UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)


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

For the quarterly period ended ~~March 31,~~June 30, 2022


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

For the transition period from to

Commission File Number: 001-09318

FRANKLIN RESOURCES, INC.

(Exact name of registrant as specified in its charter)


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

One Franklin Parkway, San Mateo, CA 94403

(Address of principal executive offices) (Zip code)

(650) 312-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Number of shares of the registrant’s common stock outstanding at ~~April 26,~~July 21, 2022: ~~499,924,147.~~498,357,111.

Table of Contents

INDEX TO FORM 10-Q


			Page
PART I		Financial Information
	Item 1.	Financial Statements (unaudited)
		Consolidated Statements of Income	3
		Consolidated Statements of Comprehensive Income	4
		Consolidated Balance Sheets	5
		Consolidated Statements of Stockholders’ Equity	6
		Consolidated Statements of Cash Flows	8
		Notes to Consolidated Financial Statements	10
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4144
	Item 4.	Controls and Procedures	4244

PART II		Other Information
	Item 1.	Legal Proceedings	4345
	Item 1A.	Risk Factors	4345
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4446
	Item 6.	Exhibits	4446

Exhibit Index			4547
Signatures			4648

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited


		Three Months Ended March 31,				Six Months Ended March 31,					Three Months Ended June 30,				Nine Months Ended June 30,
(in millions, except per share data)	(in millions, except per share data)	2022		2021		2022		2021		(in millions, except per share data)	2022		2021		2022		2021
Operating Revenues	Operating Revenues									Operating Revenues
Investment management fees	Investment management fees	$	1,649.2	$	1,598.4	$	3,409.7	$	3,138.8	Investment management fees	$	1,636.1	$	1,697.3	$	5,045.8	$	4,836.1
Sales and distribution fees	Sales and distribution fees	370.2		413.6		768.4		810.5		Sales and distribution fees	335.6		416.9		1,104.0		1,227.4
Shareholder servicing fees	Shareholder servicing fees	52.2		55.7		99.9		105.1		Shareholder servicing fees	46.9		50.5		146.8		155.6
Other	Other	9.4		8.8		27.0		17.2		Other	12.7		8.2		39.7		25.4
Total operating revenues	Total operating revenues	2,081.0		2,076.5		4,305.0		4,071.6		Total operating revenues	2,031.3		2,172.9		6,336.3		6,244.5
Operating Expenses	Operating Expenses									Operating Expenses
Compensation and benefits	Compensation and benefits	752.5		732.3		1,555.1		1,457.8		Compensation and benefits	766.7		771.4		2,321.8		2,229.2
Sales, distribution and marketing	Sales, distribution and marketing	482.4		541.8		992.5		1,048.3		Sales, distribution and marketing	440.3		531.0		1,432.8		1,579.3
Information systems and technology	Information systems and technology	126.9		117.5		250.7		234.0		Information systems and technology	125.9		121.8		376.6		355.8
Occupancy	Occupancy	53.0		53.8		109.3		109.5		Occupancy	53.8		54.6		163.1		164.1
Amortization of intangible assets	Amortization of intangible assets	60.4		57.9		118.7		116.1		Amortization of intangible assets	81.8		58.0		200.5		174.1
General, administrative and other	General, administrative and other	142.8		116.9		258.0		240.5		General, administrative and other	158.1		158.0		416.1		398.5
Total operating expenses	Total operating expenses	1,618.0		1,620.2		3,284.3		3,206.2		Total operating expenses	1,626.6		1,694.8		4,910.9		4,901.0
Operating Income	Operating Income	463.0		456.3		1,020.7		865.4		Operating Income	404.7		478.1		1,425.4		1,343.5
Other Income (Expenses)	Other Income (Expenses)									Other Income (Expenses)
Investment and other income, net	Investment and other income, net	27.7		67.1		84.7		144.3		Investment and other income, net	13.0		52.9		97.7		197.2
Interest expense	Interest expense	(22.9)		(15.9)		(42.2)		(45.6)		Interest expense	(28.9)		(25.7)		(71.1)		(71.3)
Investment and other income of consolidated investment products, net		3.0		111.2		107.7		202.3
Investment and other income (losses) of consolidated investment products, net										Investment and other income (losses) of consolidated investment products, net	(74.4)		61.0		33.3		263.3
Expenses of consolidated investment products	Expenses of consolidated investment products	(4.6)		(5.2)		(8.8)		(15.6)		Expenses of consolidated investment products	(1.3)		(10.9)		(10.1)		(26.5)
Other income, net		3.2		157.2		141.4		285.4
Other income (expenses), net										Other income (expenses), net	(91.6)		77.3		49.8		362.7
Income before taxes	Income before taxes	466.2		613.5		1,162.1		1,150.8		Income before taxes	313.1		555.4		1,475.2		1,706.2
Taxes on income	Taxes on income	107.1		128.1		258.2		270.6		Taxes on income	89.5		83.8		347.7		354.4
Net income	Net income	359.1		485.4		903.9		880.2		Net income	223.6		471.6		1,127.5		1,351.8
Less: net income (loss) attributable to	Less: net income (loss) attributable to									Less: net income (loss) attributable to
Redeemable noncontrolling interests	Redeemable noncontrolling interests	(57.2)		12.0		(49.7)		30.7		Redeemable noncontrolling interests	(0.5)		33.7		(50.2)		64.4
Nonredeemable noncontrolling interests	Nonredeemable noncontrolling interests	66.7		91.6		150.8		122.4		Nonredeemable noncontrolling interests	(32.3)		(0.5)		118.5		121.9
Net Income Attributable to Franklin Resources, Inc.	Net Income Attributable to Franklin Resources, Inc.	$	349.6	$	381.8	$	802.8	$	727.1	Net Income Attributable to Franklin Resources, Inc.	$	256.4	$	438.4	$	1,059.2	$	1,165.5

Earnings per Share	Earnings per Share									Earnings per Share
Basic	Basic	$	0.68	$	0.74	$	1.57	$	1.42	Basic	$	0.50	$	0.86	$	2.07	$	2.27
Diluted	Diluted	0.68		0.74		1.57		1.42		Diluted	0.50		0.86		2.07		2.27

See Notes to Consolidated Financial Statements.

Table of Contents

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited


(in millions)	(in millions)	Three Months Ended March 31,				Six Months Ended March 31,				(in millions)	Three Months Ended June 30,				Nine Months Ended June 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Net Income	Net Income	$	359.1	$	485.4	$	903.9	$	880.2	Net Income	$	223.6	$	471.6	$	1,127.5	$	1,351.8
Other Comprehensive Income (Loss)	Other Comprehensive Income (Loss)									Other Comprehensive Income (Loss)
Currency translation adjustments, net of tax	Currency translation adjustments, net of tax	(16.3)		(34.8)		(23.2)		58.7		Currency translation adjustments, net of tax	(100.6)		22.6		(123.8)		81.3
Net unrealized gains on defined benefit plans, net of tax		5.3		1.0		0.2		0.4
Net unrealized gains (losses) on defined benefit plans, net of tax										Net unrealized gains (losses) on defined benefit plans, net of tax	(2.4)		(0.2)		(2.2)		0.2

Total other comprehensive income (loss)	Total other comprehensive income (loss)	(11.0)		(33.8)		(23.0)		59.1		Total other comprehensive income (loss)	(103.0)		22.4		(126.0)		81.5
Total comprehensive income	Total comprehensive income	348.1		451.6		880.9		939.3		Total comprehensive income	120.6		494.0		1,001.5		1,433.3
Less: comprehensive income (loss) attributable to	Less: comprehensive income (loss) attributable to									Less: comprehensive income (loss) attributable to
Redeemable noncontrolling interests	Redeemable noncontrolling interests	(57.2)		12.0		(49.7)		30.7		Redeemable noncontrolling interests	(0.5)		33.7		(50.2)		64.4
Nonredeemable noncontrolling interests	Nonredeemable noncontrolling interests	66.7		91.6		150.8		122.4		Nonredeemable noncontrolling interests	(32.3)		(0.5)		118.5		121.9
Comprehensive Income Attributable to Franklin Resources, Inc.	Comprehensive Income Attributable to Franklin Resources, Inc.	$	338.6	$	348.0	$	779.8	$	786.2	Comprehensive Income Attributable to Franklin Resources, Inc.	$	153.4	$	460.8	$	933.2	$	1,247.0

See Notes to Consolidated Financial Statements.

Table of Contents

FRANKLIN RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

Unaudited


(in millions, except share and per share data)	(in millions, except share and per share data)	March 31, 2022		September 30, 2021		(in millions, except share and per share data)	June 30, 2022		September 30, 2021
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	4,411.6	$	4,357.8	Cash and cash equivalents	$	3,806.3	$	4,357.8
Receivables	Receivables	1,370.7		1,428.2		Receivables	1,414.8		1,428.2
Investments (including $589.3 and $588.3 at fair value at March 31, 2022 and September 30, 2021)		1,398.4		1,510.3
Investments (including $660.8 and $588.3 at fair value at June 30, 2022 and September 30, 2021)						Investments (including $660.8 and $588.3 at fair value at June 30, 2022 and September 30, 2021)	1,658.5		1,510.3
Assets of consolidated investment products	Assets of consolidated investment products					Assets of consolidated investment products
Cash and cash equivalents	Cash and cash equivalents	603.1		289.4		Cash and cash equivalents	672.4		289.4
Investments, at fair value	Investments, at fair value	7,134.6		5,820.1		Investments, at fair value	7,475.3		5,820.1
Property and equipment, net	Property and equipment, net	744.0		770.0		Property and equipment, net	759.1		770.0
Goodwill	Goodwill	4,718.2		4,457.7		Goodwill	5,807.1		4,457.7
Intangible assets, net	Intangible assets, net	4,721.9		4,710.2		Intangible assets, net	5,177.4		4,710.2
Operating lease right-of-use assets	Operating lease right-of-use assets	398.3		448.4		Operating lease right-of-use assets	486.8		448.4
Other	Other	332.1		376.3		Other	338.3		376.3
Total Assets	Total Assets	$	25,832.9	$	24,168.4	Total Assets	$	27,596.0	$	24,168.4

Liabilities	Liabilities					Liabilities
Compensation and benefits	Compensation and benefits	$	1,014.8	$	1,179.3	Compensation and benefits	$	1,234.3	$	1,179.3
Accounts payable and accrued expenses	Accounts payable and accrued expenses	504.7		479.3		Accounts payable and accrued expenses	541.7		479.3
Commissions	Commissions	229.7		259.8		Commissions	209.8		259.8
Income taxes	Income taxes	591.8		693.6		Income taxes	521.2		693.6
Debt	Debt	3,388.0		3,399.4		Debt	3,382.2		3,399.4
Liabilities of consolidated investment products	Liabilities of consolidated investment products					Liabilities of consolidated investment products
Accounts payable and accrued expenses	Accounts payable and accrued expenses	654.3		558.0		Accounts payable and accrued expenses	451.4		558.0
Debt	Debt	5,100.1		3,671.0		Debt	5,496.5		3,671.0
Deferred tax liabilities	Deferred tax liabilities	252.3		311.7		Deferred tax liabilities	290.9		311.7
Operating lease liabilities	Operating lease liabilities	462.6		518.4		Operating lease liabilities	555.3		518.4
Other	Other	306.9		354.3		Other	1,133.9		354.3
Total liabilities	Total liabilities	12,505.2		11,424.8		Total liabilities	13,817.2		11,424.8
Commitments and Contingencies (Note 10)		0		0
Commitments and Contingencies (Note 11)						Commitments and Contingencies (Note 11)	0		0
Redeemable Noncontrolling Interests	Redeemable Noncontrolling Interests	1,138.1		933.0		Redeemable Noncontrolling Interests	1,493.7		933.0
Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none issued	Preferred stock, $1.00 par value, 1,000,000 shares authorized; none issued	—		—		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; 500,374,393 and 501,807,677 shares issued and outstanding at March 31, 2022 and September 30, 2021		50.0		50.2
Common stock, $0.10 par value, 1,000,000,000 shares authorized; 498,356,132 and 501,807,677 shares issued and outstanding at June 30, 2022 and September 30, 2021						Common stock, $0.10 par value, 1,000,000,000 shares authorized; 498,356,132 and 501,807,677 shares issued and outstanding at June 30, 2022 and September 30, 2021	49.8		50.2
Retained earnings	Retained earnings	11,891.3		11,550.8		Retained earnings	11,997.5		11,550.8
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(400.6)		(377.6)		Accumulated other comprehensive loss	(503.6)		(377.6)
Total Franklin Resources, Inc. stockholders’ equity	Total Franklin Resources, Inc. stockholders’ equity	11,540.7		11,223.4		Total Franklin Resources, Inc. stockholders’ equity	11,543.7		11,223.4
Nonredeemable noncontrolling interests	Nonredeemable noncontrolling interests	648.9		587.2		Nonredeemable noncontrolling interests	741.4		587.2
Total stockholders’ equity	Total stockholders’ equity	12,189.6		11,810.6		Total stockholders’ equity	12,285.1		11,810.6
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	25,832.9	$	24,168.4	Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	27,596.0	$	24,168.4

See Notes to Consolidated Financial Statements.

Table of Contents

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Unaudited


		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)																(in millions)
for the six months ended March 31, 2022		Shares	Amount
for the nine months ended June 30, 2022																	for the nine months ended June 30, 2022			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, 2021	Balance at October 1, 2021	501.8	$	50.2	$	—	$	11,550.8	$	(377.6)	$	11,223.4	$	587.2	$	11,810.6	Balance at October 1, 2021	501.8			$	50.2
Net income	Net income						453.2				453.2		84.1		537.3		Net income
Other comprehensive loss	Other comprehensive loss								(12.0)		(12.0)				(12.0)		Other comprehensive loss												(12.0)			(12.0)
Dividends declared on common stock ($0.29 per share)	Dividends declared on common stock ($0.29 per share)						(148.9)				(148.9)				(148.9)		Dividends declared on common stock ($0.29 per share)										(148.9)						(148.9)						(148.9)
Repurchase of common stock	Repurchase of common stock	(0.7)	—		(58.8)		37.1				(21.7)				(21.7)		Repurchase of common stock			(0.7)			—			(58.8)			37.1						(21.7)						(21.7)
Issuance of common stock	Issuance of common stock	1.4	0.1		47.6						47.7				47.7		Issuance of common stock			1.4			0.1			47.6									47.7						47.7
Stock-based compensation	Stock-based compensation				11.2						11.2				11.2		Stock-based compensation							11.2									11.2						11.2
Net distributions and other	Net distributions and other												(27.8)		(27.8)		Net distributions and other																			(27.8)			(27.8)
Balance at December 31, 2021	Balance at December 31, 2021	502.5	$	50.3	$	—	$	11,892.2	$	(389.6)	$	11,552.9	$	643.5	$	12,196.4	Balance at December 31, 2021		502.5		$	50.3		$	—		$	11,892.2		$	(389.6)		$	11,552.9		$	643.5		$	12,196.4
Net income	Net income						349.6				349.6		66.7		416.3		Net income										349.6						349.6			66.7			416.3
Other comprehensive loss	Other comprehensive loss								(11.0)		(11.0)				(11.0)		Other comprehensive loss													(11.0)			(11.0)						(11.0)
Dividends declared on common stock ($0.29 per share)	Dividends declared on common stock ($0.29 per share)						(148.3)				(148.3)				(148.3)		Dividends declared on common stock ($0.29 per share)										(148.3)						(148.3)						(148.3)
Repurchase of common stock	Repurchase of common stock	(2.7)	(0.4)		(66.7)		(13.7)				(80.8)				(80.8)		Repurchase of common stock		(2.7)		(0.4)			(66.7)			(13.7)						(80.8)						(80.8)
Issuance of common stock	Issuance of common stock	0.6	0.1		18.5						18.6				18.6		Issuance of common stock		0.6		0.1			18.5									18.6						18.6
Stock-based compensation	Stock-based compensation				48.2						48.2				48.2		Stock-based compensation							48.2									48.2						48.2
Net distributions and other	Net distributions and other												(21.7)		(21.7)		Net distributions and other																			(21.7)			(21.7)
Net deconsolidation of investment products	Net deconsolidation of investment products												(39.6)		(39.6)		Net deconsolidation of investment products																			(39.6)			(39.6)
Adjustment to fair value of redeemable noncontrolling interests	Adjustment to fair value of redeemable noncontrolling interests						(188.5)				(188.5)				(188.5)		Adjustment to fair value of redeemable noncontrolling interests										(188.5)						(188.5)						(188.5)
Balance at March 31, 2022	Balance at March 31, 2022	500.4	$	50.0	$	—	$	11,891.3	$	(400.6)	$	11,540.7	$	648.9	$	12,189.6	Balance at March 31, 2022		500.4		$	50.0		$	—		$	11,891.3		$	(400.6)		$	11,540.7		$	648.9		$	12,189.6

Net income (loss)																	Net income (loss)										256.4						256.4			(32.3)			224.1
Other comprehensive loss																	Other comprehensive loss													(103.0)			(103.0)						(103.0)
Dividends declared on common stock ($0.29 per share)																	Dividends declared on common stock ($0.29 per share)										(147.7)						(147.7)						(147.7)
Repurchase of common stock																	Repurchase of common stock		(2.0)		(0.2)			(48.3)			(2.5)						(51.0)						(51.0)
Issuance of common stock																	Issuance of common stock		—		—			1.8									1.8						1.8
Stock-based compensation																	Stock-based compensation							46.5									46.5						46.5
Net distributions and other																	Net distributions and other																			(24.8)			(24.8)
Net deconsolidation of investment products																	Net deconsolidation of investment products																			(0.3)			(0.3)
Acquisition																	Acquisition																			149.9			149.9
Balance at June 30, 2022																	Balance at June 30, 2022		498.4		$	49.8		$	—		$	11,997.5		$	(503.6)		$	11,543.7		$	741.4		$	12,285.1

See Notes to Consolidated Financial Statements.

Table of Contents

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Unaudited


		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)																(in millions)
for the six months ended March 31, 2021		Shares	Amount
for the nine months ended June 30, 2021																	for the nine months ended June 30, 2021			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, 2020	Balance at October 1, 2020	495.1	$	49.5	$	—	$	10,472.6	$	(407.6)	$	10,114.5	$	754.6	$	10,869.1	Balance at October 1, 2020	495.1			$	49.5
Adoption of new accounting guidance	Adoption of new accounting guidance						(3.3)				(3.3)				(3.3)		Adoption of new accounting guidance
Net income	Net income						345.3				345.3		30.8		376.1		Net income									345.3						345.3
Other comprehensive income	Other comprehensive income								92.9		92.9				92.9		Other comprehensive income													92.9			92.9						92.9
Dividends declared on common stock ($0.28 per share)	Dividends declared on common stock ($0.28 per share)						(144.0)				(144.0)				(144.0)		Dividends declared on common stock ($0.28 per share)										(144.0)						(144.0)						(144.0)
Repurchase of common stock	Repurchase of common stock	(2.1)	(0.2)		(39.9)		(5.5)				(45.6)				(45.6)		Repurchase of common stock			(2.1)			(0.2)			(39.9)			(5.5)						(45.6)						(45.6)
Issuance of common stock	Issuance of common stock	12.5	1.2		32.5						33.7				33.7		Issuance of common stock			12.5			1.2			32.5									33.7						33.7
Stock-based compensation	Stock-based compensation				7.4						7.4				7.4		Stock-based compensation							7.4									7.4						7.4
Net subscriptions and other	Net subscriptions and other												93.3		93.3		Net subscriptions and other																			93.3			93.3
Balance at December 31, 2020	Balance at December 31, 2020	505.5	$	50.5	$	—	$	10,665.1	$	(314.7)	$	10,400.9	$	878.7	$	11,279.6	Balance at December 31, 2020		505.5		$	50.5		$	—		$	10,665.1		$	(314.7)		$	10,400.9		$	878.7		$	11,279.6
Net income	Net income						381.8				381.8		91.6		473.4		Net income										381.8						381.8			91.6			473.4
Other comprehensive loss	Other comprehensive loss								(33.8)		(33.8)				(33.8)		Other comprehensive loss													(33.8)			(33.8)						(33.8)
Dividends declared on common stock ($0.28 per share)	Dividends declared on common stock ($0.28 per share)						(143.7)				(143.7)				(143.7)		Dividends declared on common stock ($0.28 per share)										(143.7)						(143.7)						(143.7)
Repurchase of common stock	Repurchase of common stock	(1.7)	(0.2)		(56.2)		10.6				(45.8)				(45.8)		Repurchase of common stock		(1.7)		(0.2)			(56.2)			10.6						(45.8)						(45.8)
Issuance of common stock	Issuance of common stock	0.5	0.1		14.1						14.2				14.2		Issuance of common stock		0.5		0.1			14.1									14.2						14.2
Stock-based compensation	Stock-based compensation				42.1						42.1				42.1		Stock-based compensation							42.1									42.1						42.1
Net subscriptions and other	Net subscriptions and other												16.5		16.5		Net subscriptions and other																			16.5			16.5
Net deconsolidation of investment products	Net deconsolidation of investment products												(31.6)		(31.6)		Net deconsolidation of investment products																			(31.6)			(31.6)
Adjustment to fair value of redeemable noncontrolling interests	Adjustment to fair value of redeemable noncontrolling interests						(52.3)				(52.3)				(52.3)		Adjustment to fair value of redeemable noncontrolling interests										(52.3)						(52.3)						(52.3)
Balance at March 31, 2021	Balance at March 31, 2021	504.3	$	50.4	$	—	$	10,861.5	$	(348.5)	$	10,563.4	$	955.2	$	11,518.6	Balance at March 31, 2021		504.3		$	50.4		$	—		$	10,861.5		$	(348.5)		$	10,563.4		$	955.2		$	11,518.6

Net income (loss)																	Net income (loss)										438.4						438.4			(0.5)			437.9
Other comprehensive income																	Other comprehensive income													22.4			22.4						22.4
Dividends declared on common stock ($0.28 per share)																	Dividends declared on common stock ($0.28 per share)										(143.3)						(143.3)						(143.3)
Repurchase of common stock																	Repurchase of common stock		(1.4)		(0.1)			(40.7)			(5.6)						(46.4)						(46.4)
Issuance of common stock																	Issuance of common stock		—		—			0.2									0.2						0.2
Stock-based compensation																	Stock-based compensation							40.5									40.5						40.5
Net subscriptions and other																	Net subscriptions and other																			87.9			87.9
Net deconsolidation of investment products																	Net deconsolidation of investment products																			(487.0)			(487.0)
Balance at June 30, 2021																	Balance at June 30, 2021		502.9		$	50.3		$	—		$	11,151.0		$	(326.1)		$	10,875.2		$	555.6		$	11,430.8

See Notes to Consolidated Financial Statements.

