FRANKLIN RESOURCES INC

Previous wording

During our second fiscal quarter, global equity markets provided mixed results. U.S. markets declined, reflecting uncertainty regarding trade tariffs and other U.S. economic policies, while European and emerging markets produced gains. The S&P 500 Index and MSCI World Index decreased 4.3% and 1.7% for the quarter and 2.0%,and 1.8% for the fiscal year to date. Global bond markets improved during the quarter, as a result of weaker economic conditions. The Bloomberg Global Aggregate Index increased 2.6% during the quarter and decreased 2.6% for the fiscal year to date.

Current wording

During our third fiscal quarter, U.S. and global equity markets rebounded, despite significant volatility driven by uncertainty regarding U.S. trade tariffs. The S&P 500 Index and MSCI World Index increased 10.9% and 11.6% for the quarter and 8.8% and 9.7% for the fiscal year to date. Global bond markets provided positive results and the Bloomberg Global Aggregate Index increased 4.5% during the quarter and 1.8% for the fiscal year to date.

Previous wording

Our total AUM at March 31, 2025 was $1,540.6 billion, 8% lower than at September 30, 2024 and 6% lower than at March 31, 2024. Monthly average AUM (“average AUM”) for the three and six months ended March 31, 2025 decreased 1% and increased 8% from the same periods in the prior fiscal year.

Current wording

Our total AUM at June 30, 2025 was $1,611.8 billion, 4% lower than at September 30, 2024 and 2% lower than at June 30, 2024. Monthly average AUM (“average AUM”) for both the three and nine months ended June 30, 2025 decreased 4% from the same periods in the prior fiscal year.

Previous wording

1 Average AUM is calculated as the average of the month-end AUM for the trailing seven months.

Current wording

1 Average AUM is calculated as the average of the month-end AUM for the trailing ten months.

Previous wording

AUM decreased $35.1 billion, or 2%, during the three months ended March 31, 2025 due to $26.2 billion of long-term net outflows, inclusive of $33.6 billion of long-term net outflows at WAM and $3.3 billion of long-term reinvested distributions, and the negative impact of $11.6 billion of net market change, distributions and other, partially offset by $2.7 billion of cash management net inflows. Net market change, distributions and other primarily consists of $8.2 billion of distributions, and $8.2 billion of market depreciation, partially offset by a $4.8 billion increase from foreign exchange revaluation. The market depreciation occurred primarily in the equity asset class partially offset by appreciation in the fixed income asset class. Foreign exchange revaluation from AUM in products that are not U.S. dollar denominated was primarily due to a weaker U.S. dollar compared to the Euro and Japanese Yen.

Current wording

AUM increased $71.2 billion, or 5%, during the three months ended June 30, 2025 due to the positive impact of $78.0 billion of net market change, distributions and other, and $2.7 billion of cash management net inflows, partially offset by $9.3 billion of long-term net outflows, inclusive of $17.1 billion of long-term net outflows at WAM and $3.9 billion of long-term reinvested distributions, and $0.2 billion from the disposition of funds. Net market change, distributions and other primarily consists of $76.7 billion of market appreciation, and a $10.9 billion increase from foreign exchange revaluation, partially offset by $9.6 billion of distributions. The market appreciation occurred in all asset classes, most significantly in the equity asset class, and reflected positive returns in the global equity and bond markets. Foreign exchange revaluation from AUM in products that are not U.S. dollar denominated was primarily due to a weaker U.S. dollar compared to the Euro, Canadian Dollar, Australian Dollar and British Pound.

Previous wording

Long-term inflows increased 2% to $86.8 billion, compared to the prior year period, driven by higher inflows in alternative private funds, equity, alternative and multi-asset open end funds, and equity retail separately managed accounts, exchange traded funds, institutional separate accounts and sub-advised mutual funds, partially offset by decreased inflows across multiple fixed income vehicles at WAM. Long-term outflows increased 45% to $113.0 billion, substantially due to higher outflows across multiple fixed income vehicles at WAM, and to a lesser extent, higher outflows from equity sub-advised and open end funds, institutional separate accounts and retail separately managed accounts. WAM outflows have increased significantly following investment performance issues and the announcement of ongoing regulatory investigations.

