invest in sponsored funds and other investment products and entities, including CIPs. 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.


⁵	The amount of contingent consideration liabilities reflected for any year represents the expected settlement amounts as of September 30, 2020. The fair value of the aggregate contingent consideration liability at September 30, 2020 totaled $25.3 million and is included in other liabilities in the consolidated balance sheet.


⁶	~~Transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiaries’ earnings under the Tax Act.~~



(in millions, except per share data)
Quarter ended	December 31		March 31		June 30		September 30
Fiscal year 2020¹
Operating revenues	$	1,389.2	$	1,311.2	$	1,161.1	$	1,705.0
Operating income	372.9		339.9		232.5		103.6
Net income attributable to Franklin Resources, Inc.²	350.5		79.1		290.4		78.9
Earnings per share
Basic	$	0.70	$	0.16	$	0.58	$	0.15
Diluted	0.70		0.16		0.58		0.15
Dividends declared per share	$	0.27	$	0.27	$	0.27	$	0.27
AUM (in billions)
Ending	$	698.3	$	580.3	$	622.8	$	1,418.9
Average	693.8		655.8		605.0		1,227.8

Fiscal year 2019¹
Operating revenues	$	1,385.4	$	1,412.8	$	1,448.4	$	1,422.8
Operating income	385.3		367.3		349.2		365.1
Net income attributable to Franklin Resources, Inc.³	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

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, 2020, 2019 and 2018	Shares		Amount
Balance at October 1, 2017	554.9		$	55.5		$	0		$	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 product																		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		$	0		$	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		)
Repurchase of common stock	(24.6	)	(2.5		)	(133.8		)	(620.0		)				(756.3		)				(756.3		)
Issuance of common stock	4.8		0.5			129.8									130.3						130.3
Stock-based compensation						4.0									4.0						4.0
Net subscriptions and other																		165.0			165.0
Net consolidation of investment product																		24.3			24.3
Acquisition																		216.1			216.1
Balance at September 30, 2019	499.3		$	49.9		$	0		$	10,288.2		$	(431.6	)	$	9,906.5		$	717.7		$	10,624.2
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)									798.9						798.9			(60.4		)	738.5			Net income (loss)
Other comprehensive income												24.0			24.0						24.0			Other comprehensive income													24.0			24.0
Dividends declared on common stock ($1.08 per share)									(539.0		)				(539.0		)				(539.0		)	Dividends declared on common stock ($1.08 per share)										(539.0)						(539.0)						(539.0)
Repurchase of common stock	(9.0	)	(0.9		)	(143.0		)	(75.5		)				(219.4		)				(219.4		)	Repurchase of common stock		(9.0)		(0.9)			(143.0)			(75.5)						(219.4)						(219.4)
Issuance of common stock	4.8		0.5			126.7									127.2						127.2			Issuance of common stock		4.8		0.5			126.7									127.2						127.2
Stock-based compensation						16.3									16.3						16.3			Stock-based compensation							16.3									16.3						16.3
Net subscriptions and other																		186.4			186.4			Net subscriptions and other																			164.4			164.4
Deconsolidation of investment products																		(6.8		)	(6.8		)
Net deconsolidation of investment product																								Net deconsolidation of investment product																			(6.8)			(6.8)
Acquisitions																		39.1			39.1			Acquisitions																			39.1			39.1
Wind-down of a subsidiary																		(16.7		)	(16.7		)	Wind-down of a subsidiary																			(16.7)			(16.7)
Balance at September 30, 2020	495.1		$	49.5		$	0		$	10,472.6		$	(407.6	)	$	10,114.5		$	859.3		$	10,973.8		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																								Acquisition																			149.9			149.9
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