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FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited


		Six Months Ended March 31,					Nine Months Ended June 30,
(in millions)	(in millions)	2022		2021		(in millions)	2022		2021

Net Income	Net Income	$	903.9	$	880.2	Net Income	$	1,127.5	$	1,351.8
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	Stock-based compensation	112.5		86.2		Stock-based compensation	160.9		126.6
Amortization of deferred sales commissions	Amortization of deferred sales commissions	35.0		38.4		Amortization of deferred sales commissions	49.6		58.8
Depreciation and other amortization	Depreciation and other amortization	42.7		44.8		Depreciation and other amortization	68.8		70.9
Amortization of intangible assets	Amortization of intangible assets	118.7		116.1		Amortization of intangible assets	200.5		174.1
Net gains on investments		(2.7)		(51.5)
Net losses (gains) on investments						Net losses (gains) on investments	32.9		(67.7)
Income from investments in equity method investees	Income from investments in equity method investees	(51.7)		(84.4)		Income from investments in equity method investees	(51.6)		(123.8)
Net gains on investments of consolidated investment products		(62.6)		(140.5)
Net losses (gains) on investments of consolidated investment products						Net losses (gains) on investments of consolidated investment products	22.0		(176.1)
Net purchase of investments by consolidated investment products	Net purchase of investments by consolidated investment products	(321.8)		(242.5)		Net purchase of investments by consolidated investment products	(312.2)		(434.4)
Deferred income taxes	Deferred income taxes	3.3		(16.0)		Deferred income taxes	55.9		(42.3)
Other	Other	10.0		(8.6)		Other	33.0		12.3
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Increase in receivables and other assets	Increase in receivables and other assets	(121.6)		(112.7)		Increase in receivables and other assets	(97.3)		(115.2)
Decrease (increase) in investments, net	Decrease (increase) in investments, net	(21.3)		8.5		Decrease (increase) in investments, net	(33.2)		15.6
Decrease in accrued compensation and benefits		(162.2)		(12.5)
Increase (decrease) in accrued compensation and benefits						Increase (decrease) in accrued compensation and benefits	45.1		(88.9)
Increase (decrease) in commissions payable	Increase (decrease) in commissions payable	(30.1)		11.3		Increase (decrease) in commissions payable	(50.0)		14.2
Decrease in income taxes payable	Decrease in income taxes payable	(104.9)		(38.9)		Decrease in income taxes payable	(176.3)		(50.4)
Increase (decrease) in accounts payable, accrued expenses and other liabilities	Increase (decrease) in accounts payable, accrued expenses and other liabilities	(59.9)		45.6		Increase (decrease) in accounts payable, accrued expenses and other liabilities	40.9		(1.7)
Increase (decrease) in accounts payable and accrued expenses of consolidated investment products	Increase (decrease) in accounts payable and accrued expenses of consolidated investment products	(16.8)		22.8		Increase (decrease) in accounts payable and accrued expenses of consolidated investment products	(26.2)		15.5
Net cash provided by operating activities	Net cash provided by operating activities	270.5		546.3		Net cash provided by operating activities	1,090.3		739.3
Purchase of investments	Purchase of investments	(375.9)		(368.5)		Purchase of investments	(676.5)		(624.8)
Liquidation of investments	Liquidation of investments	726.0		207.8		Liquidation of investments	872.0		383.7
Purchase of investments by consolidated collateralized loan obligations	Purchase of investments by consolidated collateralized loan obligations	(2,170.2)		(1,656.0)		Purchase of investments by consolidated collateralized loan obligations	(3,198.4)		(2,731.1)
Liquidation of investments by consolidated collateralized loan obligations	Liquidation of investments by consolidated collateralized loan obligations	1,058.8		524.7		Liquidation of investments by consolidated collateralized loan obligations	1,501.4		1,148.7
Decrease in loans receivable, net	Decrease in loans receivable, net	—		42.7		Decrease in loans receivable, net	—		42.7
Additions of property and equipment, net	Additions of property and equipment, net	(42.5)		(20.8)		Additions of property and equipment, net	(55.6)		(34.9)
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(372.3)		—		Acquisitions, net of cash acquired	(1,354.7)		—
Payments of contingent consideration asset	Payments of contingent consideration asset	12.6		10.6		Payments of contingent consideration asset	20.9		15.6
Net consolidation (deconsolidation) of investment products	Net consolidation (deconsolidation) of investment products	12.2		(18.4)		Net consolidation (deconsolidation) of investment products	211.0		(135.9)
Net cash used in investing activities	Net cash used in investing activities	(1,151.3)		(1,277.9)		Net cash used in investing activities	(2,679.9)		(1,936.0)

[Table continued on next page]

See Notes to Consolidated Financial Statements.

Table of Contents

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

[Table continued from previous page]


		Six Months Ended March 31,					Nine Months Ended June 30,
(in millions)	(in millions)	2022		2021		(in millions)	2022		2021

Issuance of common stock	Issuance of common stock	$	13.6	$	11.0	Issuance of common stock	$	13.6	$	11.0
Dividends paid on common stock	Dividends paid on common stock	(290.5)		(276.8)		Dividends paid on common stock	(437.1)		(418.6)
Repurchase of common stock	Repurchase of common stock	(104.3)		(90.4)		Repurchase of common stock	(154.0)		(135.8)
Proceeds from issuance of debt	Proceeds from issuance of debt	—		748.3		Proceeds from issuance of debt	—		748.3
Payment of debt issuance costs	Payment of debt issuance costs	—		(6.7)		Payment of debt issuance costs	—		(6.7)
Payment on debt	Payment on debt	—		(250.0)		Payment on debt	—		(250.0)
Proceeds from debt of consolidated investment products	Proceeds from debt of consolidated investment products	3,016.9		1,496.8		Proceeds from debt of consolidated investment products	4,345.2		1,636.2
Payments on debt of consolidated investment products	Payments on debt of consolidated investment products	(1,609.9)		(488.7)		Payments on debt of consolidated investment products	(2,469.3)		(488.7)
Payments on contingent consideration liabilities	Payments on contingent consideration liabilities	(4.1)		—		Payments on contingent consideration liabilities	(4.1)		—
Noncontrolling interests	Noncontrolling interests	254.2		187.3		Noncontrolling interests	194.9		447.2
Net cash provided by financing activities	Net cash provided by financing activities	1,275.9		1,330.8		Net cash provided by financing activities	1,489.2		1,542.9
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(27.6)		14.9		Effect of exchange rate changes on cash and cash equivalents	(68.1)		25.1
Increase in cash and cash equivalents		367.5		614.1
Increase (decrease) in cash and cash equivalents						Increase (decrease) in cash and cash equivalents	(168.5)		371.3
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	4,647.2		3,989.8		Cash and cash equivalents, beginning of period	4,647.2		3,989.8
Cash and Cash Equivalents, End of Period	Cash and Cash Equivalents, End of Period	$	5,014.7	$	4,603.9	Cash and Cash Equivalents, End of Period	$	4,478.7	$	4,361.1

Supplemental Disclosure of Cash Flow Information	Supplemental Disclosure of Cash Flow Information					Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	Cash paid for income taxes	$	350.1	$	319.2	Cash paid for income taxes	$	456.7	$	434.6
Cash paid for interest	Cash paid for interest	54.7		62.8		Cash paid for interest	61.8		76.2
Cash paid for interest by consolidated investment products	Cash paid for interest by consolidated investment products	65.7		44.3		Cash paid for interest by consolidated investment products	107.0		75.7

See Notes to Consolidated Financial Statements.

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FRANKLIN RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March 31,~~June 30, 2022

(Unaudited)

Note 1 – Basis of Presentation

The unaudited interim financial statements of Franklin Resources, Inc. (“Franklin”) and its consolidated subsidiaries (collectively, the “Company”) included herein have been prepared in accordance with the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission. Under these rules and regulations, some information and footnote disclosures normally included in financial statements prepared under accounting principles generally accepted in the United States of America ~~(“U.S. GAAP”)~~ have been shortened or omitted. Management believes that all adjustments necessary for a fair statement of the financial position and the results of operations for the periods shown have been made. All adjustments are normal and recurring. Management also believes that the accounting estimates are appropriate, and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates, actual amounts may differ from these estimates. These financial statements should be read together with the Company’s audited financial statements included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2021 (“fiscal year 2021”). Certain comparative amounts for the prior fiscal year period have been reclassified to conform to the financial statement presentation as of and for the period ended ~~March 31,~~June 30, 2022.

~~During the quarter ended June 30, 2021,~~

Note 2 – Acquisitions

Lexington Partners L.P.

On April 1, 2022, the Company ~~identified an error related to~~acquired all of the ~~accounting of its indirect~~outstanding ownership interests in ~~certain collateralized loan obligations~~Lexington Partners L.P. (“~~CLOs”~~Lexington”) ~~held through~~, a ~~limited partnership~~leading global manager of secondary private equity and co-investment funds, for cash consideration of $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. In connection with the acquisition, the Company granted a 25% profits interest in Lexington and performance-based cash retention awards that both vest over approximately five years. The acquisition bolsters the Company’s ~~conclusion to consolidate that limited partnership. In accordance with U.S. GAAP, the Company should have consolidated the CLOs as the Company is the primary beneficiary of these entities~~alternative asset capabilities, complementing its existing strengths in real estate, private credit, and should not have consolidated the limited partnership. The error had no impact to net income attributable to the Company, earnings per share, retained earnings, or total Franklin Resources, Inc. stockholders’ equity.hedge fund strategies.

The Company determined that the error did not result in a material misstatement to its previously issued consolidated financial statements. Nonetheless, for comparability, the Company has revised the comparative prior period amounts included in the consolidated statementspreliminary allocation of ~~cash flows and related footnote disclosures.~~

~~The impact~~estimated fair values of the ~~error on the consolidated statement of cash flows for the six months ended March 31, 2021 is~~assets acquired and liabilities and noncontrolling interests assumed was as follows:

(in millions) As Reported Adjustments As Revised
Net cash provided by operating activities $ 505.4 $ 40.9 $ 546.3
Net cash used in investing activities (773.0) (504.9) (1,277.9)
Net cash provided by financing activities 659.9 670.9 1,330.8


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

Table of Contents

The goodwill is primarily attributable to expected growth opportunities from the combined operations and is deductible for tax purposes. The definite-lived intangible assets relate to acquired investment management contracts and trade names, which are amortized over their estimated useful lives ranging from 6.0 years to 20.0 years. Amortization expense related to the definite-lived intangible assets was $21.3 million for the period ended June 30, 2022. These assets had a weighted-average remaining useful life of 7.3 years at June 30, 2022, with estimated remaining amortization expense as follows:


(in millions)
for the fiscal years ending September 30,	Amount
2022 (remainder of year)	$	21.3
2023	85.3
2024	85.3
2025	85.3
2026	85.3
Thereafter	168.2
Total	$	530.7

Costs incurred in connection with the acquisition were $16.3 million for the nine months ended June 30, 2022.

Lexington contributed $90.7 million of revenue and did not have a material impact to net income attributable to Franklin Resources, Inc. for the period ended June 30, 2022. Consequently, the Company has not presented pro forma combined results of operations for this acquisition.

O’Shaughnessy Asset Management, LLC

On December 31, 2021, the Company acquired all of the outstanding ownership interests in O’Shaughnessy Asset Management, LLC (“OSAM”), a leading quantitative asset management firm, for cash consideration paid of approximately $300.0 million, excluding future payments to be made subject to the attainment of certain performance measures. The acquisition resulted in $262.3 million of goodwill attributable to expected growth opportunities and synergies from the combined operations and is deductible for tax purposes.

Note 23 – Earnings per Share

The components of basic and diluted earnings per share were as follows:


(in millions, except per share data)	(in millions, except per share data)	Three Months Ended March 31,				Six Months Ended March 31,				(in millions, except per share data)	Three Months Ended June 30,				Nine Months Ended June 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Net income attributable to Franklin Resources, Inc.	Net income attributable to Franklin Resources, Inc.	$	349.6	$	381.8	$	802.8	$	727.1	Net income attributable to Franklin Resources, Inc.	$	256.4	$	438.4	$	1,059.2	$	1,165.5
Less: allocation of earnings to participating nonvested stock and stock unit awards	Less: allocation of earnings to participating nonvested stock and stock unit awards	15.1		16.9		34.3		31.3		Less: allocation of earnings to participating nonvested stock and stock unit awards	11.2		19.4		45.6		50.6
Net Income Available to Common Stockholders	Net Income Available to Common Stockholders	$	334.5	$	364.9	$	768.5	$	695.8	Net Income Available to Common Stockholders	$	245.2	$	419.0	$	1,013.6	$	1,114.9

Weighted-average shares outstanding – basic	Weighted-average shares outstanding – basic	490.0		490.5		489.9		490.8		Weighted-average shares outstanding – basic	487.5		489.2		489.1		490.3
Dilutive effect of nonparticipating nonvested stock unit awards	Dilutive effect of nonparticipating nonvested stock unit awards	0.5		0.4		0.6		0.5		Dilutive effect of nonparticipating nonvested stock unit awards	0.4		0.7		0.6		0.6
Weighted-Average Shares Outstanding – Diluted	Weighted-Average Shares Outstanding – Diluted	490.5		490.9		490.5		491.3		Weighted-Average Shares Outstanding – Diluted	487.9		489.9		489.7		490.9

Earnings per Share	Earnings per Share									Earnings per Share
Basic	Basic	$	0.68	$	0.74	$	1.57	$	1.42	Basic	$	0.50	$	0.86	$	2.07	$	2.27
Diluted	Diluted	0.68		0.74		1.57		1.42		Diluted	0.50		0.86		2.07		2.27

Nonparticipating nonvested stock unit awards excluded from the calculation of diluted earnings per share because their effect would have been antidilutive were insignificant for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022 and 2021.

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Note 34 – Revenues

Operating revenues by geographic area were as follows:


(in millions)	(in millions)	United States		Luxembourg		Asia-Pacific		Americas Excluding United States		Europe, Middle East and Africa, Excluding Luxembourg		Total		(in millions)	United States			Luxembourg			Asia-Pacific			Americas Excluding United States			Europe, Middle East and Africa, Excluding Luxembourg			Total
for the three months ended March 31, 2022
for the three months ended June 30, 2022														for the three months ended June 30, 2022			United States			Luxembourg			Asia-Pacific			Americas Excluding United States			Europe, Middle East and Africa, Excluding Luxembourg			Total
Investment management fees	Investment management fees	$	1,202.1	$	237.2	$	89.5	$	64.6	$	55.8	$	1,649.2	Investment management fees
Sales and distribution fees	Sales and distribution fees	261.6		89.3		6.6		12.7		—		370.2		Sales and distribution fees	238.1			80.2			5.8			11.5			—			335.6
Shareholder servicing fees	Shareholder servicing fees	42.1		9.3		0.3		—		0.5		52.2		Shareholder servicing fees	37.5			8.5			0.4			0.1			0.4			46.9
Other	Other	9.1		0.2		0.1		—		—		9.4		Other	12.0			0.3			0.2			—			0.2			12.7
Total	Total	$	1,514.9	$	336.0	$	96.5	$	77.3	$	56.3	$	2,081.0	Total	$	1,522.3		$	300.6		$	77.6		$	71.0		$	59.8		$	2,031.3


(in millions)	(in millions)	United States		Luxembourg		Asia-Pacific		Americas Excluding United States		Europe, Middle East and Africa, Excluding Luxembourg		Total		(in millions)	United States			Luxembourg			Asia-Pacific			Americas Excluding United States			Europe, Middle East and Africa, Excluding Luxembourg			Total
for the six months ended March 31, 2022
for the nine months ended June 30, 2022														for the nine months ended June 30, 2022			United States			Luxembourg			Asia-Pacific			Americas Excluding United States			Europe, Middle East and Africa, Excluding Luxembourg			Total
Investment management fees	Investment management fees	$	2,486.1	$	495.6	$	171.3	$	134.9	$	121.8	$	3,409.7	Investment management fees
Sales and distribution fees	Sales and distribution fees	540.0		188.1		14.2		26.1		—		768.4		Sales and distribution fees	778.1			268.3			20.0			37.6			—			1,104.0
Shareholder servicing fees	Shareholder servicing fees	78.9		19.4		0.7		0.1		0.8		99.9		Shareholder servicing fees	116.4			27.9			1.1			0.2			1.2			146.8
Other	Other	26.2		0.5		0.3		—		—		27.0		Other	38.2			0.8			0.5			—			0.2			39.7
Total	Total	$	3,131.2	$	703.6	$	186.5	$	161.1	$	122.6	$	4,305.0	Total	$	4,653.5		$	1,004.2		$	264.1		$	232.1		$	182.4		$	6,336.3

~~Table of Contents~~



(in millions)	United States		Luxembourg		Asia-Pacific		Americas Excluding United States		Europe, Middle East and Africa, Excluding Luxembourg		Total
for the three months ended June 30, 2021
Investment management fees	$	1,213.0	$	269.9	$	85.7	$	73.1	$	55.6	$	1,697.3
Sales and distribution fees	293.7		100.5		8.4		14.0		0.3		416.9
Shareholder servicing fees	38.3		10.1		2.0		0.1		—		50.5
Other	7.8		0.3		0.1		—		—		8.2
Total	$	1,552.8	$	380.8	$	96.2	$	87.2	$	55.9	$	2,172.9

(in millions) United States Luxembourg Asia-Pacific Americas
Excluding
United
States Europe,
Middle East
and Africa,
Excluding
Luxembourg Total
for the three months ended March 31, 2021
Investment management fees $ 1,091.0 $ 311.5 $ 83.6 $ 69.6 $ 42.7 $ 1,598.4
Sales and distribution fees 280.8 104.9 15.0 12.6 0.3 413.6
Shareholder servicing fees 43.6 10.1 2.0 — — 55.7
Other 3.6 0.2 1.2 — 3.8 8.8
Total $ 1,419.0 $ 426.7 $ 101.8 $ 82.2 $ 46.8 $ 2,076.5


(in millions)	(in millions)	United States		Luxembourg		Asia-Pacific		Americas Excluding United States		Europe, Middle East and Africa, Excluding Luxembourg		Total		(in millions)	United States			Luxembourg			Asia-Pacific			Americas Excluding United States			Europe, Middle East and Africa, Excluding Luxembourg			Total
for the six months ended March 31, 2021
for the nine months ended June 30, 2021														for the nine months ended June 30, 2021			United States			Luxembourg			Asia-Pacific			Americas Excluding United States			Europe, Middle East and Africa, Excluding Luxembourg			Total
Investment management fees	Investment management fees	$	2,203.1	$	533.3	$	162.3	$	139.6	$	100.5	$	3,138.8	Investment management fees
Sales and distribution fees	Sales and distribution fees	558.7		194.7		29.0		24.9		3.2		810.5		Sales and distribution fees	852.4			295.2			37.4			38.9			3.5			1,227.4
Shareholder servicing fees	Shareholder servicing fees	81.6		15.9		3.9		0.1		3.6		105.1		Shareholder servicing fees	119.9			26.0			5.9			0.2			3.6			155.6
Other	Other	10.1		0.5		1.5		—		5.1		17.2		Other	17.9			0.8			1.6			—			5.1			25.4
Total	Total	$	2,853.5	$	744.4	$	196.7	$	164.6	$	112.4	$	4,071.6	Total	$	4,406.3		$	1,125.2		$	292.9		$	251.8		$	168.3		$	6,244.5

Operating revenues are attributed to geographic areas based on the locations of the subsidiaries that provide the services, which may differ from the regions in which the related investment products are sold.