Current wording

Long-term inflows decreased 9% to $75.6 billion, compared to the prior year period, driven by lower inflows for WAM institutional separate accounts, partially offset by by higher inflows in alternative and equity private funds and equity exchange traded funds. Long-term outflows decreased 1% to $84.9 billion, due to lower outflows for fixed income and equity institutional separate accounts, equity separately managed accounts, and equity and multi-asset open end funds, partially offset by higher outflows for multiple fixed income vehicles, equity sub-advised mutual funds and exchange traded funds, alternative private funds, and multi-asset separately managed accounts.

Previous wording

AUM decreased $138.0 billion, or 8%, during the six months ended March 31, 2025 due to $76.2 billion of long-term net outflows, inclusive of $101.5 billion of long-term net outflows at WAM and $23.4 billion of long-term reinvested distributions, and the negative impact of $64.5 billion of net market change, distributions and other, partially offset by $2.7 billion of cash management net inflows. Net market change, distributions and other primarily consists of $38.3 billion of distributions, primarily from the equity asset class, $16.7 billion of market depreciation and a $9.5 billion decrease from foreign exchange revaluation. The market depreciation occurred primarily in the equity 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 Australian dollar, Canadian dollar, Euro and Japanese Yen.

Current wording

AUM decreased $66.8 billion, or 4%, during the nine months ended June 30, 2025 due to $85.5 billion of long-term net outflows, inclusive of $118.6 billion of long-term net outflows at WAM and $27.3 billion of long-term reinvested distributions, and $0.2 billion from the disposition of funds, partially offset by the positive impact of $13.5 billion of net market change, distributions and other, and $5.4 billion of cash management net inflows. Net market change, distributions and other primarily consists of $60.0 billion of market appreciation and a $1.4 billion increase from foreign exchange revaluation, partially offset by $47.9 billion of distributions, primarily from the equity asset class. The market appreciation occurred in all asset classes, most significantly in the equity asset class, and reflected positive returns in the global equity markets. Foreign exchange revaluation from AUM in products that are not U.S. dollar denominated was primarily due to a weaker U.S. dollar compared to the Euro, partially offset by a stronger U.S. dollar compared to the Australian Dollar, Canadian Dollar and Indian Rupee.

Previous wording

Long-term inflows increased 19% to $183.7 billion, as compared to the prior year period, driven by higher inflows in equity, multi-asset, and alternative perpetual vehicles, and equity sub-advised mutual funds, retail separately managed accounts, institutional separate accounts and exchange traded funds, partially offset by lower inflows across multiple fixed income vehicles at WAM. Long-term outflows increased 71% to $259.9 billion, substantially due to higher outflows across multiple fixed income vehicles at WAM, and to a lesser extent, higher outflows from equity open end funds, sub-advised mutual funds, institutional separate accounts, and retail separately managed accounts.

Current wording

Long-term inflows increased 10% to $259.3 billion, as compared to the prior year period, driven by higher inflows in equity, alternative, and multi-asset open end funds, equity sub-advised mutual funds, equity separately managed accounts and exchange traded funds, and equity and alternative private funds, partially offset by lower inflows for WAM institutional separate accounts and sub-advised mutual funds. Long-term outflows increased 45% to $344.8 billion, substantially due to higher outflows across multiple fixed income vehicles at WAM, and slightly higher outflows in equity open end funds, sub-advised mutual funds, institutional separate accounts, and retail separately managed accounts.

Previous wording

1 Mutual fund performance is sourced from Morningstar and measures the percent of ranked AUM in the top two quartiles versus peers. Total mutual fund AUM measured for the 1-, 3-, 5- and 10-year periods represents 39%, 38%, 38% and 35% of our total AUM as of March 31, 2025.

Current wording

1 Mutual fund performance is sourced from Morningstar and measures the percent of ranked AUM in the top two quartiles versus peers. Total mutual fund AUM measured for the 1-, 3-, 5- and 10-year periods represents 39%, 39%, 38% and 36% of our total AUM as of June 30, 2025.

Previous wording

2 Strategy 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 55%, 55%, 54% and 49% of our total AUM as of March 31, 2025.

Current wording

2 Strategy 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 56%, 55%, 55% and 50% of our total AUM as of June 30, 2025.