(in millions)	Estimated Fair Value
as of July 31, 2020	Estimated Fair Value
Cash and cash equivalents	$	681.1
Cash and cash equivalents of consolidated investment products	253.4
Investments	471.8
Investments of consolidated investment products	402.9
Receivables	525.7
Indefinite-lived intangible assets	2,727.8
Definite-lived intangible assets¹	1,353.8
Goodwill	2,325.0
Deferred tax assets	148.4
Other assets	530.7
Debt	(2,324.4		)
Debt of consolidated investment products	(330.8		)
Compensation and benefits	(579.9		)
Deferred tax liabilities	(315.4		)
Other liabilities	(926.4		)
Redeemable noncontrolling interests	(186.4		)
Nonredeemable noncontrolling interests	(20.1		)
Total Identifiable Net Assets	$	4,737.2


¹	~~Includes $1,123.2 million related to management contracts and $230.6 million related to trade names.~~


(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)
for the fiscal year ended September 30,	2020		2019
Revenues	$	7,862.0	$	8,436.0
Net Income Attributable to Franklin Resources, Inc.	967.5		886.6



(in millions)	Estimated Fair Value
as of February 1, 2019	Estimated Fair Value
Cash	$	33.2
Investments	138.8
Investments of consolidated investment products	84.9
Indefinite-lived intangible assets	280.1
Definite-lived intangible assets	75.8
Goodwill	345.7
Other assets	35.2
Other liabilities	(57.5		)
Nonredeemable noncontrolling interests	(216.1		)
Total Identifiable Net Assets	$	720.1


(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



	Fair Value Level	2020				2019
(in millions)		Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
as of September 30,		Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets
Cash and cash equivalents	1	$	3,026.8	$	3,026.8	$	5,803.4	$	5,803.4
Other investments
Time deposits	2	19.2		19.2		15.4		15.4
Equity securities	3	64.3		67.3		17.3		19.2
Loans receivable	3	42.4		42.4		0		0

Financial Liability
Debt	2	$	3,017.1	$	3,086.5	$	696.9	$	718.7



(in millions)							Useful Lives In Years
as of September 30,	2020			2019			Useful Lives In Years
Buildings and leasehold improvements	$	877.4		$	789.2		5 – 35
Software	576.2			522.4			3 - 10
Equipment and furniture	374.0			324.3			3 - 10
Land	83.0			80.1			N/A
Total cost	1,910.6			1,716.0
Less: accumulated depreciation and amortization	(1,096.8		)	(1,032.3		)
Property and Equipment, Net	$	813.8		$	683.7



(in millions)
as of September 30, 2019	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range (Weighted Average¹)
Equity and debt securities	$	212.7	Discounted cash flow	Discount rate	4.8%–17.4% (10.0%)
	$	212.7	Discounted cash flow	Discount for lack of marketability	17.0%–24.7% (20.0%)
	192.8		Market comparable companies	Enterprise value/ EBITDA multiple	4.5–21.9 (10.8)
				Discount for lack of marketability	15.0%–30.0% (23.1%)
				Risk premium	18.9%
				Enterprise value/ Revenue multiple	3.7
	22.3		Market pricing	Private sale pricing	$0.25–$20.13 ($2.06) per share

Real estate	84.7		Discounted cash flow	Discount rate	6.4%–7.4% (7.1%)
	68.0		Yield capitalization	Equivalent yield	4.3%–6.1% (5.4%)



(in millions) for the fiscal years ended September 30,	2020									2019¹			2018¹
(in millions) for the fiscal years ended September 30,	CIPs			Minority Interests			Total			2019¹			2018¹
Balance at beginning of year	$	746.7		$	0		$	746.7		$	1,043.6		$	1,941.9
Acquisition	22.1			164.3			186.4			0			0
Business divestiture	0			(21.3		)	(21.3		)	0			0
Net income (loss)	45.0			3.6			48.6			6.2			(12.8		)
Net subscriptions (distributions) and other	247.1			(2.0		)	245.1			1,046.6			170.9
Net deconsolidations	(663.6		)	0			(663.6		)	(1,349.7		)	(1,056.4		)
Balance at End of Year	$	397.3		$	144.6		$	541.9		$	746.7		$	1,043.6