Revenues earned from sponsored funds were ~~79%~~83% and ~~80%~~81% of the Company’s total operating revenues for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022 and ~~82%~~78% and ~~81%~~80% for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2021.

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Note 45 – Investments

The disclosures below include details of the Company’s investments, excluding those of consolidated investment products (“CIPs”). See Note 78 – Consolidated Investment Products for information related to the investments held by these entities.

Investments consisted of the following:


(in millions)	(in millions)	March 31, 2022		September 30, 2021		(in millions)	June 30, 2022		September 30, 2021
Investments, at fair value	Investments, at fair value					Investments, at fair value
Sponsored funds and separate accounts	Sponsored funds and separate accounts	$	351.7	$	368.3	Sponsored funds and separate accounts	$	463.5	$	368.3
Investments related to long-term incentive plans	Investments related to long-term incentive plans	185.8		160.0		Investments related to long-term incentive plans	141.0		160.0
Other equity and debt investments	Other equity and debt investments	51.8		60.0		Other equity and debt investments	56.3		60.0
Total investments, at fair value	Total investments, at fair value	589.3		588.3		Total investments, at fair value	660.8		588.3
Investments in equity method investees	Investments in equity method investees	593.0		814.3		Investments in equity method investees	744.5		814.3
Other investments	Other investments	216.1		107.7		Other investments	253.2		107.7
Total	Total	$	1,398.4	$	1,510.3	Total	$	1,658.5	$	1,510.3

The Company recognized other-than-temporary impairment of ~~$21.2~~$8.7 million and $29.9 million in earnings during the ~~six~~three and nine months ended ~~March 31,~~June 30, 2022.

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Note 56 – Fair Value Measurements

The disclosures below include details of the Company’s fair value measurements, excluding those of CIPs. See Note 78 – Consolidated Investment Products for information related to fair value measurements of the assets and liabilities of these entities.

The assets and liabilities measured at fair value on a recurring basis were as follows:

(in millions) Level 1 Level 2 Level 3 NAV as a
Practical
Expedient Total
as of March 31, 2022
Assets
Investments, at fair value
Sponsored funds and separate accounts $ 220.4 $ 34.7 $ 21.9 $ 74.7 $ 351.7
Investments related to long-term incentive plans 185.8 — — — 185.8
Other equity and debt investments 3.6 17.0 — 31.2 51.8
Contingent consideration asset — — 17.1 — 17.1
Total Assets Measured at Fair Value $ 409.8 $ 51.7 $ 39.0 $ 105.9 $ 606.4
Liabilities
Contingent consideration liabilities $ — $ — $ 56.5 $ — $ 56.5


(in millions)	(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total		(in millions)	Level 1			Level 2			Level 3				NAV as a Practical Expedient				Total
as of September 30, 2021
as of June 30, 2022												as of June 30, 2022	Level 1			Level 2			Level 3				NAV as a Practical Expedient				Total
Assets	Assets																					Assets
Investments, at fair value	Investments, at fair value											Investments, at fair value
Sponsored funds and separate accounts	Sponsored funds and separate accounts	$	241.3	$	18.4	$	24.6	$	84.0	$	368.3	Sponsored funds and separate accounts		$	334.2		$	48.4		$	19.2				$	61.7			$	463.5
Investments related to long-term incentive plans	Investments related to long-term incentive plans	160.0		—		—		—		160.0		Investments related to long-term incentive plans	141.0			—			—					—				141.0
Other equity and debt investments	Other equity and debt investments	3.3		13.3		—		43.4		60.0		Other equity and debt investments	3.2			19.5			—				33.6				56.3
Contingent consideration asset	Contingent consideration asset	—		—		19.4		—		19.4		Contingent consideration asset	—			—			8.8				—				8.8
Total Assets Measured at Fair Value	Total Assets Measured at Fair Value	$	404.6	$	31.7	$	44.0	$	127.4	$	607.7	Total Assets Measured at Fair Value	$	478.4		$	67.9		$	28.0			$	95.3			$	669.6

Liabilities	Liabilities											Liabilities
Contingent consideration liabilities	Contingent consideration liabilities	$	—	$	—	$	42.4	$	—	$	42.4	Contingent consideration liabilities	$	—		$	—		$	60.1			$	—			$	60.1

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(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
as of September 30, 2021
Assets
Investments, at fair value
Sponsored funds and separate accounts	$	241.3	$	18.4	$	24.6	$	84.0	$	368.3
Investments related to long-term incentive plans	160.0		—		—		—		160.0
Other equity and debt investments	3.3		13.3		—		43.4		60.0
Contingent consideration asset	—		—		19.4		—		19.4
Total Assets Measured at Fair Value	$	404.6	$	31.7	$	44.0	$	127.4	$	607.7

Liabilities
Contingent consideration liabilities	$	—	$	—	$	42.4	$	—	$	42.4

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


(in millions)	(in millions)	March 31, 2022		September 30, 2021		(in millions)	June 30, 2022		September 30, 2021
Nonredeemable investments1	Nonredeemable investments1					Nonredeemable investments1
Investments with unknown liquidation periods	Investments with unknown liquidation periods	$	46.8	$	46.6	Investments with unknown liquidation periods	$	35.8	$	46.6
Investments with known liquidation periods	Investments with known liquidation periods	32.2		53.9		Investments with known liquidation periods	33.9		53.9

Redeemable investments2	Redeemable investments2	26.9		26.9		Redeemable investments2	25.6		26.9

Unfunded commitments	Unfunded commitments	51.7		51.8		Unfunded commitments	51.4		51.8

_______________

1The investments are expected to be returned through distributions over the life of the funds as a result of liquidations of the funds’ underlying assets. Investments with known liquidation periods have an expected weighted-average life of ~~4.2~~3.6 years and 4.0 years at ~~March 31,~~June 30, 2022 and September 30, 2021.

2Investments are redeemable on a monthly and quarterly basis.

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Changes in the Level 3 assets and liabilities were as follows:


		2022										2021											2022								2021
(in millions)	(in millions)	Investments				Contingent Consideration Asset		Contingent Consideration Liabilities				Investments		Contingent Consideration Asset				Contingent Consideration Liabilities		(in millions)			Investments		Contingent Consideration Asset				Contingent Consideration Liabilities		Investments				Contingent Consideration Asset			Contingent Consideration Liabilities
for the three months ended March 31,
for the three months ended June 30,																				for the three months ended June 30,			Investments		Contingent Consideration Asset				Contingent Consideration Liabilities		Investments				Contingent Consideration Asset			Contingent Consideration Liabilities
Balance at beginning of period	Balance at beginning of period			$	18.2					$	15.5					$	(56.7)				$	17.8					$	36.9					$	(25.5)			Balance at beginning of period
Total realized and unrealized gains (losses)	Total realized and unrealized gains (losses)																			Total realized and unrealized gains (losses)
Included in investment and other income, net	Included in investment and other income, net	(1.8)				—		—				(0.1)		—				—		Included in investment and other income, net			1.2			—				—		0.2				—				—
Included in general, administrative and other expense	Included in general, administrative and other expense	—				10.3		—				—		—				—		Included in general, administrative and other expense			—		—				(3.7)		—				—				—
Purchases	Purchases	6.8				—		—				3.0		—				—		Purchases			3.8		—				—		5.3				—			—
Sales	Sales	(1.3)				—		—				(1.2)		—				—		Sales			(1.6)		—				—		(0.3)				—			—
Settlements	Settlements	—				(8.7)		0.1				—		(7.8)				—		Settlements			(1.1)		(8.3)				—		—				(5.0)			—
Consolidation of investment product																				Consolidation of investment product			(5.0)		—				—		—				—			—
Foreign exchange revaluation	Foreign exchange revaluation	—				—		0.1				—		—				0.2		Foreign exchange revaluation			—		—				0.1		—				—			—
Balance at End of Period	Balance at End of Period	$	21.9			$	17.1	$	(56.5)			$	19.5	$	29.1			$	(25.3)	Balance at End of Period			$	19.2	$	8.8			$	(60.1)	$	24.7			$	24.1		$	(25.3)
Change in unrealized gains (losses) included in net income relating to assets and liabilities held at end of period	Change in unrealized gains (losses) included in net income relating to assets and liabilities held at end of period	$	(0.2)			$	10.3	$	—			$	(0.1)	$	—			$	—	Change in unrealized gains (losses) included in net income relating to assets and liabilities held at end of period			$	(0.3)	$	—			$	(3.7)	$	0.2			$	—		$	—


	2022						2021
(in millions)	Investments		Contingent Consideration Asset		Contingent Consideration Liabilities		Investments		Contingent Consideration Asset		Contingent Consideration Liabilities
for the nine months ended June 30,
Balance at beginning of period	$	24.6	$	19.4	$	(42.4)	$	17.4	$	39.7	$	(25.3)
Acquisitions	—		—		(24.5)		—		—		—
Total realized and unrealized gains (losses)
Included in investment and other income, net	(0.4)		—		—		—		—		—
Included in general, administrative and other expense	—		10.3		(2.6)		—		—		—
Purchases	14.1		—		—		13.8		—		—
Sales	(7.9)		—		—		(5.8)		—		—
Settlements	(4.3)		(20.9)		9.1		(0.5)		(15.6)		—
Consolidation of investment product	(5.0)		—		—		—		—		—
Transfers out of Level 3	(1.9)		—		—		(0.2)		—		—
Foreign exchange revaluation	—		—		0.3		—		—		—
Balance at End of Period	$	19.2	$	8.8	$	(60.1)	$	24.7	$	24.1	$	(25.3)
Change in unrealized gains (losses) included in net income relating to assets and liabilities held at end of period	$	(0.7)	$	10.3	$	(2.4)	$	—	$	—	$	—

1415

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2022 2021
(in millions) Investments Contingent Consideration Asset Contingent Consideration Liabilities Investments Contingent Consideration Asset Contingent Consideration Liabilities
for the six months ended March 31,
Balance at beginning of period $ 24.6 $ 19.4 $ (42.4) $ 17.4 $ 39.7 $ (25.3)
Acquisitions — — (24.5) — — —
Total realized and unrealized gains (losses)
Included in investment and other income, net (1.6) — — (0.2) — —
Included in general, administrative and other expense — 10.3 1.1 — — —
Purchases 10.3 — — 8.5 — —
Sales (6.3) — — (5.5) — —
Settlements (3.2) (12.6) 9.1 (0.5) (10.6) —
Transfers out of Level 3 (1.9) — — (0.2) — —
Foreign exchange revaluation — — 0.2 — — —
Balance at End of Period $ 21.9 $ 17.1 $ (56.5) $ 19.5 $ 29.1 $ (25.3)
Change in unrealized gains (losses) included in net income relating to assets and liabilities held at end of period $ (0.4) $ 10.3 $ 1.3 $ (0.2) $ — $ —

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


(in millions)	(in millions)	Fair Value Level		March 31, 2022						September 30, 2021					(in millions)		Fair Value Level		June 30, 2022				September 30, 2021
			Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value				Carrying Value			Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets	Financial Assets																	Financial Assets
Cash and cash equivalents	Cash and cash equivalents	1		$	4,411.6		$	4,411.6		$	4,357.8		$	4,357.8	Cash and cash equivalents		1		$	3,806.3	$	3,806.3	$	4,357.8	$	4,357.8
Other investments	Other investments														Other investments
Time deposits	Time deposits	2		12.7			12.7			13.2			13.2		Time deposits		2		10.8		10.8		13.2		13.2
Equity securities	Equity securities	3		203.4			203.4			94.5			99.1		Equity securities		3		242.4		242.4		94.5		99.1

Financial Liability	Financial Liability														Financial Liability
Debt	Debt	2		$	3,388.0		$	3,121.9		$	3,399.4		$	3,434.1	Debt		2		$	3,382.2	$	2,878.6	$	3,399.4	$	3,434.1

Note 67 – Debt

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. As of ~~March 31,~~June 30, 2022,, there were no amounts outstanding.

There were no other material changes to the Company’s debt during the ~~six~~nine months ended ~~March 31,~~June 30, 2022.

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Note 78 – Consolidated Investment Products

CIPs consist of mutual and other investment funds, limited partnerships and similar structures and CLOs, all of which are sponsored by the Company, and include both voting interest entities and variable interest entities (“VIEs”). The Company had 6458 CIPs, including 1314 CLOs, as of ~~March 31,~~June 30, 2022 and 60 CIPs, including 10 CLOs, as of September 30, 2021.

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


(in millions)	(in millions)	March 31, 2022		September 30, 2021		(in millions)	June 30, 2022		September 30, 2021
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	603.1	$	289.4	Cash and cash equivalents	$	672.4	$	289.4
Receivables	Receivables	130.6		127.8		Receivables	178.8		127.8
Investments, at fair value	Investments, at fair value	7,134.6		5,820.1		Investments, at fair value	7,475.3		5,820.1
Total Assets	Total Assets	$	7,868.3	$	6,237.3	Total Assets	$	8,326.5	$	6,237.3

Liabilities	Liabilities					Liabilities
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	654.3	$	558.0	Accounts payable and accrued expenses	$	451.4	$	558.0
Debt	Debt	5,100.1		3,671.0		Debt	5,496.5		3,671.0
Other liabilities	Other liabilities	19.7		13.8		Other liabilities	22.5		13.8
Total liabilities	Total liabilities	5,774.1		4,242.8		Total liabilities	5,970.4		4,242.8
Redeemable Noncontrolling Interests	Redeemable Noncontrolling Interests	625.3		622.5		Redeemable Noncontrolling Interests	994.5		622.5
Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity
Franklin Resources, Inc.’s interests	Franklin Resources, Inc.’s interests	1,017.4		1,000.7		Franklin Resources, Inc.’s interests	957.7		1,000.7
Nonredeemable noncontrolling interests	Nonredeemable noncontrolling interests	451.5		371.3		Nonredeemable noncontrolling interests	403.9		371.3
Total stockholders’ equity	Total stockholders’ equity	1,468.9		1,372.0		Total stockholders’ equity	1,361.6		1,372.0
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	7,868.3	$	6,237.3	Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	8,326.5	$	6,237.3

The CIPs did not have a significant impact on net income attributable to the Company during the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022 and 2021.

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

Fair Value Measurements

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

(in millions) Level 1 Level 2 Level 3 NAV as a
Practical
Expedient Total
as of March 31, 2022
Assets
Cash and cash equivalents of CLOs $ 438.3 $ — $ — $ — $ 438.3
Receivables of CLOs — 58.8 — — 58.8
Investments
Equity and debt securities 164.0 699.1 595.4 246.0 1,704.5
Loans — 5,221.1 33.6 — 5,254.7
Real estate — — 175.4 — 175.4
Total Assets Measured at Fair Value $ 602.3 $ 5,979.0 $ 804.4 $ 246.0 $ 7,631.7

~~Table of Contents~~


(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
as of June 30, 2022
Assets
Cash and cash equivalents of CLOs	$	299.5	$	—	$	—	$	—	$	299.5
Receivables of CLOs	—		105.0		—		—		105.0
Investments
Equity and debt securities	79.5		875.2		557.0		217.7		1,729.4
Loans	—		5,467.8		37.6		—		5,505.4
Real estate	—		—		240.5		—		240.5
Total Assets Measured at Fair Value	$	379.0	$	6,448.0	$	835.1	$	217.7	$	7,879.8


(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, nonredeemable private equity funds and a redeemable U.S. equity ~~fund and nonredeemable private equity funds.~~fund. These investments were as follows:


(in millions)	(in millions)	March 31, 2022		September 30, 2021		(in millions)	June 30, 2022		September 30, 2021
Nonredeemable investments1	Nonredeemable investments1					Nonredeemable investments1
Investments with known liquidation periods	Investments with known liquidation periods	$	46.0	$	141.4	Investments with known liquidation periods	$	38.2	$	141.4
Investments with unknown liquidation periods	Investments with unknown liquidation periods	12.0		—		Investments with unknown liquidation periods	12.2		—

Redeemable investments2	Redeemable investments2	188.0		202.1		Redeemable investments2	167.3		202.1

Unfunded commitments3	Unfunded commitments3	0.5		0.5		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. Investments with known liquidation periods have an expected weighted-average life of ~~0.8~~0.5 year at ~~March 31,~~June 30, 2022 and 1.3 years at September 30, 2021.

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

3Of the total unfunded commitments, the Company was contractually obligated to fund $0.1 million and $0.2 million based on its ownership percentage in the CIPs, at ~~March 31,~~June 30, 2022 and September 30, 2021.

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Changes in Level 3 assets were as follows:

(in millions) Equity and Debt
Securities Real Estate Loans Total
Level 3
Assets
for the three months ended March 31, 2022
Balance at January 1, 2022 $ 539.0 $ 98.9 $ 34.2 $ 672.1
Realized and unrealized gains (losses) included in investment and other income of consolidated investment products, net 78.0 5.7 (0.3) 83.4
Purchases 115.3 70.8 0.1 186.2
Sales and settlements (81.9) — (0.4) (82.3)
Deconsolidations (55.0) — — (55.0)
Balance at March 31, 2022 $ 595.4 $ 175.4 $ 33.6 $ 804.4
Change in unrealized gains (losses) included in net income relating to assets held at March 31, 2022 $ 73.6 $ 5.7 $ (0.3) $ 79.0


(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
for the three months ended June 30, 2022
Balance at April 1, 2022	$	595.4	$	175.4	$	33.6	$	804.4
Realized and unrealized gains (losses) included in investment and other income (losses) of consolidated investment products, net	(31.7)		4.1		0.2		(27.4)
Purchases	6.5		61.0		(0.1)		67.4
Sales and settlements	(13.1)		—		(0.1)		(13.2)
Deconsolidations	—		—		(1.7)		(1.7)
Transfers into Level 3	—		—		5.7		5.7
Transfers out of Level 3	(0.1)		—		—		(0.1)
Balance at June 30, 2022	$	557.0	$	240.5	$	37.6	$	835.1
Change in unrealized gains (losses) included in net income relating to assets held at June 30, 2022	$	(32.2)	$	4.1	$	0.2	$	(27.9)

~~Table of Contents~~


(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
for the nine months ended June 30, 2022
Balance at October 1, 2021	$	453.3	$	89.4	$	20.5	$	563.2
Realized and unrealized gains (losses) included in investment and other income (losses) of consolidated investment products, net	138.6		18.4		0.2		157.2
Purchases	140.0		132.7		14.0		286.7
Sales and settlements	(118.9)		—		(1.1)		(120.0)
Deconsolidations	(55.0)		—		(1.7)		(56.7)
Transfers into Level 3	0.1		—		5.7		5.8
Transfers out of Level 3	(1.1)		—		—		(1.1)
Balance at June 30, 2022	$	557.0	$	240.5	$	37.6	$	835.1
Change in unrealized gains included in net income relating to assets held at June 30, 2022	$	126.6	$	18.4	$	—	$	145.0

(in millions) Equity and Debt
Securities Real Estate Loans Total
Level 3
Assets
for the six months ended March 31, 2022
Balance at October 1, 2021 $ 453.3 $ 89.4 $ 20.5 $ 563.2
Realized and unrealized gains (losses) included in investment and other income of consolidated investment products, net 170.3 14.3 — 184.6
Purchases 133.5 71.7 14.1 219.3
Sales and settlements (105.8) — (1.0) (106.8)
Deconsolidations (55.0) — — (55.0)
Transfers into Level 3 0.1 — — 0.1
Transfers out of Level 3 (1.0) — — (1.0)
Balance at March 31, 2022 $ 595.4 $ 175.4 $ 33.6 $ 804.4
Change in unrealized gains included in net income relating to assets held at March 31, 2022 $ 166.1 $ 14.3 $ — $ 180.4

(in millions) Equity and Debt
Securities Real Estate Loans Total
Level 3
Assets
for the three months ended March 31, 2021
Balance at January 1, 2021 $ 356.0 $ 407.8 $ 23.5 $ 787.3
Realized and unrealized gains included in investment and other income of consolidated investment products, net 1.0 1.2 — 2.2
Purchases 7.5 21.2 — 28.7
Sales and settlements (56.0) — (1.1) (57.1)
Deconsolidations (36.2) — — (36.2)
Transfers into Level 3 1.2 — — 1.2
Foreign exchange revaluation (2.3) (6.7) — (9.0)
Balance at March 31, 2021 $ 271.2 $ 423.5 $ 22.4 $ 717.1
Change in unrealized gains (losses) included in net income relating to assets held at March 31, 2021 $ 1.2 $ 1.2 $ (0.1) $ 2.3