Previous wording

Investment management fees decreased $40.3 million for the three months ended March 31, 2025 primarily due to a 1% decrease in average AUM and a decrease in performance fees. The decrease in average AUM for the three months ended March 31, 2025 primarily occurred in the fixed income asset class, substantially offset by increases in the equity and multi-asset asset classes. Investment management fees increased $106.8 million for the six months ended March 31, 2025, primarily due to one additional quarter of revenue earned by Putnam, which was acquired on January 1, 2024, and an 8% increased in average AUM, partially offset by a decrease in performance fees and catch-up fees recognized in the prior year at the closing of fundraising rounds in a secondary private equity fund, which ended in January 2024. The increase in average AUM for the six months ended March 31, 2025 primarily occurred in the equity and multi-asset asset classes, partially offset by a decrease in the fixed income asset class.

Current wording

Investment management fees decreased $49.1 million for the three months ended June 30, 2025 primarily due to a 4% decrease in average AUM, partially offset by a slight increase in performance fees. The decrease in average AUM for the three months ended June 30, 2025 primarily occurred in the fixed income asset class, partially offset by increases in the equity and multi-asset asset classes. Investment management fees increased $57.7 million for the nine months ended June 30, 2025 primarily due to one additional quarter of revenue earned by Putnam, which was acquired on January 1, 2024, and an increase in average equity and multi-asset AUM, partially offset by the impact of WAM outflows, a decrease in performance fees and catch-up fees recognized in the prior year at the closing of fundraising rounds in a secondary private equity fund, which ended in January 2024.

Previous wording

Our effective investment management fee rate excluding performance fees (annualized investment management fees excluding performance fees divided by average AUM) was 41.4 basis points for both the three months ended March 31, 2025 and 2024, and decreased to 40.7 basis points for the six months ended March 31, 2025 from 41.7 basis points for the same period in the prior fiscal year. The fee rate remained flat for the three month period and decreased for the six month period primarily due to higher AUM in lower fee equity products, including those from the acquisition of Putnam, partially offset by a reduction in lower fee fixed income AUM at WAM. The decrease for the six month period was also due to catch-up fees recognized in the prior year at the closing of fundraising rounds in a secondary private equity fund,

Current wording

Our effective investment management fee rate excluding performance fees (annualized investment management fees excluding performance fees divided by average AUM) was 40.5 basis points for both the three and nine months ended June 30, 2025, as compared to 40.2 and 41.4 basis points for the same period in the prior fiscal year. The increase in the fee rate for the three month period was primarily due to the impact of outflows at WAM, partially offset by significant intra-quarter daily volatility in the current year period that caused an unusual dispersion between simple monthly average AUM and daily average AUM, while the decrease for the nine month period was primarily due to higher AUM in lower fee equity products and catch-up fees recognized in the prior year at the closing of fundraising rounds in a secondary private equity fund, partially offset by the impact of outflows at WAM.

Previous wording

Performance fees decreased to $71.9 million and $213.5 million for the three and six months ended March 31, 2025 from $85.2 million and $251.6 million for the same periods in the prior fiscal year due to lower performance fees earned by certain of our alternative specialist investment managers.

Current wording

Performance fees were $60.6 million and $274.1 million for the three and nine months ended June 30, 2025 as compared to $56.6 million and $308.2 million for the same periods in the prior fiscal year. The increase for the three month period and decrease for the nine month period were primarily due to changes in the amount of performance fees earned by our alternative specialist investment managers.

Previous wording

Asset-based distribution fees increased $5.7 million and $68.8 million for the three and six months ended March 31, 2025 primarily due to increases of 9% and 13% in the related average AUM, partially offset by a higher mix of lower fee assets. The six months ended March 31, 2025 also includes one additional quarter of revenue related to Putnam products.

Current wording

Asset-based distribution fees decreased $0.7 million for the three months ended June 30, 2025, primarily due to a higher mix of lower fee assets, partially offset by a slight increase in the related average AUM. Asset-based distribution fees increased $68.1 million for the nine months ended June 30, 2025 primarily due to an increase of 6% in the related average AUM and one additional quarter of asset-based revenue related to Putnam products, partially offset by a higher mix of lower fee assets.

Previous wording

Sales-based fees increased $0.9 million for the three months ended March 31, 2025, as commissionable sales remained relatively flat, and increased $16.9 million for the six months ended March 31, 2025 primarily due to an increase of 13% in commissionable sales and one additional quarter of sales-based revenue related to Putnam products.

Current wording

Sales-based fees decreased $5.7 million for the three months ended June 30, 2025, primarily due to a decrease of 12% in commissionable sales, and increased $11.2 million for the nine months ended June 30, 2025, primarily due to an increase of 2% in commissionable sales and one additional quarter of sales-based revenue related to Putnam products.

Previous wording

Shareholder servicing fees decreased $6.1 million for the three months ended March 31, 2025, primarily due to lower margin-based fees, partially offset by higher AUM-based fees driven by higher levels of related AUM, and increased $24.9 million for the six months ended March 31, 2025 primarily due to one additional quarter of fees earned by Putnam, partially offset by lower margin-based fees.

Current wording

Shareholder servicing fees decreased $1.9 million for the three months ended June 30, 2025, primarily due to lower levels of related AUM and increased $23.0 million for the nine months ended June 30, 2025 primarily due to one additional quarter of fees earned by Putnam, partially offset by lower margin-based fees.

Previous wording

The acquisition of Putnam on January 1, 2024 had a significant impact on operating expenses in the six months ended March 31, 2025, however, due to the ongoing integration of the combined businesses, it is not practicable to separately quantify the impact of the legacy Putnam business.

Current wording

The acquisition of Putnam on January 1, 2024 had a significant impact on operating expenses in the nine months ended June 30, 2025, however, due to the ongoing integration of the combined businesses, it is not practicable to separately quantify the impact of the legacy Putnam business.

Previous wording

Salaries, wages and benefits decreased $7.9 million for the three months ended March 31, 2025, primarily due to the impact of headcount reductions, which were partially offset by annual salary increases. Salaries, wages and benefits increased $44.8 million for the six months ended March 31, 2025, primarily due to annual salary increases and one additional quarter of expenses related to Putnam.

Current wording

Salaries, wages and benefits increased $3.2 million for the three months ended June 30, 2025, primarily due to annual salary increases and higher employee insurance costs, partially offset by the impact of headcount reductions. Salaries, wages and benefits increased $48.0 million for the nine months ended June 30, 2025, primarily due to annual salary increases and one additional quarter of expenses related to Putnam, partially offset by the impact of headcount reductions.

Previous wording

Incentive compensation decreased $3.5 million for the three months ended March 31, 2025, primarily due to lower incentive compensation at certain specialist investment managers and a decrease in expense for deferred compensation awards, partially offset by higher sales-related commissions. Incentive compensation increased $17.6 million for the six months ended March 31, 2025, primarily due to one additional quarter of expenses related to Putnam, higher annual acceleration of deferred compensation expense related to retirement-eligible employees, and higher sales-related commissions, partially offset by lower incentive compensation at certain specialist investment managers and lower ongoing deferred compensation expense.

Current wording

Incentive compensation decreased $14.5 million for the three months ended June 30, 2025, primarily due to lower incentive compensation at certain specialist investment managers, partially offset by an increase in expense for deferred compensation awards. Incentive compensation increased $3.1 million for the nine months ended June 30, 2025, primarily due to one additional quarter of expenses related to Putnam, higher sales-related commissions, and higher annual acceleration of deferred compensation expense related to retirement-eligible employees, partially offset by lower incentive compensation at certain specialist investment managers and lower ongoing deferred compensation expense.

Previous wording

Acquisition-related retention expenses decreased $69.8 million and $93.1 million for the three and six months ended March 31, 2025, primarily due to lower costs associated with the acquisition of Putnam, and lower compensation associated with performance-based and time-based awards.

Current wording

Acquisition-related retention expenses increased $4.2 million for the three months ended June 30, 2025, primarily due to higher compensation associated with performance-based and time-based awards, and decreased $88.9 million for the nine months ended June 30, 2025, primarily due to lower compensation associated with time-based and performance-based awards, and lower costs associated with the acquisition of Putnam.