(in millions)	(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets		(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
for the six months ended March 31, 2021
Balance at October 1, 2020		$	322.3	$	339.2	$	24.9	$	686.4
Realized and unrealized gains included in investment and other income of consolidated investment products, net		20.1		2.7		—		22.8
for the three months ended June 30, 2021										for the three months ended June 30, 2021	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
Balance at April 1, 2021										Balance at April 1, 2021
Realized and unrealized gains included in investment and other income (losses) of consolidated investment products, net										Realized and unrealized gains included in investment and other income (losses) of consolidated investment products, net	6.2		2.4		0.2		8.8
Purchases	Purchases	20.1		72.3		—		92.4		Purchases	14.0		44.2		—		58.2
Sales and settlements	Sales and settlements	(57.0)		—		(2.5)		(59.5)		Sales and settlements	(2.4)		—		(1.2)		(3.6)
Deconsolidations	Deconsolidations	(36.2)		—		—		(36.2)		Deconsolidations	—		(448.8)		—		(448.8)
Transfers into Level 3	Transfers into Level 3	1.2		—		—		1.2		Transfers into Level 3	0.9		—		—		0.9
Transfers out of Level 3										Transfers out of Level 3	(1.0)		—		—		(1.0)
Foreign exchange revaluation	Foreign exchange revaluation	0.7		9.3		—		10.0		Foreign exchange revaluation	—		1.2		—		1.2
Balance at March 31, 2021		$	271.2	$	423.5	$	22.4	$	717.1
Change in unrealized gains included in net income relating to assets held at March 31, 2021		$	19.7	$	2.7	$	0.1	$	22.5
Balance at June 30, 2021										Balance at June 30, 2021	$	288.9	$	22.5	$	21.4	$	332.8
Change in unrealized gains (losses) included in net income relating to assets held at June 30, 2021										Change in unrealized gains (losses) included in net income relating to assets held at June 30, 2021	$	6.2	$	(0.5)	$	0.2	$	5.9

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(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
for the nine months ended June 30, 2021
Balance at October 1, 2020	$	322.3	$	339.2	$	24.9	$	686.4
Realized and unrealized gains included in investment and other income (losses) of consolidated investment products, net	26.3		5.1		0.2		31.6
Purchases	34.1		116.5		—		150.6
Sales and settlements	(59.4)		—		(3.7)		(63.1)
Deconsolidations	(36.2)		(448.8)		—		(485.0)
Transfers into Level 3	2.1		—		—		2.1
Transfers out of Level 3	(1.0)		—		—		(1.0)
Foreign exchange revaluation	0.7		10.5		—		11.2
Balance at June 30, 2021	$	288.9	$	22.5	$	21.4	$	332.8
Change in unrealized gains included in net income relating to assets held at June 30, 2021	$	25.9	$	2.2	$	0.3	$	28.4

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

(in millions)

as of March 31, 2022

Fair Value

Valuation Technique

Significant Unobservable Inputs

Range (Weighted Average1)

as of June 30, 2022

Fair Value

Valuation Technique

Significant Unobservable Inputs

Range (Weighted Average1)

Equity and debt securities

529.3

Market pricing

Private sale pricing

$0.39–td,704.16 (td32.63) per share

Equity and debt securities

492.7

Market pricing

Private sale pricing

$0.39–$789.78 ($45.27) per share

66.1

Market comparable companies

Enterprise value/
EBITDA multiple

14.7

64.3

Market comparable companies

Enterprise value/
EBITDA multiple

14.7

Discount for lack of marketability

25.0%

Discount for lack of marketability

14.6%–25.0% (19.4%)

Price-to-book value ratio

1.2

Price-to-book value ratio

1.2

Real estate

175.4

Discounted cash flow

Discount rate

5.5%–6.3% (6.0%)

Real estate

240.5

Discounted cash flow

Discount rate

5.5%–6.3% (6.0%)

Exit capitalization rate

4.5%–5.5% (4.9%)

Exit capitalization rate

4.5%–5.5% (4.9%)

(in millions)

as of September 30, 2021

Fair Value

Valuation Technique

Significant Unobservable Inputs

Range (Weighted Average1)

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 ratio

0.7–1.8 (1.4)

Control premium

20%

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 discount for lack of marketability, were independently higher (lower) as of ~~March 31,~~June 30, 2022, the resulting fair value of the assets would be higher (lower). If the relevant significant inputs used in the discounted cash flow valuations, as well as the discount for lack of marketability used in the market-based valuations, were independently higher (lower) as of ~~March 31,~~June 30, 2022, the resulting fair value of the assets would be lower (higher).

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


(in millions)	(in millions)	Fair Value Level		March 31, 2022						September 30, 2021					(in millions)		Fair Value Level		June 30, 2022				September 30, 2021
			Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value				Carrying Value			Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Asset	Financial Asset																	Financial Asset
Cash and cash equivalents	Cash and cash equivalents	1		$	164.8		$	164.8		$	144.0		$	144.0	Cash and cash equivalents		1		$	372.9	$	372.9	$	144.0	$	144.0
Receivables of CLOs															Receivables of CLOs		2		16.7		16.7		—		—
Financial Liabilities	Financial Liabilities														Financial Liabilities
Debt of CLOs1	Debt of CLOs1	2 or 3		$	5,029.6		$	5,067.3		$	3,634.1		$	3,610.6	Debt of CLOs1		2 or 3		$	5,396.8	$	5,437.8	$	3,634.1	$	3,610.6
Other debt	Other debt	3		70.5			66.1			36.9			36.6		Other debt		3		99.7		92.9		36.9		36.6

__________________

1Substantially all was Level 2.

~~Table of Contents~~

Debt

Debt of CIPs consisted of the following:


		March 31, 2022			September 30, 2021				June 30, 2022			September 30, 2021
(in millions)	(in millions)	Amount		Weighted- Average Effective Interest Rate	Amount		Weighted- Average Effective Interest Rate	(in millions)	Amount		Weighted- Average Effective Interest Rate	Amount		Weighted- Average Effective Interest Rate
Debt of CLOs	Debt of CLOs	$	5,029.6	1.86%	$	3,634.1	2.11%	Debt of CLOs	$	5,396.8	2.03%	$	3,634.1	2.11%
Other debt	Other debt	70.5		2.52%	36.9		1.95%	Other debt	99.7		3.73%	36.9		1.95%
Total	Total	$	5,100.1		$	3,671.0		Total	$	5,496.5		$	3,671.0

The debt of CLOs had fixed and floating interest rates ranging from ~~0.88%~~1.00% to ~~7.30%~~8.27% at ~~March 31,~~June 30, 2022, and from 1.00% to 8.22% at September 30, 2021. The other debt had fixed and floating interest rates ranging from ~~1.72%~~3.31% to 6.00% at ~~March 31,~~June 30, 2022, and from 1.63% to 2.42% at September 30, 2021. The floating rates were primarily based on LIBOR.

The contractual maturities for the debt of CIPs at ~~March 31,~~June 30, 2022 were as follows:


(in millions)	(in millions)			(in millions)
for the fiscal years ending September 30,	for the fiscal years ending September 30,	Amount		for the fiscal years ending September 30,	Amount
2022 (remainder of year)	2022 (remainder of year)	$	19.6	2022 (remainder of year)	$	99.4
2023	2023	—		2023	21.9
2024	2024	98.9		2024	84.2
2025	2025	—		2025	—
2026	2026	—		2026	—
Thereafter	Thereafter	4,981.6		Thereafter	5,291.0
Total	Total	$	5,100.1	Total	$	5,496.5

Collateralized Loan Obligations

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


(in millions)	(in millions)	March 31, 2022		September 30, 2021		(in millions)	June 30, 2022		September 30, 2021
Unpaid principal balance	Unpaid principal balance	$	5,235.2	$	3,951.1	Unpaid principal balance	$	5,549.5	$	3,951.1
Difference between unpaid principal balance and fair value	Difference between unpaid principal balance and fair value	9.5		20.9		Difference between unpaid principal balance and fair value	(46.9)		20.9
Fair Value	Fair Value	$	5,244.7	$	3,972.0	Fair Value	$	5,502.6	$	3,972.0

~~Investments 90 days or more past due were immaterial at March 31, 2022.~~ There were no investments 90 days or more past due at June 30, 2022 and September 30, 2021.

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The Company recognized ~~$7.6~~$4.9 million and ~~$12.9~~$17.8 million of net gains during the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022 and ~~$6.5~~$1.1 million and ~~$7.4~~$8.5 million of net gains during the three and ~~six~~nine months ended ~~March 31,~~June 30, 2021, related to its own economic interests in the CLOs. The aggregate principal amount due of the debt of CLOs was ~~$5,039.8~~$5,463.1 million and $3,629.9 million at ~~March 31,~~June 30, 2022 and September 30, 2021.

~~Table of Contents~~

Note 89 – Redeemable Noncontrolling Interests

Changes in redeemable noncontrolling interests were as follows:


(in millions)	(in millions)	2022										2021								(in millions)			2022								2021
		CIPs				Minority Interests		Total				CIPs		Minority Interests				Total					CIPs		Minority Interests				Total		CIPs				Minority Interests			Total
for the three months ended March 31,
for the three months ended June 30,																				for the three months ended June 30,			CIPs		Minority Interests				Total		CIPs				Minority Interests			Total
Balance at beginning of period	Balance at beginning of period			$	662.5					$	320.9					$	983.4				$	465.3					$	150.3					$	615.6			Balance at beginning of period
Net income (loss)	Net income (loss)	(69.6)				12.4		(57.2)				6.4		5.6				12.0		Net income (loss)			(16.5)			16.0				(0.5)		23.5				10.2				33.7
Net subscriptions (distributions) and other	Net subscriptions (distributions) and other	148.3				(9.0)		139.3				109.8		(2.4)				107.4		Net subscriptions (distributions) and other			5.4		(29.6)				(24.2)		190.1				(18.1)				172.0
Net consolidations (deconsolidations)		(115.9)				—		(115.9)				28.4		—				28.4
Adjustment to fair value		—				188.5		188.5				—		52.3				52.3
Net consolidations																				Net consolidations			380.3		—				380.3		31.3				—			31.3

Balance at End of Period	Balance at End of Period	$	625.3			$	512.8	$	1,138.1			$	609.9	$	205.8			$	815.7	Balance at End of Period			$	994.5	$	499.2			$	1,493.7	$	854.8			$	197.9		$	1,052.7


(in millions)	(in millions)	2022										2021								(in millions)			2022								2021
		CIPs				Minority Interests		Total				CIPs		Minority Interests				Total					CIPs		Minority Interests				Total		CIPs				Minority Interests			Total
for the six months ended March 31,
for the nine months ended June 30,																				for the nine months ended June 30,			CIPs		Minority Interests				Total		CIPs				Minority Interests			Total
Balance at beginning of period	Balance at beginning of period			$	622.5					$	310.5					$	933.0				$	397.3					$	144.6					$	541.9			Balance at beginning of period
Net income (loss)	Net income (loss)	(74.4)				24.7		(49.7)				19.4		11.3				30.7		Net income (loss)			(90.9)			40.7				(50.2)		42.9				21.5				64.4
Net subscriptions (distributions) and other	Net subscriptions (distributions) and other	314.6				(10.9)		303.7				79.9		(2.4)				77.5		Net subscriptions (distributions) and other			320.0		(40.5)				279.5		270.0				(20.5)				249.5
Net consolidations (deconsolidations)		(237.4)				—		(237.4)				113.3		—				113.3
Net consolidations																				Net consolidations			142.9		—				142.9		144.6				—			144.6
Adjustment to fair value	Adjustment to fair value	—				188.5		188.5				—		52.3				52.3		Adjustment to fair value			—		188.5				188.5		—				52.3			52.3
Balance at End of Period	Balance at End of Period	$	625.3			$	512.8	$	1,138.1			$	609.9	$	205.8			$	815.7	Balance at End of Period			$	994.5	$	499.2			$	1,493.7	$	854.8			$	197.9		$	1,052.7

Note 910 – Nonconsolidated Variable Interest Entities

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


(in millions)	(in millions)	March 31, 2022		September 30, 2021		(in millions)	June 30, 2022		September 30, 2021
Investments	Investments	$	535.0	$	639.2	Investments	$	728.7	$	639.2
Receivables	Receivables	153.4		172.1		Receivables	175.9		172.1
Total	Total	$	688.4	$	811.3	Total	$	904.6	$	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. The Company did not provide financial or other support to its sponsored funds assessed as VIEs during the ~~six~~nine months ended ~~March 31,~~June 30, 2022. During the fiscal year ended September 30, 2020, the Company authorized loans to certain sponsored funds in India that experienced increased liquidity risks and redemptions. The loans were fully repaid by March 31, 2021. See Note 16 – Commitments and Contingencies in the notes to consolidated financial statements in Item 8 of Part II of our Annual Report on Form 10-K for fiscal year 2021 for further information.

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Note 1011 – Commitments and Contingencies

Legal Proceedings

India Credit Fund Closure Matters. During the ~~six~~nine months ended ~~March 31,~~June 30, 2022, there were no significant changes from the disclosure in the Form 10‑K for the fiscal year ended September 30, 2021. As of ~~March 31,~~June 30, 2022, the amount reported as distributed to Fund unitholders is approximately $3.5 billion.

~~Table of Contents~~

Other Litigation Matters. The Company is from time to time involved in other litigation relating to claims arising in the normal course of business. Management is of the opinion that the ultimate resolution of such claims will not materially affect the Company’s business, financial position, results of operations or liquidity. In management’s opinion, an adequate accrual has been made as of ~~March 31,~~June 30, 2022 to provide for any probable losses that may arise from such matters for which the Company could reasonably estimate an amount.

Indemnifications and Guarantees

In the ordinary course of business or in connection with certain acquisition agreements, the Company enters into contracts that provide for indemnifications by the Company in certain circumstances. In addition, certain Company entities guarantee certain financial and performance-related obligations of various Franklin subsidiaries. The Company is also subject to certain legal requirements and agreements providing for indemnifications of directors, officers and personnel against liabilities and expenses they may incur under certain circumstances in connection with their service in those positions. The terms of these indemnities and guarantees vary pursuant to applicable facts and circumstances, and from agreement to agreement. Future payments for claims against the Company under these indemnities or guarantees could negatively impact the Company’s financial condition. In management’s opinion, no material loss was deemed probable or reasonably possible pursuant to such indemnification agreements and/or guarantees as of ~~March 31,~~June 30, 2022.

Other Commitments and Contingencies

At ~~March 31,~~June 30, 2022, there were no material changes in the other commitments and contingencies as reported in the Company’s Annual Report on Form 10-K for fiscal year 2021.

Note 1112 – Stock-Based Compensation

Stock and stock unit award activity was as follows:


(shares in thousands)	(shares in thousands)	Time-Based Shares		Performance- Based Shares	Total Shares		Weighted- Average Grant-Date Fair Value		(shares in thousands)		Time-Based Shares	Performance- Based Shares				Total Shares			Weighted- Average Grant-Date Fair Value
for the six months ended March 31, 2022
for the nine months ended June 30, 2022									for the nine months ended June 30, 2022		Time-Based Shares	Performance- Based Shares				Total Shares			Weighted- Average Grant-Date Fair Value
Nonvested balance at October 1, 2021	Nonvested balance at October 1, 2021		14,176			3,658				17,834				$	22.27			Nonvested balance at October 1, 2021
Granted	Granted	4,465		227	4,692		34.89		Granted		4,713		227				4,940				34.36
Vested	Vested	(1,834)		(98)	(1,932)		25.26		Vested		(1,891)	(98)				(1,989)				25.43
Forfeited/canceled	Forfeited/canceled	(301)		(166)	(467)		25.48		Forfeited/canceled		(435)	(188)				(623)			26.20
Nonvested Balance at March 31, 2022		16,506		3,621	20,127		$	24.54
Nonvested Balance at June 30, 2022									Nonvested Balance at June 30, 2022		16,563	3,599				20,162			$	24.48

Total unrecognized compensation expense related to nonvested stock and stock unit awards was ~~$331.8~~$286.4 million at ~~March 31,~~June 30, 2022. This expense is expected to be recognized over a remaining weighted-average vesting period of ~~2.2~~2.0 years.

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Note 1213 – Investment and Other Income, Net

Investment and other income, net consisted of the following:

Three Months Ended
March 31, Six Months Ended
March 31,
(in millions) 2022 2021 2022 2021
Dividend and interest income $ 5.1 $ 3.9 $ 11.2 $ 9.0
Gains (losses) on investments, net (23.1) 10.2 2.7 58.9
Income from investments in equity method investees 27.0 45.9 51.7 84.4
Gains (losses) on derivatives, net 6.7 (6.1) (2.3) (16.1)
Rental income 8.6 7.8 18.3 15.5
Foreign currency exchange gains (losses), net 5.8 6.5 9.7 (10.0)
Other, net (2.4) (1.1) (6.6) 2.6
Investment and other income, net $ 27.7 $ 67.1 $ 84.7 $ 144.3

~~Table of Contents~~


	Three Months Ended June 30,				Nine Months Ended June 30,
(in millions)	2022		2021		2022		2021
Dividend and interest income	$	6.3	$	3.4	$	17.5	$	12.4
Gains (losses) on investments, net	(35.6)		17.3		(32.9)		76.2
Income (losses) from investments in equity method investees	(0.1)		39.4		51.6		123.8
Gains (losses) on derivatives, net	17.5		(9.1)		15.2		(25.2)
Rental income	9.6		7.2		27.9		22.7
Foreign currency exchange gains (losses), net	14.5		(7.2)		24.2		(17.2)
Other, net	0.8		1.9		(5.8)		4.5
Investment and other income, net	$	13.0	$	52.9	$	97.7	$	197.2

Net gains (losses) recognized on equity securities measured at fair value and trading debt securities that were held by the Company at ~~March 31,~~June 30, 2022 and 2021 were ~~$(29.2)~~$(50.3) million and ~~$(34.5)~~$(79.1) million for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022, and ~~$(2.6)~~$(0.2) million and ~~$51.2~~$27.2 million for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2021.

Note 1314 – Accumulated Other Comprehensive Income (Loss)

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

(in millions) Currency
Translation
Adjustments Unrealized
Losses on
Defined Benefit
Plans Total
for the three months ended March 31, 2022
Balance at January 1, 2022 $ (377.4) $ (12.2) $ (389.6)
Other comprehensive income (loss)
Other comprehensive income (loss) before reclassifications, net of tax (17.4) 5.4 (12.0)
Reclassifications to compensation and benefits expense, net of tax — (0.1) (0.1)
Reclassifications to net investment and other income, net of tax 1.1 — 1.1
Total other comprehensive income (loss) (16.3) 5.3 (11.0)
Balance at March 31, 2022 $ (393.7) $ (6.9) $ (400.6)


(in millions)	Currency Translation Adjustments		Unrealized Losses on Defined Benefit Plans		Total
for the three months ended June 30, 2022
Balance at April 1, 2022	$	(393.7)	$	(6.9)	$	(400.6)
Other comprehensive loss
Other comprehensive loss before reclassifications, net of tax	(101.5)		(2.4)		(103.9)

Reclassifications to net investment and other income, net of tax	0.9		—		0.9
Total other comprehensive loss	(100.6)		(2.4)		(103.0)
Balance at June 30, 2022	$	(494.3)	$	(9.3)	$	(503.6)

(in millions) Currency
Translation
Adjustments Unrealized
Losses on
Defined Benefit
Plans Total
for the six months ended March 31, 2022
Balance at October 1, 2021 $ (370.5) $ (7.1) $ (377.6)
Other comprehensive income (loss)
Other comprehensive income (loss) before reclassifications, net of tax (24.3) 0.8 (23.5)
Reclassifications to compensation and benefits expense, net of tax — (0.6) (0.6)
Reclassifications to net investment and other income, net of tax 1.1 — 1.1
Total other comprehensive income (loss) (23.2) 0.2 (23.0)
Balance at March 31, 2022 $ (393.7) $ (6.9) $ (400.6)

(in millions) Currency
Translation
Adjustments Unrealized
Losses on
Defined Benefit
Plans Total
for the three months ended March 31, 2021
Balance at January 1, 2021 $ (306.1) $ (8.6) $ (314.7)
Other comprehensive income (loss)
Other comprehensive income (loss) before reclassifications, net of tax (35.6) 1.0 (34.6)
Reclassifications to net investment and other income, net of tax 0.8 — 0.8
Total other comprehensive income (loss) (34.8) 1.0 (33.8)
Balance at March 31, 2021 $ (340.9) $ (7.6) $ (348.5)

(in millions) Currency
Translation
Adjustments Unrealized
Losses on
Defined Benefit
Plans Total
for the six months ended March 31, 2021
Balance at October 1, 2020 $ (399.6) $ (8.0) $ (407.6)
Other comprehensive income
Other comprehensive income before reclassifications, net of tax 57.8 0.4 58.2
Reclassifications to net investment and other income, net of tax 0.9 — 0.9
Total other comprehensive income 58.7 0.4 59.1
Balance at March 31, 2021 $ (340.9) $ (7.6) $ (348.5)


(in millions)	Currency Translation Adjustments		Unrealized Losses on Defined Benefit Plans		Total
for the nine months ended June 30, 2022
Balance at October 1, 2021	$	(370.5)	$	(7.1)	$	(377.6)
Other comprehensive loss
Other comprehensive loss before reclassifications, net of tax	(125.8)		(1.6)		(127.4)
Reclassifications to compensation and benefits expense, net of tax	—		(0.6)		(0.6)
Reclassifications to net investment and other income, net of tax	2.0		—		2.0
Total other comprehensive loss	(123.8)		(2.2)		(126.0)
Balance at June 30, 2022	$	(494.3)	$	(9.3)	$	(503.6)

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~~Note 14~~ – ~~Subsequent Event~~


(in millions)	Currency Translation Adjustments		Unrealized Losses on Defined Benefit Plans		Total
for the three months ended June 30, 2021
Balance at April 1, 2021	$	(340.9)	$	(7.6)	$	(348.5)
Other comprehensive income (loss)
Other comprehensive income (loss) before reclassifications, net of tax	21.5		(0.2)		21.3
Reclassifications to net investment and other income, net of tax	1.1		—		1.1
Total other comprehensive income (loss)	22.6		(0.2)		22.4
Balance at June 30, 2021	$	(318.3)	$	(7.8)	$	(326.1)

On April 1, 2022, the Company acquired all of the outstanding ownership interests in Lexington Partners L.P. (“Lexington”) 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, the Company is granting a 25% ownership stake in Lexington and performance-based cash retention awards that both vest over approximately five years.