Previous wording

Other compensation and benefits decreased $28.8 million and $52.7 million for the three and six months ended March 31, 2025, primarily due to a decrease in special termination benefits and lower net market gains on investments related to our deferred compensation plans. Special termination benefits decreased $23.0 million and $29.3 million for the three and six months ended March 31, 2025 primarily due to the higher costs associated with workforce optimization initiatives in the prior year.

Current wording

Other compensation and benefits increased $12.3 million for the three months ended June 30, 2025, primarily due to an increase in special termination benefits and higher compensation expense related to minority interests; and decreased $40.4 million for the nine months ended June 30, 2025, primarily due to lower net market gains on investments related to our deferred compensation plans and a decrease in special termination benefits. Special termination benefits increased $10.2 million for the three months ended June 30, 2025 primarily due to higher costs associated with workforce optimization initiatives in the current year period and decreased $19.1 million for the nine months ended June 30, 2025 primarily due to higher costs associated with such initiatives in the prior year period.

Previous wording

At March 31, 2025, our global workforce decreased to approximately 10,000 employees from approximately 10,100 at March 31, 2024.

Current wording

At June 30, 2025, our global workforce decreased to approximately 10,100 employees from approximately 10,300 at June 30, 2024.

Previous wording

Asset-based expenses increased $5.7 million and $93.4 million for the three and six months ended March 31, 2025 primarily due to increases of 3% and 7% in the related average AUM, and higher marketing support fees, partially offset by a higher mix of lower-fee assets. The six months ended March 31, 2025 also includes one additional quarter of expenses related to Putnam products. 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.

Current wording

Asset-based expenses were essentially flat for the three months ended June 30, 2025 and increased $93.1 million for the nine months ended June 30, 2025. The increase for the nine month period was primarily due to one additional quarter of expenses related to Putnam products, an increase of 4% in the related average AUM and higher marketing support fees. 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.

Previous wording

Sales-based expenses increased $4.2 million for the three months ended March 31, 2025, primarily due to higher marketing support expenses, and increased $21.2 million for the six months ended March 31, 2025 primarily due to increases of 13% in commissionable sales and one additional quarter of expenses related to Putnam products.

Current wording

Sales-based expenses decreased $5.0 million for the three months ended June 30, 2025, primarily due to a decrease of 12% in commissionable sales, and increased $16.2 million for the nine months ended June 30, 2025 primarily due to one additional quarter of expenses related to Putnam products, higher marketing support fees and an increase of 2% in commissionable sales.

Previous wording

Occupancy expenses decreased $6.9 million and increased $1.5 million for the three and six months ended March 31, 2025. Both the three and six month periods reflect lower costs due to the consolidation of office space in New York City, which were offset by one additional quarter of expenses incurred by Putnam in the six month period.

Current wording

Occupancy expenses decreased $35.3 million and $33.8 million for the three and nine months ended June 30, 2025. Both the three and nine month periods in the prior year included the impairment of the right of use asset related to office space vacated in connection with the consolidation of our office space in New York City, and the current year three and nine month periods reflect lower costs due to the office space consolidation. The decrease for the nine month period was partially offset by one additional quarter of expenses incurred by Putnam.

Previous wording

Information systems and technology expenses increased $3.6 million for the three months ended March 31, 2025, primarily due to higher technology consulting and software costs, partially offset by lower costs for external data services, and increased $28.6 million for the six months ended March 31, 2025, primarily due to one additional quarter of expenses incurred by Putnam, and higher technology consulting and software costs, partially offset by lower costs for hardware purchases and maintenance.

Current wording

Information systems and technology expenses increased $6.1 million for the three months ended June 30, 2025, primarily due to higher costs for technology consulting and external data services, and increased $34.7 million for the nine months ended June 30, 2025, primarily due to one additional quarter of expenses incurred by Putnam, and higher technology consulting and software costs, partially offset by lower costs for hardware maintenance and purchases.

Previous wording

Amortization of intangible assets increased $27.9 million and $54.7 million for the three and six months ended March 31, 2025, primarily due to a reduction in the remaining useful life of definite-lived intangible assets related to WAM.

Current wording

Amortization of intangible assets increased $28.2 million and $82.9 million for the three and nine months ended June 30, 2025, primarily due to a reduction in the remaining useful life of definite-lived intangible assets related to WAM.

Previous wording

During the three months ended March 31, 2025, we recognized an impairment charge of $24.4 million related to certain indefinite-lived intangible assets for acquired mutual fund investment management contracts. See Critical Accounting Policies for additional information.

Current wording

During the nine months ended June 30, 2025, we recognized an impairment charge of $24.4 million related to certain indefinite-lived intangible assets for acquired mutual fund investment management contracts. See Critical Accounting Policies for additional information.

Previous wording

General, administrative and other operating expenses decreased $12.3 million and increased $40.9 million for the three and six months ended March 31, 2025. The decrease for the three months ended March 31, 2025 was primarily due to a $19.5 million decrease in acquisition-related costs, primarily related to the acquisition of Putnam in the prior year quarter, and a $10.7 million decrease in legal and other professional fees, inclusive of $17.6 million of insurance recoveries, partially offset by increases in advertising and promotion costs and placement fees. The increase for the six months ended March 31, 2025 was primarily due to one additional quarter of expenses incurred by Putnam, an $11.7 million increase in advertising and promotion costs, an $8.1 million increase in legal and other professional fees, net of $27.6 million of insurance recoveries, and an increase in fund-related expenses, partially offset by a $19.1 million decrease in acquisition-related costs, primarily related to the acquisition of Putnam.

Current wording

General, administrative and other operating expenses increased $3.6 million and increased $44.5 million for the three and nine months ended June 30, 2025. The increase for the three months ended June 30, 2025 was primarily due to increases of $4.8 million in placement and platform fees, $4.0 million in advertising and promotion costs, and $2.3 million in fund-related expenses, and a $2.9 million net credit recognized in the prior year to reduce the fair value of contingent consideration liabilities. These increases were partially offset by a $10.3 million decrease in legal and other professional fees, inclusive of $18.0 million of insurance recoveries. The increase for the nine months ended June 30, 2025 was primarily due to one additional quarter of expenses incurred by Putnam, and increases of $15.7 million in advertising and promotion costs, $8.0 million in placement and platform fees, and $6.4 million in fund-related expenses. These increases were partially offset by a $15.8 million decrease in acquisition-related costs, primarily related to the acquisition of Putnam, and a $2.7 million decrease in legal and other professional fees, inclusive of $45.6 million of insurance recoveries.

Previous wording

Dividend and interest income decreased $18.6 million and $30.3 million for the three and six months ended March 31, 2025, primarily due to lower yields and lower average balances.

Current wording

Dividend and interest income decreased $0.9 million and $31.2 million for the three and nine months ended June 30, 2025. The decrease for the nine months ended June 30, 2025 was primarily due to lower average balances and lower yields.

Previous wording

Investments held by the Company generated net gains of $46.8 million, as compared to net losses of $18.5 million for the three months ended March 31, 2025 and 2024. The net gains in the three months ended March 31, 2025 were primarily from investments in nonconsolidated funds and separate accounts, partially offset by net losses on investments measured at cost adjusted for observable price changes, while the net losses in the prior year period were primarily from investments in nonconsolidated funds and separate accounts, partially offset by net gains from assets invested for deferred compensation plans. Investments held by the Company generated net losses of $10.3 million, as compared to net gains of $41.6 million for the six months ended March 31, 2025 and 2024. The net losses in the six months ended March 31, 2025 were primarily from net losses on investments measured at cost adjusted for observable price changes, partially offset by net gains from investments in nonconsolidated funds and separate accounts, while the net gains in the prior year were primarily from assets invested for deferred compensation plans and investments in nonconsolidated funds and separate accounts, partially offset by net losses on investments measured at cost adjusted for observable price changes.

Current wording

Investments held by the Company generated net losses of $31.4 million and $24.3 million for the three months ended June 30, 2025 and 2024. The net losses in both the current and prior year periods were primarily from investments in nonconsolidated funds and separate accounts and investments measured at cost adjusted for observable price changes. Investments held by the Company generated net losses of $41.7 million, as compared to net gains of $17.3 million for the nine months ended June 30, 2025 and 2024. The net losses in the current year were primarily from investments measured at cost adjusted for observable price changes and investments in nonconsolidated funds and separate accounts, while the net gains in the prior year were primarily from assets invested for deferred compensation plans, partially offset by losses on investments measured at cost adjusted for observable price changes.