(in millions)	Currency Translation Adjustments		Unrealized Losses on Defined Benefit Plans		Total
for the nine months ended June 30, 2021
Balance at October 1, 2020	$	(399.6)	$	(8.0)	$	(407.6)
Other comprehensive income
Other comprehensive income before reclassifications, net of tax	79.3		0.2		79.5
Reclassifications to net investment and other income, net of tax	2.0		—		2.0
Total other comprehensive income	81.3		0.2		81.5
Balance at June 30, 2021	$	(318.3)	$	(7.8)	$	(326.1)

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENTS

This Form 10-Q and the documents incorporated by reference herein may include forward-looking statements that reflect our current views with respect to future events, financial performance and market conditions. Such statements are provided under the “safe harbor” protection of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical or current facts and generally can be identified by words or phrases written in the future tense and/or preceded by words such as “anticipate,” “believe,” “could,” “depends,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “potential,” “seek,” “should,” “will,” “would,” or other similar words or variations thereof, or the negative thereof, but these terms are not the exclusive means of identifying such statements.

Forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that may cause actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements, including pandemic-related risks, market and volatility risks, investment performance and reputational risks, global operational risks, competition and distribution risks, third-party risks, technology and security risks, human capital risks, cash management risks, and legal and regulatory risks. The forward-looking statements contained in this Form 10-Q or that are incorporated by reference herein are qualified in their entirety by reference to the risks and uncertainties disclosed in this Form 10-Q, including those discussed under the heading “Risk Factors” below, and/or discussed under the headings “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021 (“fiscal year 2021”).

While forward-looking statements are our best prediction at the time that they are made, you should not rely on them and are cautioned against doing so. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other possible future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. They are neither statements of historical fact nor guarantees or assurances of future performance. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.

If a circumstance occurs after the date of this Form 10-Q that causes any of our forward-looking statements to be inaccurate, whether as a result of new information, future developments or otherwise, we undertake no obligation to announce publicly the change to our expectations, or to make any revision to our forward-looking statements, to reflect any change in assumptions, beliefs or expectations, or any change in events, conditions or circumstances upon which any forward-looking statement is based, unless required by law.

In this section, we discuss and analyze the results of operations and financial condition of Franklin Resources, Inc. (“Franklin”) and its subsidiaries (collectively, the “Company”). The following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year 2021 filed with the U.S. Securities and Exchange Commission, and the consolidated financial statements and notes thereto included elsewhere in this Form 10-Q.

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 that derives operating revenues and net income from providing investment management and related services to investors in jurisdictions 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 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®, Benefit Street Partners®, Brandywine Global Investment Management®, Clarion Partners®, ClearBridge Investments®, Fiduciary Trust International™, Franklin Bissett®, Franklin Mutual Series®, K2®, Lexington Partners®, LibertyShares®, Martin Currie®, 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 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.

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The level of our revenues depends largely on the level and relative mix of assets under management (“AUM”). As noted in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year 2021, the amount and mix of our AUM are subject to significant fluctuations that can negatively impact our revenues and income. The level of our revenues also depends on the fees charged for our services, which are based on contracts with our funds and 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 of our Annual Report on Form 10-K for the fiscal year 2021, 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 may continue to adversely affect, our business, financial condition and results of operations. Ongoing 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 the pandemic may adversely impact our business, liquidity, capital resources, financial results and operations, which impacts will depend on numerous developing factors that remain uncertain and subject to change.

During our ~~second~~third fiscal quarter, global equity markets ~~declined driven by~~remained challenged amid continued concerns about further interest rate increases, the global economic ~~impacts~~growth outlook and the risk of ~~the Russian invasion of Ukraine, rising inflation and central banks’ monetary policies, including expectations about the pace of future interest rate increases.~~a recession. The S&P 500 Index and MSCI World Index each decreased ~~4.6% and 5.0%~~16.1% for the quarter, and ~~increased 5.9%~~decreased 11.1% and ~~2.4%~~14.0% for the fiscal year to date. The global bond markets had negative returns, with the Bloomberg Global Aggregate Index decreasing ~~6.2%~~8.3% during the quarter and ~~6.8%~~14.5% for the fiscal year to date, as the Federal Reserve and other developed market central banks ~~began increasing~~continued to increase interest rates in an effort to combat inflation.

Our total AUM at ~~March 31,~~June 30, 2022 was ~~$1,477.5~~$1,379.8 billion, 3%10% lower than at September 30, 2021 and 1%11% lower than at ~~March 31,~~June 30, 2021. Monthly average AUM (“average AUM”) for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022 decreased 6% and increased 1% ~~and 4%~~ from the same periods in the prior fiscal year.

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 ~~are granting~~granted a 25% ownership stake in Lexington and performance-based cash retention awards that both 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.

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 under the heading “Risk Factors” below and in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year 2021.

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RESULTS OF OPERATIONS


		Three Months Ended March 31,						Percent Change				Six Months Ended March 31,										Percent Change					Three Months Ended June 30,									Percent Change			Nine Months Ended June 30,						Percent Change
(in millions, except per share data)	(in millions, except per share data)	2022			2021					2022					2021					(in millions, except per share data)				2022				2021						2022					2021
Operating revenues	Operating revenues	$	2,081.0		$	2,076.5				0	%				$	4,305.0				$	4,071.6				6	%	Operating revenues			$	2,031.3				$		2,172.9		(7		%)	$	6,336.3		$	6,244.5		1	%
Operating income	Operating income	463.0			456.3			1	%			1,020.7					865.4					18	%	Operating income			404.7				478.1					(15		%)	1,425.4			1,343.5			6		%
Operating margin1	Operating margin1	22.2		%	22.0		%					23.7		%			21.3		%					Operating margin1			19.9		%		22.0		%						22.5		%	21.5		%

Net income attributable to Franklin Resources, Inc.	Net income attributable to Franklin Resources, Inc.	$	349.6		$	381.8		(8	%)			$	802.8				$	727.1				10	%	Net income attributable to Franklin Resources, Inc.			$	256.4			$	438.4				(42		%)	$	1,059.2		$	1,165.5		(9		%)
Diluted earnings per share	Diluted earnings per share	0.68			0.74			(8	%)			1.57					1.42					11	%	Diluted earnings per share			0.50				0.86					(42		%)	2.07			2.27			(9		%)

As adjusted (non-GAAP):2	As adjusted (non-GAAP):2																							As adjusted (non-GAAP):2
Adjusted operating income	Adjusted operating income	$	576.6		$	581.1		(1	%)			$	1,262.5				$	1,131.0				12	%	Adjusted operating income			$	566.9			$	601.2				(6		%)	$	1,829.4		$	1,732.2		6		%
Adjusted operating margin	Adjusted operating margin	35.7		%	38.0		%					37.8		%			37.6		%					Adjusted operating margin			35.3		%		36.5		%						37.0		%	37.2		%

Adjusted net income	Adjusted net income	$	491.6		$	403.5		22	%			$	1,045.2				$	776.9				35	%	Adjusted net income			$	416.0			$	493.7				(16		%)	$	1,461.2		$	1,270.6		15		%
Adjusted diluted earnings per share	Adjusted diluted earnings per share	0.96			0.79			22	%			2.04					1.51					35	%	Adjusted diluted earnings per share			0.82				0.96					(15		%)	2.86			2.48			15		%

~~__________________~~_________________

1Defined as operating income divided by operating revenues.

2“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.

ASSETS UNDER MANAGEMENT

AUM by asset class was as follows:


(in billions)	(in billions)	March 31, 2022		March 31, 2021		Percent Change		(in billions)	June 30, 2022		June 30, 2021		Percent Change
Fixed Income	Fixed Income	$	595.0	$	642.3	(7	%)	Fixed Income	$	536.3	$	658.1	(19	%)
Equity	Equity	515.4		511.9		1	%	Equity	424.9		536.9		(21	%)
Alternative	Alternative	157.9		131.1		20	%	Alternative	224.8		140.8		60	%
Multi-Asset	Multi-Asset	151.9		148.2		2	%	Multi-Asset	136.2		153.0		(11	%)
Cash Management	Cash Management	57.3		65.4		(12	%)	Cash Management	57.6		63.3		(9	%)
Total	Total	$	1,477.5	$	1,498.9	(1	%)	Total	$	1,379.8	$	1,552.1	(11	%)

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


(in billions)	(in billions)	Average AUM				Percent Change				Mix of Average AUM						(in billions)			Average AUM								Percent Change			Mix of Average AUM
for the three months ended March 31,		2022		2021				2022				2021
for the three months ended June 30,																for the three months ended June 30,			2022				2021						Percent Change			2022				2021
Fixed Income	Fixed Income	$	619.0	$	658.6			(6	%)			41	%			44	%	Fixed Income			$	563.4			$	651.5				39	%			42	%
Equity	Equity	528.7		500.2		6	%			35	%			33	%	Equity			467.8				529.0				(12	%)				33	%			35	%
Alternative	Alternative	155.5		129.0		21	%			10	%			9	%	Alternative			205.4				135.3				52	%		14	%			9	%
Multi-Asset	Multi-Asset	151.5		143.4		6	%			10	%			10	%	Multi-Asset			144.4				152.0				(5	%)		10	%			10	%
Cash Management	Cash Management	61.4		66.7		(8	%)			4	%			4	%	Cash Management			58.8				63.2				(7	%)		4	%			4	%
Total	Total	$	1,516.1	$	1,497.9	1	%			100	%			100	%	Total			$	1,439.8			$	1,531.0			(6	%)		100	%			100	%

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(in billions)	(in billions)	Average AUM				Percent Change				Mix of Average AUM						(in billions)			Average AUM								Percent Change			Mix of Average AUM
for the six months ended March 31,		2022		2021				2022				2021
for the nine months ended June 30,																for the nine months ended June 30,			2022				2021						Percent Change			2022				2021
Fixed Income	Fixed Income	$	629.0	$	658.7			(5	%)			41	%			45	%	Fixed Income			$	606.2			$	657.5				40	%			44	%
Equity	Equity	535.5		475.0		13	%			35	%			32	%	Equity			510.4				492.9				4	%				34	%			33	%
Alternative	Alternative	152.2		125.9		21	%			10	%			9	%	Alternative			172.9				129.1				34	%		12	%			9	%
Multi-Asset	Multi-Asset	151.3		140.2		8	%			10	%			10	%	Multi-Asset			148.4				144.1				3	%		10	%			10	%
Cash Management	Cash Management	61.0		67.2		(9	%)			4	%			4	%	Cash Management			60.5				65.8				(8	%)		4	%			4	%
Total	Total	$	1,529.0	$	1,467.0	4	%			100	%			100	%	Total			$	1,498.4			$	1,489.4			1	%		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)	(in billions)	Three Months Ended March 31,				Percent Change				Six Months Ended March 31,								Percent Change		(in billions)			Three Months Ended June 30,								Percent Change				Nine Months Ended June 30,								Percent Change
		2022		2021				2022				2021									2022				2021								2022				2021
Beginning AUM	Beginning AUM	$	1,578.1	$	1,498.0			5	%			$	1,530.1			$	1,418.9			8	%	Beginning AUM			$	1,477.5			$	1,498.9			(1	%)			$	1,530.1			$	1,418.9			8	%
Long-term inflows	Long-term inflows	76.1		101.7		(25	%)			183.1				197.8				(7	%)	Long-term inflows			77.4				83.7				(8	%)			260.5				281.5				(7	%)
Long-term outflows	Long-term outflows	(87.8)		(105.9)		(17	%)			(170.7)				(206.5)				(17	%)	Long-term outflows			(97.2)				(90.3)				8	%			(267.9)				(296.8)				(10	%)
Long-term net flows	Long-term net flows	(11.7)		(4.2)		179	%			12.4				(8.7)				NM		Long-term net flows			(19.8)				(6.6)				200	%			(7.4)				(15.3)				(52%)
Cash management net flows	Cash management net flows	(7.1)		1.2		NM				(1.3)				(9.0)				(86%)		Cash management net flows			0.4				(2.2)				NM				(0.9)				(11.2)				(92%)
Total net flows	Total net flows	(18.8)		(3.0)		527	%			11.1				(17.7)				NM		Total net flows			(19.4)				(8.8)				120	%			(8.3)				(26.5)				(69%)
Acquisitions	Acquisitions	—		—		NM				7.7				—				NM		Acquisitions			57.2				—				NM				64.9				—				NM
Net market change, distributions and other	Net market change, distributions and other	(81.8)		3.9		NM				(71.4)				97.7				NM		Net market change, distributions and other			(135.5)				62.0				NM				(206.9)				159.7				NM
Ending AUM	Ending AUM	$	1,477.5	$	1,498.9	(1	%)			$	1,477.5			$	1,498.9			(1	%)	Ending AUM			$	1,379.8			$	1,552.1			(11	%)			$	1,379.8			$	1,552.1			(11	%)

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


(in billions)	(in billions)	Fixed Income				Equity		Alternative				Multi-Asset		Cash Management				Total		(in billions)			Fixed Income					Equity				Alternative			Multi-Asset			Cash Management			Total
for the three months ended March 31, 2022
AUM at January 1, 2022				$	642.1					$	563.4					$	154.3				$	154.0				$	64.3			$	1,578.1
for the three months ended June 30, 2022																				for the three months ended June 30, 2022			Fixed Income					Equity				Alternative			Multi-Asset			Cash Management			Total
AUM at April 1, 2022																				AUM at April 1, 2022
Long-term inflows	Long-term inflows	33.3				29.8		4.6				8.4		—				76.1		Long-term inflows					35.2									24.5			5.9			11.8			—	77.4
Long-term outflows	Long-term outflows	(41.2)				(35.9)		(4.6)				(6.1)		—				(87.8)		Long-term outflows			(49.5)					(33.7)				(3.8)			(10.2)			—			(97.2)
Long-term net flows	Long-term net flows	(7.9)				(6.1)		—				2.3		—				(11.7)		Long-term net flows			(14.3)					(9.2)				2.1			1.6			—			(19.8)
Cash management net flows	Cash management net flows	—				—		—				—		(7.1)				(7.1)		Cash management net flows			—					—				—			—			0.4			0.4
Total net flows	Total net flows	(7.9)				(6.1)		—				2.3		(7.1)				(18.8)		Total net flows			(14.3)					(9.2)				2.1			1.6			0.4			(19.4)

Acquisition																				Acquisition			—					—				57.2			—			—			57.2
Net market change, distributions and other	Net market change, distributions and other	(39.2)				(41.9)		3.6				(4.4)		0.1				(81.8)		Net market change, distributions and other			(44.4)					(81.3)				7.6			(17.3)			(0.1)			(135.5)
AUM at March 31, 2022		$	595.0			$	515.4	$	157.9			$	151.9	$	57.3			$	1,477.5
AUM at June 30, 2022																				AUM at June 30, 2022			$	536.3				$	424.9			$	224.8		$	136.2		$	57.6		$	1,379.8

AUM decreased ~~$100.6~~$97.7 billion, or 6%7%, during the three months ended ~~March 31,~~June 30, 2022 due to ~~$81.8~~the negative impact of $135.5 billion of net market change, distributions and other ~~$11.7~~and $19.8 billion of long-term net outflows, partially offset by an acquisition of $57.2 billion and $0.4 billion of cash management net inflows. Net market change, distributions and other primarily consists of $117.3 billion of market depreciation, a $10.3 billion decrease from foreign exchange revaluation and $7.9 billion of long-term distributions. The market depreciation occurred in all long-term asset classes with the exception of the alternative asset class. Foreign exchange revaluation from AUM in products that are not U.S. dollar denominated, which represented 10% of total AUM as of June 30, 2022, was primarily due to a stronger U.S. dollar compared to the Australian dollar, Japanese Yen, Pound sterling and Euro.

AUM decreased $172.3 billion, or 11%, as compared to the prior year period. Long-term inflows decreased 8% to $77.4 billion, driven by lower inflows in fixed income, equity and alternative open-end funds and equity investment trusts,

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partially offset by higher inflows in multi-asset open end funds, alternative private closed-end funds and multi-asset and equity sub-advised mutual funds. Long-term outflows increased 8% to $97.2 billion driven by higher redemptions in fixed income open-end funds and institutional separate accounts, multi-asset sub-advised mutual funds, and equity retail separate accounts, partially offset by lower redemptions in equity sub-advised mutual funds, open-end funds and institutional separate accounts.


(in billions)	Fixed Income		Equity		Alternative		Multi-Asset		Cash Management		Total
for the three months ended June 30, 2021
AUM at April 1, 2021	$	642.3	$	511.9	$	131.1	$	148.2	$	65.4	$	1,498.9
Long-term inflows	40.2		29.1		5.8		8.6		—		83.7
Long-term outflows	(38.1)		(40.6)		(2.7)		(8.9)		—		(90.3)
Long-term net flows	2.1		(11.5)		3.1		(0.3)		—		(6.6)
Cash management net flows	—		—		—		—		(2.2)		(2.2)
Total net flows	2.1		(11.5)		3.1		(0.3)		(2.2)		(8.8)
Net market change, distributions and other	13.7		36.5		6.6		5.1		0.1		62.0
AUM at June 30, 2021	$	658.1	$	536.9	$	140.8	$	153.0	$	63.3	$	1,552.1

AUM increased $53.2 billion, or 4%, during the three months ended June 30, 2021 due to $62.0 billion of net market change, distributions and other, partially offset by $6.6 billion of long-term net outflows and ~~$7.1~~$2.2 billion of cash management net outflows. Net market change, distributions and other ~~primarily~~ consists of ~~$77.0~~$66.1 billion of market ~~depreciation~~appreciation and ~~$4.6~~a $1.5 billion increase from foreign exchange revaluation, partially offset by $5.6 billion of long-term distributions. The market ~~depreciation~~appreciation occurred ~~primarily~~in all long-term asset classes, most significantly in the equity and fixed income asset ~~classes.~~

~~AUM decreased $21.4 billion or 1%, as compared to the prior year period. Long-term inflows decreased 25% to $76.1 billion, driven by lower inflows~~classes, and reflected positive returns in ~~fixed income institutional separate accounts and~~global equity and fixed income ~~open-end funds.~~ markets. Foreign exchange revaluation was primarily due to a weaker U.S. dollar compared to the Brazilian Real, Canadian dollar and Euro, partially offset by a stronger U.S. dollar compared to the Australian dollar.

Long-term outflows ~~decreased 17% to $87.8~~included outflows of $7.0 billion ~~driven by lower~~from three institutional products, including two equity redemptions inof $3.7 billion and $2.2 billion, and $2.5 billion from six fixed income ~~institutional separate accounts related to a single fixed income institutional redemption of nearly $6~~funds, including $1.2 billion ~~and $1.3 billion of outflows~~ from ~~our~~five India credit funds that ~~did not earn management fees,~~were non-management fee earning which are in the process of winding up. Long-term outflows were partially offset by inflows of $3.8 billion in two fixed income funds, including the $1.0 billion launch of a closed-end fund.


(in billions)	Fixed Income		Equity		Alternative		Multi-Asset		Cash Management		Total
for the nine months ended June 30, 2022
AUM at October 1, 2021	$	650.3	$	523.6	$	145.2	$	152.4	$	58.6	$	1,530.1
Long-term inflows	112.2		100.4		16.6		31.3		—		260.5
Long-term outflows	(126.3)		(103.0)		(11.5)		(27.1)		—		(267.9)
Long-term net flows	(14.1)		(2.6)		5.1		4.2		—		(7.4)
Cash management net flows	—		—		—		—		(0.9)		(0.9)
Total net flows	(14.1)		(2.6)		5.1		4.2		(0.9)		(8.3)
Acquisitions	—		4.6		58.0		2.3		—		64.9
Net market change, distributions and other	(99.9)		(100.7)		16.5		(22.7)		(0.1)		(206.9)
AUM at June 30, 2022	$	536.3	$	424.9	$	224.8	$	136.2	$	57.6	$	1,379.8

AUM decreased $150.3 billion, or 10%, during the nine months ended June 30, 2022 due to the negative impact of $206.9 billion of net market change, distributions and other, $7.4 billion of long-term net outflows and $0.9 billion of cash management net outflows, partially offset by $64.9 billion from acquisitions. Net market change, distributions and other primarily consists of $152.5 billion of market depreciation, $42.6 billion of long-term distributions and $11.8 billion decrease from foreign exchange revaluation. The market depreciation occurred in all asset classes with the exception of 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 Australian dollar.