Previous wording

Equity method investees generated income of $23.1 million and $15.5 million for the three and six months ended March 31, 2025, as compared to income of $24.4 million and $81.3 million in the prior year, largely related to various global alternative funds and, in the prior year periods, equity funds.

Current wording

Equity method investees generated income of $23.0 million and $38.5 million for the three and nine months ended June 30, 2025, as compared to income of $41.0 million and $122.3 million in the prior year, largely related to various global alternative funds and global equity funds.

Previous wording

Net foreign currency exchange losses increased $6.2 million for the three months ended March 31, 2025, primarily due to the U.S. dollar weakening more in the current year period against the Euro and British Pound, which resulted in higher net foreign exchange losses on cash and cash equivalents denominated in U.S. dollars held by our European subsidiaries. Net foreign currency exchange gains were $7.0 million for the six months ended March 31, 2025, as compared to net losses of $8.7 million in the prior year. The U.S. dollar strengthened in the six month period against the Euro and British Pound, which resulted in net foreign exchange gains on cash and cash equivalents denominated in U.S. dollars held by our European subsidiaries, as compared to net losses in the prior year.

Current wording

Net foreign currency exchange losses were $14.4 million for the three months ended June 30, 2025, as compared to net gains of $1.2 million in the prior year period. The U.S. dollar weakened in the current year period against the Euro and British Pound, which resulted in net foreign exchange losses on cash and cash equivalents denominated in U.S. dollars held by our European subsidiaries, as compared to net gains in the prior year period.

Previous wording

Interest expense decreased $6.9 million for the three months ended March 31, 2025 primarily due to lower accretion on Lexington deferred purchase consideration and lower interest recognized on tax reserves, and $2.6 million for the six months ended March 31, 2025 primarily due to lower accretion on Lexington deferred purchase consideration and a net decrease in interest on debt, partially offset by an increase in interest recognized on tax reserves.

Current wording

Interest expense decreased $2.5 million for the nine months ended June 30, 2025 primarily due to lower accretion on Lexington deferred purchase consideration, partially offset by an increase in interest recognized on tax reserves.

Previous wording

Investments held by consolidated investment products (“CIPs”) generated losses of $164.7 million and $50.6 million in the three and six months ended March 31, 2025, largely related to losses on holdings of various global equity funds, partially offset by gains on various alternative funds, and for the six month period, global fixed income and multi-asset funds. Investments held by CIPs generated investment gains and other income of $89.9 million and $66.1 million in the three and six months ended March 31, 2024, largely related to gains on holdings of various fixed income, global equity and alternative funds, and for the six month period, multi-asset funds.

Current wording

Investments held by consolidated investment products (“CIPs”) generated gains of $35.9 million for the three months ended June 30, 2025, largely related to gains on holdings of various equity, fixed income, and multi-asset funds, and losses of $14.7 million for the nine months ended June 30, 2025, largely related to losses on holdings of various equity funds, partially offset by gains on holdings of various alternative, fixed income, and multi-asset funds. Investments held by CIPs generated investment gains and other income of $37.6 million and $103.7 million in the three and nine months ended June 30, 2024, largely related to gains on holdings of various funds.

Previous wording

Expenses of CIPs increased $5.6 million and $7.0 million for the three and six months ended March 31, 2025, due to activity of the funds.

Current wording

Expenses of CIPs increased $2.2 million and $9.2 million for the three and nine months ended June 30, 2025, due to activity of the funds.

Previous wording

2 Total cash and cash equivalents and investments includes$4,362.2 million maintained for operational activities, including investments in sponsored funds and other products, and $446.1 million necessary to comply with regulatory requirements.

Current wording

2 Total cash and cash equivalents and investments includes $4,514.6 million maintained for operational activities, including investments in sponsored funds and other products, and $449.0 million necessary to comply with regulatory requirements.

Previous wording

3 Total cash and cash equivalents and investments includes approximately $365 million attributable to employee-owned and other third-party investments made through partnerships which are offset in noncontrolling interests, approximately $236 million of investments that are subject to long-term repurchase agreements and other net financing arrangements, and approximately $431 million of cash and investments related to deferred compensation plans.