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Table of Contents

(in billions) Fixed Income Equity Alternative Multi-Asset Cash
Management Total
for the three months ended
March 31, 2021
AUM at January 1, 2021 $ 669.9 $ 495.7 $ 127.1 $ 141.1 $ 64.2 $ 1,498.0
Long-term inflows 53.5 32.4 6.2 9.6 — 101.7
Long-term outflows (56.1) (38.0) (3.3) (8.5) — (105.9)
Long-term net flows (2.6) (5.6) 2.9 1.1 — (4.2)
Cash management net flows — — — — 1.2 1.2
Total net flows (2.6) (5.6) 2.9 1.1 1.2 (3.0)
Net market change, distributions and other (25.0) 21.8 1.1 6.0 — 3.9
AUM at March 31, 2021 $ 642.3 $ 511.9 $ 131.1 $ 148.2 $ 65.4 $ 1,498.9
Long-term inflows decreased 7% to $260.5 billion, as compared to the prior-year period, driven by lower inflows in fixed income open-end funds and institutional separate accounts, partially offset by higher inflows for alternative private closed end funds. Long-term outflows decreased 10% to $267.9 billion due to lower outflows in fixed income institutional separate accounts and equity open-end funds, partially offset by higher outflows for multi-asset sub-advised mutual funds.


(in billions)	Fixed Income		Equity		Alternative		Multi-Asset		Cash Management		Total
for the nine months ended June 30, 2021
AUM at October 1, 2020	$	656.9	$	438.1	$	122.1	$	129.4	$	72.4	$	1,418.9
Long-term inflows	135.7		103.0		15.3		27.5		—		281.5
Long-term outflows	(142.1)		(118.8)		(8.9)		(27.0)		—		(296.8)
Long-term net flows	(6.4)		(15.8)		6.4		0.5		—		(15.3)
Cash management net flows	—		—		—		—		(11.2)		(11.2)
Total net flows	(6.4)		(15.8)		6.4		0.5		(11.2)		(26.5)
Net market change, distributions and other	7.6		114.6		12.3		23.1		2.1		159.7
AUM at June 30, 2021	$	658.1	$	536.9	$	140.8	$	153.0	$	63.3	$	1,552.1

AUM increased ~~$0.9~~$133.2 billion, or 9%, during the ~~three~~nine months ended ~~March 31,~~June 30, 2021 due to ~~$3.9~~$159.7 billion of net market change, distributions and other, partially offset by $15.3 billion of long-term net outflows and ~~$1.2~~$11.2 billion of cash management ~~net inflows, partially offset by $4.2 billion of long-term~~ net outflows. Net market change, distributions and other consists of ~~$12.7~~$179.9 billion of market appreciation ~~partially offset by~~and a ~~$4.8~~$4.9 billion ~~decrease~~increase from foreign exchange revaluation, ~~and $4.0~~partially offset by $25.1 billion of long-term distributions. The market appreciation occurred ~~primarily~~in all asset classes, most significantly in the equity and multi-asset asset classes, ~~partially offset by depreciation in the fixed income asset class,~~ and reflected positive returns in global equity ~~markets~~markets. Foreign exchange revaluation was primarily due to a weaker U.S. dollar compared to the Canadian dollar, Australian dollar, Pound Sterling and ~~negative returns in fixed income markets.~~ Brazilian Real, partially offset by a stronger U.S. dollar compared to the Japanese Yen.

Long-term outflows included outflows of ~~$8.6~~$26.9 billion from ~~three~~eleven institutional products, including a single fixed income ~~institutional~~ redemption of $5.9 billion, ~~$2.7~~and two equity redemptions of $3.7 billion and $2.2 billion, $10.2 billion from ~~two equity funds, $2.7 billion from six~~seven fixed income funds, including ~~$1.3~~$2.5 billion from five India credit funds that were non-management fee earning which are in the process of winding up, and $1.7 billion from a multi-asset fund, partially offset by inflows of $3.0 billion in a multi-asset fund, $1.8 billion in a fixed income fund, $1.1 billion in an equity fund and $1.1 billion in an institutional separate account. Additionally, long-term outflows in the equity asset class included $2.1 billion of exchanges that are included as long-term inflows in the multi-asset asset class. The foreign exchange revaluation was primarily due to the strengthening of the U.S. dollar against the Japanese Yen, Euro and Brazilian Real.

(in billions) Fixed Income Equity Alternative Multi-Asset Cash
Management Total
for the six months ended
March 31, 2022
AUM at October 1, 2021 $ 650.3 $ 523.6 $ 145.2 $ 152.4 $ 58.6 $ 1,530.1
Long-term inflows 77.0 75.9 10.7 19.5 — 183.1
Long-term outflows (76.8) (69.3) (7.7) (16.9) — (170.7)
Long-term net flows 0.2 6.6 3.0 2.6 — 12.4
Cash management net flows — — — — (1.3) (1.3)
Total net flows 0.2 6.6 3.0 2.6 (1.3) 11.1
Acquisitions — 4.6 0.8 2.3 — 7.7
Net market change, distributions and other (55.5) (19.4) 8.9 (5.4) — (71.4)
AUM at March 31, 2022 $ 595.0 $ 515.4 $ 157.9 $ 151.9 $ 57.3 $ 1,477.5

AUM decreased $52.6 billion or 3% during the six months ended March 31, 2022 due to $71.4 billion of net market change, distributions and other and $1.3 billion of cash management net outflows, partially offset by $12.4 billion of long-term net inflows and $7.7 billion from acquisitions. Net market change, distributions and other primarily consists of $35.2 billion of market depreciation, $34.7 billion of long-term distributions. The market depreciation occurred primarily in the fixed income and equity asset classes, partially offset by appreciation in the alternative asset class.

Long-term inflows decreased 7% to $183.1 billion, as compared to the prior-year period, driven by lower inflows in the equity and fixed income asset classes related to decreased sales in institutional separate accounts and open-end funds, partially offset by higher reinvested distributions in equity and multi-asset open-end funds. Long-term outflows decreased 17% to $170.7 billion due to lower outflows in fixed income institutional separate accounts.

~~Table of Contents~~

(in billions) Fixed Income Equity Alternative Multi-Asset Cash
Management Total
for the six months ended
March 31, 2021
AUM at October 1, 2020 $ 656.9 $ 438.1 $ 122.1 $ 129.4 $ 72.4 $ 1,418.9
Long-term inflows 95.5 73.9 9.5 18.9 — 197.8
Long-term outflows (104.0) (78.2) (6.2) (18.1) — (206.5)
Long-term net flows (8.5) (4.3) 3.3 0.8 — (8.7)
Cash management net flows — — — — (9.0) (9.0)
Total net flows (8.5) (4.3) 3.3 0.8 (9.0) (17.7)
Net market change, distributions and other (6.1) 78.1 5.7 18.0 2.0 97.7
AUM at March 31, 2021 $ 642.3 $ 511.9 $ 131.1 $ 148.2 $ 65.4 $ 1,498.9

AUM increased $80.0 billion or 6% during the six months ended March 31, 2021 due to $97.7 billion of net market change, distributions and other, partially offset by $9.0 billion of cash management net outflows and $8.7 billion of long-term net outflows. Net market change, distributions and other consists of $113.8 billion of market appreciation and a $3.4 billion increase from foreign exchange revaluation, partially offset by $19.5 billion of long-term distributions. The market appreciation occured primarily in the equity and multi-asset asset classes, and reflected positive returns in global equity markets. Long-term net outflows included outflows of $19.8 billion from eight institutional products, including a single fixed income institutional redemption of $5.9 billion, $7.1 billion from seven fixed income funds, including $1.3 billion from five India credit funds that were non-management fee earning which are in the process of winding up, $3.2$3.6 billion from two equity funds and $3.1 billion from a multi-asset ~~fund,~~fund. Long-term outflows were partially offset by inflows of ~~$6.3~~$10.6 billion in ~~two~~three fixed income funds, including the $1.0 billion launch of a closed-end fund, $5.3 billion in two institutional separate accounts, $3.1 billion in a multi-asset fund and ~~$2.4~~$3.0 billion in an equity fund. Additionally, long-term outflows in the equity asset class included $2.1 billion of exchanges that are included as long-term inflows in the multi-asset asset class. The foreign exchange revaluation was primarily due to weakening of the U.S. dollar against the Australian dollar, Canadian dollar and Pound Sterling, partially offset by strengthening of the U.S. dollar against the Japanese Yen.

AUM by sales region was as follows:


(in billions)	(in billions)	March 31, 2022		March 31, 2021		Percent Change		(in billions)	June 30, 2022		June 30, 2021		Percent Change
United States	United States	$	1,107.2	$	1,100.5	1	%	United States	$	1,034.3	$	1,151.2	(10	%)
International	International							International
Asia-Pacific	Asia-Pacific	148.3		164.5		(10	%)	Asia-Pacific	131.1		161.1		(19	%)
Europe, Middle East and Africa	Europe, Middle East and Africa	143.4		150.1		(4	%)	Europe, Middle East and Africa	133.6		156.2		(14	%)
Americas, excl. U.S.	Americas, excl. U.S.	78.6		83.8		(6	%)	Americas, excl. U.S.	80.8		83.6		(3	%)
Total international	Total international	370.3		398.4		(7	%)	Total international	345.5		400.9		(14	%)
Total	Total	$	1,477.5	$	1,498.9	(1	%)	Total	$	1,379.8	$	1,552.1	(11	%)

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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 strategy composites against benchmarks. More than half of our total mutual fund AUM exceeded the peer group median comparison for the 1-, 5- and 10-year periods and more than half of our total strategy composite AUM exceeded the benchmark for the 3-, 5- and 10-year periods.

The performance of our mutual fund products against peer group medians and of our 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 Strategy Composite AUM Exceeding Benchmark
as of March 31, 2022		1-Year		3-Year		5-Year		10-Year		1-Year		3-Year		5-Year		10-Year
as of June 30, 2022																		as of June 30, 2022	1-Year		3-Year		5-Year		10-Year		1-Year		3-Year		5-Year		10-Year
Fixed Income	Fixed Income	38	%	41	%	60	%	65	%	42	%	88	%	90	%	95	%	Fixed Income	38	%	38	%	32	%	68	%	18	%	48	%	84	%	95	%
Equity	Equity	48	%	28	%	54	%	49	%	25	%	32	%	37	%	51	%	Equity	46	%	27	%	55	%	50	%	41	%	34	%	42	%	40	%
Total AUM3	Total AUM3	52	%	43	%	61	%	63	%	39	%	65	%	68	%	77	%	Total AUM3	52	%	42	%	54	%	50	%	35	%	49	%	69	%	73	%

__________________

1Mutual fund performance is sourced from Morningstar and measures the percent of ranked AUM in the top two quartiles versus peers. Total mutual fund AUM measured for the 1-, 3-, 5- and 10-year periods represents ~~41%~~37%, ~~41%~~37%, ~~40%~~37% and ~~38%~~35% of our total AUM as of ~~March 31,~~June 30, 2022.

2Strategy composite performance measures the percent of composite AUM beating its benchmark. The benchmark comparisons are based on each account’s/composite’s (strategy composites may include retail separately managed accounts and mutual fund assets managed as part of the same strategy) return as compared to a market index that has been selected to be generally consistent with the asset class of the account/composite. Total strategy composite AUM measured for the 1-, 3-, 5- and 10-year periods represents ~~68%~~65%, ~~68%~~64%, ~~67%~~64% and ~~63%~~59% of our total AUM as of ~~March 31,~~June 30, 2022.

3Total mutual fund AUM includes performance of our alternative and multi-asset funds, and total strategy composite AUM includes performance of our alternative composites. Alternative and multi-asset AUM represent ~~11%~~16% and 10% of our total AUM at ~~March 31,~~June 30, 2022.

Mutual fund performance data includes U.S. and cross-border domiciled mutual funds and exchange-traded funds, and excludes cash management and fund of funds. These results assume the reinvestment of dividends, are based on data available as of ~~April 8,~~July 10, 2022, and are subject to revision.

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

OPERATING REVENUES

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


(in millions)	(in millions)	Three Months Ended March 31,				Percent Change				Six Months Ended March 31,								Percent Change		(in millions)			Three Months Ended June 30,								Percent Change				Nine Months Ended June 30,								Percent Change
		2022		2021				2022				2021									2022				2021								2022				2021
Investment management fees	Investment management fees	$	1,649.2	$	1,598.4			3	%			$	3,409.7			$	3,138.8			9	%	Investment management fees			$	1,636.1			$	1,697.3			(4	%)			$	5,045.8			$	4,836.1			4	%
Sales and distribution fees	Sales and distribution fees	370.2		413.6		(10	%)			768.4				810.5				(5	%)	Sales and distribution fees			335.6				416.9				(20	%)			1,104.0				1,227.4				(10	%)
Shareholder servicing fees	Shareholder servicing fees	52.2		55.7		(6	%)			99.9				105.1				(5	%)	Shareholder servicing fees			46.9				50.5				(7	%)			146.8				155.6				(6	%)
Other	Other	9.4		8.8		7	%			27.0				17.2				57	%	Other			12.7				8.2				55	%			39.7				25.4				56	%
Total Operating Revenues	Total Operating Revenues	$	2,081.0	$	2,076.5	0	%			$	4,305.0			$	4,071.6			6	%	Total Operating Revenues			$	2,031.3			$	2,172.9			(7	%)			$	6,336.3			$	6,244.5			1	%

Table of Contents

Investment Management Fees

Investment management fees ~~increased $50.8 million and $270.9~~decreased $61.2 million for the three ~~and six~~ months ended ~~March 31,~~June 30, 2022 primarily due to a 6% decrease in average AUM, partially offset by higher performance fees. The decrease in average AUM occurred primarily in the fixed income and equity asset classes, partially offset by an increase in the alternative asset class that includes the acquisition of Lexington.

Investment management fees increased $209.7 million for the nine months ended June 30, 2022 primarily due to higher performance fees and ~~for the six-month period,~~ a 4%1% increase in average AUM. The increase in average AUM occurred primarily in the ~~equity,~~ alternative and ~~multi-asset~~equity asset classes, partially offset by decreases in the fixed income asset class.

Our effective investment management fee rate excluding performance fees (annualized investment management fees excluding performance fees divided by average AUM) ~~were 41.3~~increased to 42.3 and ~~41.5~~41.8 basis points for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022, ~~and 42.1~~from 41.8 and 41.7 basis points for the same periods in the prior fiscal year. The ~~decreases~~increases were primarily due to the acquisition of Lexington, partially offset by a shift in assets from higher-fee ~~international sales regions~~products to lower-fee products in the ~~lower-fee U.S. sales region.~~fixed income and equity asset classes.

~~Performance-based investment management~~Performance fees were ~~$105.1~~$119.3 million and ~~$245.0~~$364.3 million for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022, and ~~$45.3~~$102.6 million and ~~$87.1~~$189.7 million for the same periods in the prior fiscal year, with the increase due to strong performance by our alternative specialist investment ~~managers reflecting strong markets.~~managers.

Sales and Distribution Fees

Sales and distribution fees by revenue driver are presented below.


(in millions)	(in millions)	Three Months Ended March 31,				Percent Change				Six Months Ended March 31,								Percent Change		(in millions)			Three Months Ended June 30,								Percent Change				Nine Months Ended June 30,								Percent Change
		2022		2021				2022				2021									2022				2021								2022				2021
Asset-based fees	Asset-based fees	$	296.1	$	322.2			(8	%)			$	618.0			$	639.2			(3	%)	Asset-based fees			$	272.5			$	332.0			(18	%)			$	890.5			$	971.2			(8	%)
Sales-based fees	Sales-based fees	70.6		86.4		(18	%)			143.2				160.0				(11	%)	Sales-based fees			59.4				80.9				(27	%)			202.6				240.9				(16	%)
Contingent sales charges	Contingent sales charges	3.5		5.0		(30	%)			7.2				11.3				(36	%)	Contingent sales charges			3.7				4.0				(8	%)			10.9				15.3				(29	%)
Sales and Distribution Fees	Sales and Distribution Fees	$	370.2	$	413.6	(10	%)			$	768.4			$	810.5			(5	%)	Sales and Distribution Fees			$	335.6			$	416.9			(20	%)			$	1,104.0			$	1,227.4			(10	%)

Asset-based distribution fees decreased ~~$26.1~~$59.5 million and ~~$21.2~~$80.7 million for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022 primarily due to ~~$13.4~~$44.9 million and ~~$24.9~~$41.2 million from decreases of 15% and 5% in the related average AUM, and $9.4 million and $30.4 million from a higher mix of lower-fee ~~assets and for the three-month period $9.8 million from a 3% decrease in the related average AUM.~~assets.

Sales-based fees decreased ~~$15.8~~$21.5 million and ~~$16.8~~$38.3 million for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022 primarily due to ~~$16.7~~$22.6 million and ~~$19.8~~$42.3 million from lower commissionable sales, partially offset by ~~$3.0~~$1.2 million and $4.2 million from a higher mix of equity sales, ~~for the six-month period,~~ which typically generate higher sales fees than fixed income products.

Other

Other revenue increased ~~$9.8~~$4.5 million and $14.3 million for the ~~six~~three and nine months ended ~~March 31,~~June 30, 2022 primarily due to an increase in real estate transaction fees earned by certain of our alternative asset managers.

Table of Contents

OPERATING EXPENSES

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


		Three Months Ended March 31,				Percent Change				Six Months Ended March 31,								Percent Change					Three Months Ended June 30,							Percent Change			Nine Months Ended June 30,					Percent Change
(in millions)	(in millions)	2022		2021				2022				2021				(in millions)				2022				2021				2022					2021
Compensation and benefits	Compensation and benefits	$	752.5	$	732.3			3	%			$	1,555.1			$	1,457.8				7	%	Compensation and benefits		$	766.7			$		771.4		(1		%)	$	2,321.8	$	2,229.2		4	%
Sales, distribution and marketing	Sales, distribution and marketing	482.4		541.8		(11	%)			992.5				1,048.3				(5	%)	Sales, distribution and marketing			440.3			531.0				(17		%)	1,432.8			1,579.3		(9		%)
Information systems and technology	Information systems and technology	126.9		117.5		8	%			250.7				234.0				7	%	Information systems and technology			125.9			121.8				3		%	376.6			355.8		6		%
Occupancy	Occupancy	53.0		53.8		(1	%)			109.3				109.5				0	%	Occupancy			53.8			54.6				(1		%)	163.1			164.1		(1		%)
Amortization of intangible assets	Amortization of intangible assets	60.4		57.9		4	%			118.7				116.1				2	%	Amortization of intangible assets			81.8			58.0				41		%	200.5			174.1		15		%
General, administrative and other	General, administrative and other	142.8		116.9		22	%			258.0				240.5				7	%	General, administrative and other			158.1			158.0				0		%	416.1			398.5		4		%
Total Operating Expenses	Total Operating Expenses	$	1,618.0	$	1,620.2	0	%			$	3,284.3			$	3,206.2			2	%	Total Operating Expenses			$	1,626.6		$	1,694.8			(4		%)	$	4,910.9		$	4,901.0	0		%

~~Table of Contents~~

Compensation and Benefits

The components of compensation and benefits expenses are presented below.


		Three Months Ended March 31,				Percent Change				Six Months Ended March 31,								Percent Change					Three Months Ended June 30,							Percent Change			Nine Months Ended June 30,					Percent Change
(in millions)	(in millions)	2022		2021				2022				2021				(in millions)				2022				2021				2022					2021
Salaries, wages and benefits	Salaries, wages and benefits	$	358.2	$	361.3			(1	%)			$	703.9			$	719.0				(2	%)	Salaries, wages and benefits		$	366.5			$		366.7		0		%	$	1,078.9	$	1,091.1		(1	%)
Incentive compensation	Incentive compensation	355.7		313.9		13	%			769.9				630.8				22	%	Incentive compensation			364.3			352.1				3		%	1,136.8			963.2		18		%
Acquisition-related retention	Acquisition-related retention	34.2		46.6		(27	%)			74.2				90.1				(18	%)	Acquisition-related retention			44.2			39.1				13		%	118.4			129.2		(8		%)
Special termination benefits		4.4		10.5		(58	%)			7.1				17.9				(60	%)
Other1																				Other1			(8.3)			13.5				NM			(12.3)			45.7		NM
Compensation and Benefits Expenses	Compensation and Benefits Expenses	$	752.5	$	732.3	3	%			$	1,555.1			$	1,457.8			7	%	Compensation and Benefits Expenses			$	766.7		$	771.4			(1		%)	$	2,321.8		$	2,229.2	4		%

_______________

1Includes impact of gains and losses on investments related to deferred compensation plans and seed investments, which is offset in investment and other income (losses), net, minority interests in certain subsidiaries, which is offset in net income (loss) attributable to redeemable noncontrolling interests and special termination benefits.

Salaries, wages and benefits remained flat for the three months ended June 30, 2022 and decreased ~~$15.1~~$12.2 million for the ~~six~~nine months ended ~~March 31,~~June 30, 2022, as the impact of headcount reductions associated with strategic initiatives and a $15.5 million decrease in termination benefits for the nine-month period, were substantially offset by salaries, wages and benefits expense due to the acquisitions of Lexington and OSAM.

Incentive compensation increased $12.2 million for the three months ended June 30, 2022 primarily due to an increase of approximately $50.0 million at alternative specialist investment managers, including the acquisition of Lexington, partially offset by lower incentive compensation at other specialist investment managers and declines in our sales-based and discretionary incentive expense. Incentive compensation increased $173.6 million for the nine months ended June 30, 2022 primarily due to a ~~decrease of $14.0~~$142.0 million ~~related to lower termination benefits in the current year.~~

~~Incentive compensation increased $41.8 million and $139.1 million for the three and six months ended March 31, 2022 primarily due to increases of $33.3 million and $83.4 million~~increase related to higher ~~bonuses~~incentive compensation at the specialist investment managers, ~~due to~~driven by higher ~~revenue, $8.3 million~~performance fees and ~~$28.5~~the acquisition of Lexington, and an increase of $39.1 million in stock and stock unit award ~~amortization and $15.3 million related to bonus expense primarily due to stronger performance in the six-month period.~~amortization.

Acquisition-related retention expenses ~~decreased $12.4~~increased $5.1 million for the three months ended June 30, 2022, primarily due to the acquisition of Lexington.

Other compensation and benefits was $(8.3) million and ~~$15.9~~$13.5 million for the three months ended June 30, 2022 and 2021, and $(12.3) million and $45.7 million for the nine months ended June 30, 2022 and 2021. The changes for both periods were primarily related to market adjustments on investments related to our deferred compensation plans and compensation related to minority interests. Special termination benefits also decreased $3.2 million and $14.0 million for the three and ~~six~~nine months ended ~~March 31, 2022.~~

~~Special termination benefits decreased $6.1 million and $10.8 million for the three and six months~~ ended ~~March 31,~~June 30, 2022 primarily due to workforce optimization initiatives related to the acquisition of Legg Mason, Inc. (“Legg Mason”) in the prior year periods.

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We expect to incur additional acquisition-related retention expenses of approximately ~~$130~~$60 million during the remainder of the current fiscal year, and annual amounts beginning at approximately ~~$240~~$230 million in the fiscal year ending September 30, 2023 and decreasing over the following two fiscal years by approximately $30 million and $70 million. At ~~March 31,~~June 30, 2022, our global workforce had decreased to approximately ~~9,500~~9,800 employees from approximately ~~11,100~~10,600 at ~~March 31,~~June 30, 2021.

Sales, Distribution and Marketing

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


		Three Months Ended March 31,				Percent Change				Six Months Ended March 31,								Percent Change					Three Months Ended June 30,							Percent Change			Nine Months Ended June 30,					Percent Change
(in millions)	(in millions)	2022		2021				2022				2021				(in millions)				2022				2021				2022					2021
Asset-based expenses	Asset-based expenses	$	396.2	$	437.3			(9	%)			$	815.8			$	851.6				(4	%)	Asset-based expenses		$	367.0			$		430.7		(15		%)	$	1,182.8	$	1,282.3		(8	%)
Sales-based expenses	Sales-based expenses	69.6		85.1		(18	%)			141.7				158.3				(10	%)	Sales-based expenses			58.7			79.9				(27		%)	200.4			238.2		(16		%)
Amortization of deferred sales commissions	Amortization of deferred sales commissions	16.6		19.4		(14	%)			35.0				38.4				(9	%)	Amortization of deferred sales commissions			14.6			20.4				(28		%)	49.6			58.8		(16		%)
Sales, Distribution and Marketing	Sales, Distribution and Marketing	$	482.4	$	541.8	(11	%)			$	992.5			$	1,048.3			(5	%)	Sales, Distribution and Marketing			$	440.3		$	531.0			(17		%)	$	1,432.8		$	1,579.3	(9		%)

Asset-based expenses decreased ~~$41.1~~$63.7 million and ~~$35.8~~$99.5 million for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022 primarily due to ~~$11.9~~$42.0 million and ~~$18.2~~$33.0 million from decreases of 12% and 3% in related average AUM, and $23.7 million and $48.1 million from a higher mix of lower-fee ~~assets and, for the three-month period, $15.4 million from a 4% decrease in related average AUM.~~assets. Distribution expenses are generally not directly correlated with distribution fee revenues due to certain fee structures that do not provide full recovery of distribution costs.

Sales-based expenses decreased ~~$15.5~~$21.2 million and ~~$16.6~~$37.8 million for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022 substantially all due to lower commissionable sales.

Information Systems and Technology

Information systems and technology expenses increased ~~$9.4~~$4.1 million and ~~$16.7~~$20.8 million for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022, primarily due to higher costs incurred for consulting and software.

Amortization of intangible assets

~~Table~~

Amortization of ~~Contents~~intangible assets increased $23.8 million and $26.4 million for the three and nine months ended June 30, 2022, primarily related to intangible assets recognized as part of the acquisition of Lexington.

General, Administrative and Other

General, administrative and other operating expenses increased ~~$25.9~~$0.1 million and ~~$17.5~~$17.6 million for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022, primarily due increases of $14.1 million and $7.8 million in professional fees, largely related to acquisition-related costs, as well as increases of $10.0 million and $24.3 million in advertising and promotion expenses primarily related to our global brand campaign and $12.2 million and $23.6 million in travel and entertainment expenses. The nine months ended June 30, 2022, also included $15.7 million inof non-recurring costs incurred in connection with the outsourcing of our global transfer agent ~~functions, as well as~~functions. The increases for both the three- and nine-month periods were partially offset by $43.0 million of ~~$11.4 million~~closed-end fund product launch costs incurred in the prior year and ~~$14.3 million in advertising and promotion expenses, largely related to our global brand campaign,~~the increase for the nine-month period was also partially offset ~~in part~~ by a ~~$10.3~~net $7.7 million credit ~~adjustment~~ to ~~increase~~adjust the fair value of aour contingent consideration ~~asset.~~asset and liabilities recognized in the current year.

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OTHER INCOME (EXPENSES)

Other income (expenses) consisted of the following:


		Three Months Ended March 31,				Percent Change				Six Months Ended March 31,								Percent Change					Three Months Ended June 30,							Percent Change			Nine Months Ended June 30,					Percent Change
(in millions)	(in millions)	2022		2021				2022				2021				(in millions)				2022				2021				2022					2021
Investment and other income, net	Investment and other income, net	$	27.7	$	67.1			(59	%)			$	84.7			$	144.3				(41	%)	Investment and other income, net		$	13.0			$		52.9		(75		%)	$	97.7	$	197.2		(50	%)
Interest expense	Interest expense	(22.9)		(15.9)		44	%			(42.2)				(45.6)				(7	%)	Interest expense			(28.9)			(25.7)				12		%	(71.1)			(71.3)		0		%
Investment and other income of consolidated investment products, net		3.0		111.2		(97	%)			107.7				202.3				(47	%)
Investment and other income (losses) of consolidated investment products, net																				Investment and other income (losses) of consolidated investment products, net			(74.4)			61.0				NM			33.3			263.3		(87		%)
Expenses of consolidated investment products	Expenses of consolidated investment products	(4.6)		(5.2)		(12	%)			(8.8)				(15.6)				(44	%)	Expenses of consolidated investment products			(1.3)			(10.9)				(88		%)	(10.1)			(26.5)		(62		%)
Other Income, Net		$	3.2	$	157.2	(98	%)			$	141.4			$	285.4			(50	%)
Other Income (Expenses), Net																				Other Income (Expenses), Net			$	(91.6)		$	77.3			NM			$	49.8		$	362.7	(86		%)

Investment and other income, net decreased ~~$39.4~~$39.9 million and ~~$59.6~~$99.5 million for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022 primarily due to the impact of ~~declines in~~ market ~~valuations amid global market volatility~~declines in the current year periods.

~~Income from equity~~Equity method investees ~~decreased $18.9 million and $32.7~~generated net losses of $0.1 million for the three ~~and six~~ months ended ~~March 31,~~June 30, 2022, ~~primarily due to losses in the three-month period,~~ as compared to ~~gains~~income of $39.4 million in the prior year, and ~~lower~~for the nine-month periods generated income ~~in the six-month period,~~of $51.6 million and $123.8 million, largely related to various global equity and alternative funds. The ~~decrease~~nine-month period in ~~both periods was partially offset by~~the current year also reflects a $52.6 million gain recognized on the sale of our investment in ~~Embark in the current year.~~Embark.

Investments held by the Company generated net losses of ~~$23.1~~$35.6 million and $32.9 million for the ~~three-month period~~three and nine months ended June 30, 2022, as compared to net gains of ~~$10.2~~$17.3 million and $76.2 million in the prior year ~~and for the six-month period generated net gains of $2.7 million as compared to net gains of $58.9 million in the prior year,~~periods, primarily from investments in nonconsolidated funds and separate accounts and assets invested for deferred compensation plans, ~~separate accounts and nonconsolidated funds,~~ partially offset ~~in the six-month period~~ by net gains from investments measured at cost adjusted for observable price changes.

Net foreign currency exchange gains were ~~$9.7~~$14.5 million and $24.2 million for the ~~six~~three and nine months ended ~~March 31,~~June 30, 2022, as compared to net losses of ~~$10.0~~$7.2 million and $17.2 million for the ~~six~~three and nine months ended ~~March 31,~~June 30, 2021. The ~~increase was~~increases were primarily due to the impact of the strengthening of the U.S. dollar against the Euro ~~on cash~~ and ~~cash equivalents denominated in U.S. dollars held in Europe.~~British Pound.

Derivatives generated ~~$6.7~~$17.5 million and $15.2 million of gains ~~and $2.3 million of losses~~ for the ~~three-~~three and ~~six-month periods~~nine months ended ~~March 31,~~June 30, 2022 as compared to losses of ~~$6.1~~$9.1 million and ~~$16.1~~$25.2 million in the prior year ~~three- and six-month~~ periods.

Interest expense increased ~~$7.0~~$3.2 million for the three months ended ~~March 31,~~June 30, 2022 and decreased ~~$3.4~~$0.2 million for the ~~six~~nine months ended ~~March 31,~~June 30, 2022. The increase for the three-month period was primarily due to ~~$3.0~~$6.1 million of accretion on the Lexington deferred consideration and $3.1 million of interest expense recognized on the senior unsecured unsubordinated notes issued in August 2021, ~~and~~offset in part by a ~~$3.0~~$6.8 million ~~increase in interest recognized on tax reserves in the current year period. The~~ decrease ~~for the six-month period was primarily~~ due to the ~~redemptions~~redemption in ~~fiscal year~~September 2021 of the junior notes issued by Legg ~~Mason, partially offset~~Mason.

Investments held by ~~interest expense recognized on the senior unsecured unsubordinated notes issued in August 2021.~~

~~Investment and other income of~~ consolidated investment products ~~net, decreased $108.2~~(“CIPs”) generated losses of $78.5 million and ~~$94.6~~$4.0 million ~~for~~in the three and ~~six~~nine months ended ~~March 31, 2022. Investments held by CIPs generated losses of $14.2 million in the three-month period,~~June 30, 2022, as compared to gains of ~~$88.7~~$33.2 million and $182.8 million in the prior year ~~period, and for the six-month period generated gains of $74.5 million, as compared to gains of $149.6 million in the prior year period,~~periods, largely related to losses on holdings of various equity, fixed income and alternative funds for the three month-period, and losses on holdings of various equity and fixed income funds, partially offset by higher gains on holdings of various alternative ~~funds. The three-month period included $17.2 million of dividend~~funds for the nine-month period. Dividend and interest income of CIPs was $4.1 million and $37.3 million for the three and nine months ended June 30, 2022, as compared to ~~$22.5~~$27.8 million and $80.5 million in the prior year ~~period, and the six-month period included $33.2 million, as compared to $52.7 million in the prior year period.~~

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periods.

Expenses of consolidated investments products decreased ~~$6.8~~$9.6 million and $16.4 million for the ~~six~~three- and nine- months ended ~~March 31,~~June 30, 2022, primarily due to lower expenses incurred by an alternative fund.

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Our cash, cash equivalents and investments portfolio by asset class and accounting classification at ~~March 31,~~June 30, 2022, excluding third-party assets of CIPs, was as follows:


		Accounting Classification1										Total Direct Portfolio			Accounting Classification1										Total
(in millions)	(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	Cash and Cash Equivalents	$	4,411.6	$	—	$	—	$	—	$	—	$	4,411.6	Cash and Cash Equivalents	$	3,806.3	$	—	$	—	$	—	$	—	$	3,806.3
Investments	Investments													Investments
Alternative	Alternative	—		94.7		346.3		61.9		457.9		960.8		Alternative	—		99.0		517.9		65.7		478.0		1,160.6
Equity	Equity	—		227.8		208.9		116.9		199.6		753.2		Equity	—		315.3		191.0		150.0		139.1		795.4
Fixed Income	Fixed Income	—		226.7		24.1		37.3		280.6		568.7		Fixed Income	—		206.2		22.0		37.5		269.5		535.2
Multi-Asset	Multi-Asset	—		40.1		13.7		—		84.6		138.4		Multi-Asset	—		40.3		13.6		—		75.0		128.9
Total investments	Total investments	—		589.3		593.0		216.1		1,022.7		2,421.1		Total investments	—		660.8		744.5		253.2		961.6		2,620.1
Total Cash and Cash Equivalents and Investments2		$	4,411.6	$	589.3	$	593.0	$	216.1	$	1,022.7	$	6,832.7
Total Cash and Cash Equivalents and Investments2, 3														Total Cash and Cash Equivalents and Investments2, 3	$	3,806.3	$	660.8	$	744.5	$	253.2	$	961.6	$	6,426.4

______________

1See Note 1 – Significant Accounting Policies in the notes to consolidated financial statements in Item 8 of Part II of our Annual Report on Form 10-K for fiscal year 2021 for information on investment accounting classifications.

2Total cash and cash equivalents and investments includes ~~$3,321.0~~$3,620.8 million used for operational activities, including investments in sponsored funds and other products, and ~~$253.6~~$229.7 million necessary to comply with regulatory requirements.

3Total cash and cash equivalents and investments includes $308.7 million attributable to employee-owned and other third-party investments made through partnerships which are offset in nonredeemable noncontrolling interests.

TAXES ON INCOME

Our effective income tax rate was ~~23.0%~~28.6% and ~~22.2%~~23.6% for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022, as compared to ~~20.9%~~15.1% and ~~23.5%~~20.8% for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2021. The rate increase for three-month period was primarily due to ~~a decrease~~net losses on investments held by CIPs for which there are no related tax benefits, benefits in ~~net income attributable to noncontrolling interests~~the prior year from the release of the valuation allowance for interest expense carryforward and a decrease in foreign earnings. The rate ~~decrease~~increase for the ~~six-month~~nine-month period was primarily due to ~~tax benefits from stock-based compensation and the release of tax reserves due to statute of limitation expiration partially offset by~~ a decrease in ~~net income from noncontrolling interests.~~foreign earnings.

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

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES

As supplemental information, we are providing performance measures for “adjusted operating income,” “adjusted operating margin,” “adjusted net income” and “adjusted diluted earnings per share,” each of which is based on methodologies other than generally accepted accounting principles (“non-GAAP measures”). Management believes these non-GAAP measures are useful indicators of our financial performance and may be helpful to investors in evaluating our relative performance against industry peers as these measures exclude the impact of CIPs and mitigate the margin variability related to sales and distribution revenues and expenses across multiple distribution channels globally. These measures also exclude performance-based investment management fees which are fully passed through as compensation and benefits expense per the terms of ~~a previous acquisition by Legg Mason~~certain acquisitions and have no impact on net income. These ~~non-GAAP~~ measures also exclude acquisition-related expenses, certain items which management considers to be nonrecurring, unrealized investment gains and losses included in investment and other income (losses), net, and the related income tax effect of these adjustments, as applicable. These ~~non-GAAP~~ measures also exclude the impact on compensation and benefits expense from ~~gains and losses on investments made to fund deferred compensation plans and on seed investments under certain historical revenue sharing~~ arrangements which isare offset in investment and other income ~~(losses)~~(loss), ~~net.~~net or net income (loss) attributable to noncontrolling interests.

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

Adjusted Operating Income

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

•Elimination of operating revenues upon consolidation of investment products.

•Acquisition-related retention compensation.

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

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

•Amortization and impairment of intangible assets, if any.

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

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

Adjusted Operating Margin

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

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

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

•Elimination of operating revenues upon consolidation of investment products.

Adjusted Net Income

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

•Activities of CIPs, including investment and other income (losses), net, and income (loss) attributable to noncontrolling interests, net of revenues eliminated upon consolidation of investment products.

•Acquisition-related retention compensation.

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

•Amortization and impairment of intangible assets, if any.

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

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

•Unrealized investment gains and losses other than those that are offset by compensation and benefits expense.

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

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

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

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Adjusted Diluted Earnings Per Share

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

In calculating adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted earnings per share, we adjust for activities of CIPs because the impact of consolidated products is not considered reflective of the underlying results of our operations. We adjust for acquisition-related retention compensation, other acquisition-related expenses, amortization and impairment of intangible assets, if any, and interest expense for amortization of the Legg Mason debt premium to facilitate comparability of our operating results with the results of other asset management firms. We adjust for special termination benefits related to workforce optimization initiatives related to past acquisitions and specific initiatives announced by the Company because these items are deemed nonrecurring. In calculating adjusted net income and adjusted diluted earnings per share, we adjust for unrealized investment gains and losses included in investment and other income (losses), net, net compensation and benefits expense related to minority interests in certain subsidiaries not offset by net income

(loss) attributable to redeemable noncontrolling interests because these items relate to profits interest shares and net gains or losses on investments related to deferred compensation plans which are not offset by compensation and benefits expense because these items primarily relate to seed and strategic investments which have been and are generally expected to be held long term.