Current wording

3 Total cash and cash equivalents and investments includes approximately $366 million attributable to employee-owned and other third-party investments made through partnerships which are offset in noncontrolling interests, approximately $429 million of investments that are subject to long-term repurchase agreements and other net financing arrangements, and approximately $444 million of cash and investments related to deferred compensation plans.

Previous wording

Our effective income tax rate was 72.8% and 31.5% for the three and six months ended March 31, 2025, as compared to 26.4% and 24.2% for the three and six months ended March 31, 2024. The rate increase for the three month period was primarily due to losses of CIPs for which there are no related tax benefits and valuation allowance on net operating losses and capital losses, partially offset by discrete tax benefits from state audit settlements. The rate increase for the six month period was primarily due to losses of CIPs for which there are no related tax benefits, a reduction in foreign rate benefits and tax expenses from stock-based compensation, partially offset by discrete tax benefits from state audit settlements.

Current wording

Our effective income tax rate was 33.9% and 32.3% for the three and nine months ended June 30, 2025, as compared to 22.7% and 23.7% for the three and nine months ended June 30, 2024. The rate increase for the three month period was primarily due to a reduction in foreign rate benefits, valuation allowance on net capital losses, and lower gains of CIPs for which there is no related tax expense. The rate increase for the nine month period was primarily due to losses of CIPs for which there are no related tax benefits and a reduction in foreign rate benefits.

Previous wording

Net cash used in operating activities increased during the six months ended March 31, 2025 primarily due to higher payments for incentive compensation and income tax payments, partially offset by higher net income adjusted for non-cash items. Net cash used in investing activities increased primarily due to net purchases of investments as compared to liquidations in the prior year and higher net purchases of investments by collateralized loan obligations (“CLOs”). Net cash provided by financing activities increased due to higher net proceeds on debt of CIPs, higher net subscriptions in CIPs by noncontrolling interests and lower repurchases of common stock, partially offset by net repayment of debt.

Current wording

Net cash provided by operating activities increased during the nine months ended June 30, 2025 primarily due to higher net income adjusted for non-cash items and an increase in accounts payable and accrued expenses, partially offset by higher payments for incentive compensation and income tax payments. Net cash used in investing activities increased primarily due to net purchases of investments as compared to liquidations in the prior year and higher net purchases of investments by collateralized loan obligations (“CLOs”). Net cash provided by financing activities decreased due to lower net proceeds on debt of CIPs and net repayment of debt, partially offset by net proceeds from repurchase agreements.

Previous wording

In prior fiscal years, we issued senior unsecured unsubordinated notes for general corporate purposes and to redeem outstanding notes. At March 31, 2025, Franklin’s outstanding senior notes had an aggregate principal amount due of $1,200.0 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 $1,487.8 million. At March 31, 2025, Legg Mason’s outstanding senior notes had an aggregate principal amount due of $1,000.0 million. The notes have fixed interest rates from 4.750% to 5.625% with interest paid semi-annually and have an aggregate carrying value, inclusive of unamortized premium, of $1,183.5 million at March 31, 2025. Franklin unconditionally and irrevocably guarantees all of the outstanding notes issued by Legg Mason. The $400.0 million 2.850% senior notes due March 2025 were repaid on March 31, 2025 using existing cash and borrowings from our revolving credit facility.

Current wording

In prior fiscal years, we issued senior unsecured unsubordinated notes for general corporate purposes and to redeem outstanding notes. At June 30, 2025, Franklin’s outstanding senior notes had an aggregate principal amount due of $1,200.0 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 $1,488.2 million. At June 30, 2025, Legg Mason’s outstanding senior notes had an aggregate principal amount due of $1,000.0 million. The notes have fixed interest rates from 4.750% to 5.625% with interest paid semi-annually and have an aggregate carrying value, inclusive of unamortized premium, of $1,178.5 million at June 30, 2025. Franklin unconditionally and irrevocably guarantees all of the outstanding notes issued by Legg Mason. The $400.0 million 2.850% senior notes due March 2025 were repaid on March 31, 2025 using existing cash and borrowings from our revolving credit facility.