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


(in millions)	(in millions)	Three Months Ended March 31,				Six Months Ended March 31,				(in millions)	Three Months Ended June 30,				Nine Months Ended June 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Operating income	Operating income	$	463.0	$	456.3	$	1,020.7	$	865.4	Operating income	$	404.7	$	478.1	$	1,425.4	$	1,343.5
Add (subtract):	Add (subtract):									Add (subtract):
Elimination of operating revenues upon consolidation of investment products1	Elimination of operating revenues upon consolidation of investment products1	17.2		5.8		25.5		11.5		Elimination of operating revenues upon consolidation of investment products1	13.0		5.2		38.5		16.7
Acquisition-related retention	Acquisition-related retention	34.2		46.6		74.2		90.1		Acquisition-related retention	44.2		39.1		118.4		129.2
Compensation and benefits expense from gains (losses) on deferred compensation and seed investments, net	Compensation and benefits expense from gains (losses) on deferred compensation and seed investments, net	(15.3)		0.2		(11.1)		14.3		Compensation and benefits expense from gains (losses) on deferred compensation and seed investments, net	(19.3)		9.6		(30.4)		23.9
Other acquisition-related expenses	Other acquisition-related expenses	12.7		3.8		27.4		15.7		Other acquisition-related expenses	31.5		7.3		58.9		23.0
Amortization of intangible assets	Amortization of intangible assets	60.4		57.9		118.7		116.1		Amortization of intangible assets	81.8		58.0		200.5		174.1
Special termination benefits	Special termination benefits	4.4		10.5		7.1		17.9		Special termination benefits	0.7		3.9		7.8		21.8
Compensation and benefits expense related to minority interests in certain subsidiaries										Compensation and benefits expense related to minority interests in certain subsidiaries	10.3		—		10.3		—
Adjusted operating income	Adjusted operating income	$	576.6	$	581.1	$	1,262.5	$	1,131.0	Adjusted operating income	$	566.9	$	601.2	$	1,829.4	$	1,732.2

Total operating revenues	Total operating revenues	$	2,081.0	$	2,076.5	$	4,305.0	$	4,071.6	Total operating revenues	$	2,031.3	$	2,172.9	$	6,336.3	$	6,244.5
Add (subtract):	Add (subtract):									Add (subtract):
Acquisition-related pass through performance fees	Acquisition-related pass through performance fees	—		(9.3)		(0.4)		(25.3)		Acquisition-related pass through performance fees	—		—		(0.4)		(25.3)
Sales and distribution fees	Sales and distribution fees	(370.2)		(413.6)		(768.4)		(810.5)		Sales and distribution fees	(335.6)		(416.9)		(1,104.0)		(1,227.4)
Allocation of investment management fees for sales, distribution and marketing expenses	Allocation of investment management fees for sales, distribution and marketing expenses	(112.2)		(128.2)		(224.1)		(237.8)		Allocation of investment management fees for sales, distribution and marketing expenses	(104.7)		(114.1)		(328.8)		(351.9)
Elimination of operating revenues upon consolidation of investment products1	Elimination of operating revenues upon consolidation of investment products1	17.2		5.8		25.5		11.5		Elimination of operating revenues upon consolidation of investment products1	13.0		5.2		38.5		16.7
Adjusted operating revenues	Adjusted operating revenues	$	1,615.8	$	1,531.2	$	3,337.6	$	3,009.5	Adjusted operating revenues	$	1,604.0	$	1,647.1	$	4,941.6	$	4,656.6

Operating margin	Operating margin	22.2%		22.0%		23.7%		21.3%		Operating margin	19.9%		22.0%		22.5%		21.5%
Adjusted operating margin	Adjusted operating margin	35.7%		38.0%		37.8%		37.6%		Adjusted operating margin	35.3%		36.5%		37.0%		37.2%

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(in millions, except per share data)	(in millions, except per share data)	Three Months Ended March 31,				Six Months Ended March 31,				(in millions, except per share data)	Three Months Ended June 30,				Nine Months Ended June 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Net income attributable to Franklin Resources, Inc.	Net income attributable to Franklin Resources, Inc.	$	349.6	$	381.8	$	802.8	$	727.1	Net income attributable to Franklin Resources, Inc.	$	256.4	$	438.4	$	1,059.2	$	1,165.5
Add (subtract):	Add (subtract):									Add (subtract):
Net (income) loss of consolidated investment products1	Net (income) loss of consolidated investment products1	0.1		(6.3)		10.1		14.9		Net (income) loss of consolidated investment products1	(6.8)		(0.6)		3.3		14.3
Acquisition-related retention	Acquisition-related retention	34.2		46.6		74.2		90.1		Acquisition-related retention	44.2		39.1		118.4		129.2
Other acquisition-related expenses	Other acquisition-related expenses	12.7		3.7		27.8		13.8		Other acquisition-related expenses	37.6		7.2		65.4		21.0
Amortization of intangible assets	Amortization of intangible assets	60.4		57.9		118.7		116.1		Amortization of intangible assets	81.8		58.0		200.5		174.1

Special termination benefits	Special termination benefits	4.4		10.5		7.1		17.9		Special termination benefits	0.7		3.9		7.8		21.8
Net (gains) losses on deferred compensation plan investments not offset by compensation and benefits expense	Net (gains) losses on deferred compensation plan investments not offset by compensation and benefits expense	2.8		(0.2)		2.5		(1.4)		Net (gains) losses on deferred compensation plan investments not offset by compensation and benefits expense	6.1		(0.9)		8.6		(2.3)
Unrealized investment losses (gains)	Unrealized investment losses (gains)	70.3		(60.6)		72.1		(156.5)		Unrealized investment losses (gains)	45.7		(30.1)		117.8		(186.6)
Interest expense for amortization of debt premium	Interest expense for amortization of debt premium	(6.3)		(16.9)		(12.6)		(22.9)		Interest expense for amortization of debt premium	(6.3)		(6.4)		(18.9)		(29.3)
Net compensation and benefits expense related to minority interests in certain subsidiaries not offset by net income (loss) attributable to redeemable noncontrolling interests										Net compensation and benefits expense related to minority interests in certain subsidiaries not offset by net income (loss) attributable to redeemable noncontrolling interests	0.5		—		0.5		—
Net income tax expense of adjustments	Net income tax expense of adjustments	(36.6)		(13.0)		(57.5)		(22.2)		Net income tax expense of adjustments	(43.9)		(14.9)		(101.4)		(37.1)
Adjusted net income	Adjusted net income	$	491.6	$	403.5	$	1,045.2	$	776.9	Adjusted net income	$	416.0	$	493.7	$	1,461.2	$	1,270.6

Diluted earnings per share	Diluted earnings per share	$	0.68	$	0.74	$	1.57	$	1.42	Diluted earnings per share	$	0.50	$	0.86	$	2.07	$	2.27
Adjusted diluted earnings per share	Adjusted diluted earnings per share	0.96		0.79		2.04		1.51		Adjusted diluted earnings per share	0.82		0.96		2.86		2.48

__________________

1The impact of CIPs is summarized as follows:


(in millions)	(in millions)	Three Months Ended March 31,				Six Months Ended March 31,				(in millions)	Three Months Ended June 30,				Nine Months Ended June 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Elimination of operating revenues upon consolidation	Elimination of operating revenues upon consolidation	$	(17.2)	$	(5.8)	$	(25.5)	$	(11.5)	Elimination of operating revenues upon consolidation	$	(13.0)	$	(5.2)	$	(38.5)	$	(16.7)
Other income, net		9.9		95.6		82.4		115.9
Other income (expenses), net										Other income (expenses), net	(33.6)		13.1		48.8		129.0
Less: income (loss) attributable to noncontrolling interests	Less: income (loss) attributable to noncontrolling interests	(7.2)		83.5		67.0		119.3		Less: income (loss) attributable to noncontrolling interests	(53.4)		7.3		13.6		126.6
Net income (loss)	Net income (loss)	$	(0.1)	$	6.3	$	(10.1)	$	(14.9)	Net income (loss)	$	6.8	$	0.6	$	(3.3)	$	(14.3)

LIQUIDITY AND CAPITAL RESOURCES

Cash flows were as follows:


		Six Months Ended March 31,					Nine Months Ended June 30,
(in millions)	(in millions)	2022		2021		(in millions)	2022		2021
Operating cash flows	Operating cash flows	$	270.5	$	546.3	Operating cash flows	$	1,090.3	$	739.3
Investing cash flows	Investing cash flows	(1,151.3)		(1,277.9)		Investing cash flows	(2,679.9)		(1,936.0)
Financing cash flows	Financing cash flows	1,275.9		1,330.8		Financing cash flows	1,489.2		1,542.9

Net cash provided by operating activities ~~decreased~~increased during the ~~six~~nine months ended ~~March 31,~~June 30, 2022 primarily due to ~~payments of~~adjustments for losses from CIPs as compared to gains in the prior year, increases in acquisition-related accrued compensation and benefits, lower net purchases of investments by CIPs and ~~decreases in accounts payable, accrued expenses and other liabilities~~net losses on investments as compared to ~~increases~~net gains in the prior ~~year.~~year, partially offset by lower net income. Net cash used in investing activities ~~decreased~~increased primarily due to cash paid for acquisitions in the current year, partially offset by net liquidations of our investments as compared to net purchases in the prior ~~year, partially offset by cash paid for acquisitions in the current~~ year. Net cash provided by financing activities decreased primarily due to proceeds from the issuance of debt in the prior year, partially offset by higher net proceeds from the debt of ~~CIPs, a prior-year debt payment and higher net subscriptions in CIPs by noncontrolling interests.~~CIPs.

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

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Our liquid assets and debt consisted of the following:


(in millions)	(in millions)	March 31, 2022		September 30, 2021		(in millions)	June 30, 2022		September 30, 2021
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	4,303.7	$	4,357.8	Cash and cash equivalents	$	3,697.5	$	4,357.8
Receivables	Receivables	1,240.1		1,300.4		Receivables	1,236.0		1,300.4
Investments	Investments	809.6		1,042.2		Investments	859.5		1,042.2
Total Liquid Assets	Total Liquid Assets	$	6,353.4	$	6,700.4	Total Liquid Assets	$	5,793.0	$	6,700.4

Liability	Liability					Liability
Debt	Debt	$	3,388.0	$	3,399.4	Debt	$	3,382.2	$	3,399.4

Liquidity

Liquid assets consist of cash and cash equivalents, receivables and certain investments. Cash and cash equivalents at ~~March 31,~~June 30, 2022 primarily consist of money market funds and deposits with financial institutions. Liquid investments consist of investments in sponsored and other funds, direct investments in redeemable CIPs, other equity and debt securities, and time deposits with maturities greater than three months.

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

Capital Resources

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

On 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. As of the time of this filing, there were no amounts outstanding.

In prior fiscal years, we issued senior unsecured unsubordinated notes for general corporate purposes and to redeem outstanding notes. At ~~March 31,~~June 30, 2022, Franklin’s outstanding senior notes had an aggregate principal amount due of $1,900.0 million. The notes have fixed interest rates from 1.600% to 2.950% with interest paid semi-annually and have an aggregate carrying value, inclusive of unamortized discounts and debt issuance costs, of ~~$1,882.2~~$1,882.7 million. We are considering repaying the $300.0 million 2.800% senior notes due September 2022 by refinancing or using existing cash. At ~~March 31,~~June 30, 2022, Legg Mason’s outstanding senior notes had an aggregate principal amount due of $1,250.0 million. The notes have fixed interest rates from 3.950% to 5.625% with interest payable semi-annually for senior notes, and have an aggregate carrying value, inclusive of unamortized premium and debt issuance costs, of ~~$1,505.8~~$1,499.5 million at ~~March 31,~~June 30, 2022. Effective August 2, 2021, Franklin agreed to unconditionally and irrevocably guarantee all of the outstanding notes issued by Legg Mason.

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The senior notes contain an optional redemption feature that allows us to redeem each series of notes prior to maturity in whole or in part at any time, at a make-whole redemption price. The indentures governing the senior notes contain limitations on our ability and the ability of our subsidiaries to pledge voting stock or profit participating equity interests in our subsidiaries to secure other debt without similarly securing the notes equally and ratably. In addition, the indentures include requirements that must be met if we consolidate or merge with, or sell all of our assets to, another entity. We were in compliance with all debt covenants at ~~March 31,~~June 30, 2022.

At ~~March 31,~~June 30, 2022, we had $500.0 million of short-term commercial paper available for issuance under an uncommitted private placement program which has been inactive since 2012 and is unrated.

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

Uses of Capital

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

On November 15, 2021, we entered into an agreement with FIS, a financial technology leader, to assume operation of the Company’s global transfer agent function as a sub-agent or delegate, depending on the jurisdiction. We will incur transfer agent expenses for the services provided by FIS which will be recorded gross of shareholder servicing revenue earned from the funds.

We typically declare cash dividends on a quarterly basis, subject to approval by our Board of Directors. We declared regular dividends of ~~$0.58~~$0.87 per share during the ~~six~~nine months ended ~~March 31,~~June 30, 2022 and ~~$0.56~~$0.84 per share during the ~~six~~nine months ended ~~March 31,~~June 30, 2021. We currently expect to continue paying comparable regular dividends on a quarterly basis to holders of our common stock depending upon earnings and other relevant factors.

We maintain a stock repurchase program to manage our equity capital with the objective of maximizing shareholder value. Our stock repurchase program is effected through open-market purchases and private transactions in accordance with applicable laws and regulations, and is not subject to an expiration date. The size and timing of these purchases will depend on business conditions, price, market and other factors. During the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022, we repurchased ~~2.7~~2.0 million and ~~3.4~~5.4 million shares of our common stock at a cost of ~~$80.8~~$51.0 million and ~~$102.5~~$153.5 million. At ~~March 31,~~June 30, 2022, ~~27.5~~25.4 million shares remained available for repurchase under the authorization of 80.0 million shares approved by our Board of Directors in April 2018. During the three and ~~six~~nine months ended ~~March 31,~~June 30, 2021, we repurchased ~~1.7~~1.4 million and ~~3.8~~5.2 million shares of our common stock at a cost of ~~$45.8~~$46.4 million and ~~$91.4~~$137.8 million.

We ~~redeemed $122.6~~invested $19.7 million and $199.2 million, net of ~~investments,~~redemptions, into our sponsored products during the ~~six~~nine months ended ~~March~~June 30, 2022 and 2021.

On May 31, 2022, we entered into an acquisition agreement to acquire all of the outstanding ownership interests in BNY Alcentra Group Holdings, Inc. from BNY Mellon for cash consideration of approximately $350 million to be paid at closing and ~~invested $171.9~~up to $350 million ~~net~~in contingent consideration to be paid upon on the achievement of ~~redemptions, in~~certain performance thresholds over the ~~prior year period.~~next four years. The acquisition is expected to be funded from our existing balance sheet resources.

On April 1, 2021, we acquired all of the outstanding ownership interests in Lexington, a leading global manager of secondary private equity and co-investment funds, for cash consideration of approximately $1.0 billion, excluding future payments to be made subject to the attainment of certain performance measures. In connection with the acquisition, we ~~are granting~~granted a 25% ~~ownership stake~~profits interest in Lexington and performance-based cash retention awards that both vest over approximately five years. We paid the purchase price from our existing cash.

On December 31, 2021, we acquired all of the outstanding ownership interests in OSAM, a leading quantitative asset management firm, for cash consideration of approximately $300 million, excluding future payments to be made subject to the attainment of certain performance measures. We paid the purchase price from our existing cash.

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The funds that we manage have their own resources available for purposes of providing liquidity to meet shareholder redemptions, including securities that can be sold or provided to investors as in-kind redemptions, and lines of credit. Increased liquidity risks and redemptions have required, and may continue to require, increased cash in the form of loans or other lines of credit to help settle redemptions and for other related purposes. While we have no legal or contractual obligation to do so, we have in certain instances voluntarily elected to provide the funds with direct or indirect financial support based on our business objectives. During the fiscal year ended September 30, 2020, the Company authorized loans to certain sponsored funds in India that experienced increased liquidity risks and redemptions. The loans were fully repaid during the second quarter of fiscal year 2021. See Note 16 – Commitments and Contingencies in the notes to consolidated financial statements in Item 8 of Part II of our Annual Report on Form 10-K for fiscal year 2021 for further information. We did not provide financial or other support to our sponsored funds during the ~~six~~nine months ended ~~March 31,~~June 30, 2022.

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CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. These estimates, judgments and assumptions are affected by our application of accounting policies. Further, global concerns about the ~~Russian invasion~~the global economic growth outlook and the risk of ~~Ukraine and~~a recession as well as the ongoing COVID-19 pandemic have adversely affected, and may continue to adversely affect, our business, financial condition and results of operations including the estimates and assumptions made by management. Actual results could differ from the estimates. The following are updates to our critical accounting policies disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal year 2021.

Consolidation

We consolidate our subsidiaries and investment products in which we have a controlling financial interest. We have a controlling financial interest when we own a majority of the voting interest in a voting interest entity or are the primary beneficiary of a variable interest entity (“VIE”). Our VIEs are primarily investment products and our variable interests consist of our equity ownership interests in and investment management fees earned from these products. As of ~~March 31,~~June 30, 2022, we were the primary beneficiary of 5551 investment product VIEs.

Business Combinations

Business combinations are accounted for by recognizing the acquired assets, including separately identifiable intangible assets, and assumed liabilities at their acquisition-date estimated fair values. Any excess of the purchase consideration over the acquisition-date fair values of these identifiable assets and liabilities is recognized as goodwill. Goodwill and indefinite-lived intangible assets are tested for impairment annually and when an event occurs or circumstances change that more likely than not reduce the fair value of the related reporting unit or indefinite-lived intangible asset below its carrying value. Definite-lived intangible assets are tested for impairment quarterly.

Subsequent to the annual impairment tests performed as of August 1, 2021, we monitored both macroeconomic and entity-specific factors, including changes in our AUM to determine whether circumstances have changed that would more likely than not reduce the fair value of the reporting unit below its carrying value or indicate that the indefinite-lived intangible assets might be impaired. We also monitored fluctuations of our common stock per share price to evaluate our market capitalization relative to the reporting unit as a whole. During the ~~six~~nine months ended ~~March 31,~~June 30, 2022, there were no events or circumstances which would indicate that goodwill, indefinite-lived intangible assets or definite-lived intangible assets might be impaired.

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

Fair Value Measurements

A substantial amount of our investments are recorded at fair value or amounts that approximate fair value on a recurring basis. We use a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on whether the inputs to those valuation techniques are observable or unobservable.

As of ~~March 31,~~June 30, 2022, Level 3 assets represented 10% of total assets measured at fair value, which primarily related to CIPs’ investments in equity and debt securities. There were insignificant transfers into and out of Level 3 during the ~~six~~nine months ended ~~March 31,~~June 30, 2022.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

During the ~~six~~nine months ended ~~March 31,~~June 30, 2022, there were no material changes from the market risk disclosures in our Form 10‑K for the fiscal year ended September 30, 2021.

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Item 4. Controls and Procedures.

The Company’s management evaluated, with the participation of the Company’s principal executive and principal financial officers, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~March 31,~~June 30, 2022. Based on their evaluation, the Company’s principal executive and principal financial officers concluded that the Company’s disclosure controls and procedures as of ~~March 31,~~June 30, 2022 were designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company’s fiscal quarter ended ~~March 31,~~June 30, 2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of our legal proceedings, please see the description set forth in the “Legal Proceedings” section in Note 1011 – Commitments and Contingencies in the notes to consolidated financial statements in Item 1 of Part I of this Form 10‑Q, which is incorporated herein by reference.

Item 1A. Risk Factors.

The following Risk Factor disclosure supplements the discussion of our Risk Factors previously disclosed in our Annual Report on Form 10‑K for fiscal year 2021. The Risk Factors disclosed in our Annual Report on Form 10-K for fiscal year 2021 and the Risk Factor below could materially and adversely affect our business, financial condition and results of operations, and our business also could be impacted by other risk factors that are not presently known to us or that we currently consider to be immaterial. Further, our disclosure of a risk should not be interpreted to imply that the risk has not already developed or materialized.

Volatility and disruption of our business and financial markets and adverse changes in the global economy may significantly affect our results of operations and 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. 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 asset management industry continues to experience disruption and challenges, including 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, financial markets have and may continue, from time to time, to experience volatility and disruption worldwide. Declines in global economic conditions have in the past resulted 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 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.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information with respect to the shares of our common stock that we repurchased during the three months ended ~~March 31,~~June 30, 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
January 2022 469,554 $ 33.38 469,554 29,717,806
February 2022 754,482 30.44 754,482 28,963,324
March 2022 1,508,934 27.96 1,508,934 27,454,390
Total 2,732,970 2,732,970


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
April 2022	580,651	$	26.40	580,651	26,873,739
May 2022	1,039,302	24.68		1,039,302	25,834,437
June 2022	404,784	24.75		404,784	25,429,653
Total	2,024,737			2,024,737

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. Exhibits.

The exhibits listed on the Exhibit Index to this Form 10-Q are incorporated herein by reference.

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EXHIBIT INDEX


Exhibit No.						Description

3.1						Certificate of Incorporation of Registrant, as filed November 28, 1969, incorporated by reference to Exhibit (3)(i) to our Annual Report on Form 10-K for the fiscal year ended September 30, 1994 (File No. 001-09318) (the “1994 Annual Report”)

3.2						Certificate of Amendment of Certificate of Incorporation of Registrant, as filed March 1, 1985, incorporated by reference to Exhibit 3(ii) to the 1994 Annual Report

3.3						Certificate of Amendment of Certificate of Incorporation of Registrant, as filed April 1, 1987, incorporated by reference to Exhibit 3(iii) to the 1994 Annual Report

3.4						Certificate of Amendment of Certificate of Incorporation of Registrant, as filed February 2, 1994, incorporated by reference to Exhibit 3(iv) to the 1994 Annual Report

3.5						Certificate of Amendment of Certificate of Incorporation of Registrant, as filed February 4, 2005, incorporated by reference to Exhibit (3)(i)(e) to our Quarterly Report on Form 10-Q for the period ended December 31, 2004 (File No. 001-09318)

3.6						Amended and Restated Bylaws of Registrant (as adopted and effective June 29, 2021), incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on July 1, 2021 (File No. 001-09318)

10.1						~~Credit Agreement, dated as of January 10, 2022, by~~1998 Employee Stock Investment Plan (as amended and among Registrant, as borrower, the financial institutions from time-to-time party thereto, as lenders, and Bank of America, N.A., as administrative agent, incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on January 14, 2022 (File No. 001-09318)restated effective June 21, 2022) (filed herewith)*

31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

101						The following materials from Registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL), include: (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) related notes (filed herewith)

104						Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101)

_______________


*			Management contract or compensatory plan or arrangement

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FRANKLIN RESOURCES, INC.

Date:

~~May 3,~~July 28, 2022

By:

/s/ Matthew Nicholls

Matthew Nicholls

Executive Vice President, Chief Financial Officer and Chief Operating Officer

Date:

~~May 3,~~July 28, 2022

By:

/s/ Gwen L. Shaneyfelt

Gwen L. Shaneyfelt

Chief Accounting Officer

4648


(in millions)	As Reported		Adjustments		As Revised
Net cash provided by operating activities	$	505.4	$	40.9	$	546.3
Net cash used in investing activities	(773.0)		(504.9)		(1,277.9)
Net cash provided by financing activities	659.9		670.9		1,330.8