FRANKLIN RESOURCES INC

Previous wording

The initiation or unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or inquiries, including the Western Asset Management (“WAM”) investigations described under the heading “Risk Factors” and in “Note 15 - Commitments and Contingencies” to our audited financial statements contained in our Annual Report on Form 10-K for fiscal year 2025, and in “Note 10 - Commitments and Contingencies” to our unaudited interim financial statements contained in this Form 10-Q, may result in additional costs, monetary judgments, settlements or other remedies, including fines, penalties, restitution and/or alterations in our business practices or those of our investment groups. In addition, these matters may cause reputational harm to us or our investment groups and could result in additional expenses and collateral costs, outflows of assets under management or other financial impacts that could materially affect our results of operations and the price of our common stock.

Current wording

The initiation or unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or inquiries may result in additional costs, monetary judgments, settlements or other remedies, including fines, penalties, restitution and/or alterations in our business practices or those of our investment groups. In addition, these matters may cause reputational harm to us or our investment groups and could result in additional expenses and collateral costs, outflows of assets under management or other financial impacts that could materially affect our results of operations and the price of our common stock.

Previous wording

During our second fiscal quarter, U.S. and global equity markets declined amid heightened volatility, driven by the escalation of geopolitical tensions in the Middle East, rising energy and gas prices, and renewed inflation concerns. The S&P 500 Index and the MSCI World Index decreased by 4.3% and 3.5%, respectively, for the quarter, and by 1.8% and 0.4% for the fiscal year to date. Global bond markets declined as the Bloomberg Global Aggregate Index decreased 1.1% during the quarter and 0.8% for the fiscal year to date.

Current wording

During our third fiscal quarter, U.S. and global equity markets provided positive returns on lower energy prices, resilient corporate earnings, and continued investment in artificial intelligence. The S&P 500 Index and the MSCI World Index increased by 15.2% and 13.9%, respectively, for the quarter, and by 13.1% and 13.5% for the fiscal year to date. Global bond markets remained relatively flat as the Bloomberg Global Aggregate Index increased 0.9% during the quarter and remained flat for the fiscal year to date.

Previous wording

Our total AUM at March 31, 2026 was $1,682.1 billion, 1% higher than at September 30, 2025 and 9% higher than at March 31, 2025. Monthly average AUM (“average AUM”) for the three and six months ended March 31, 2026 increased 8% and 5% from the same periods in the prior fiscal year.

Current wording

Our total AUM at June 30, 2026 was $1,791.6 billion, 8% higher than at September 30, 2025 and 11% higher than at June 30, 2025. Monthly average AUM (“average AUM”) for the three and nine months ended June 30, 2026 increased 12% and 7% 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 $1.9 billion during the three months ended March 31, 2026 due to the negative impact of $30.2 billion of net market change, distributions and other, partially offset by $16.9 billion of long-term net inflows, inclusive of $4.1 billion of long-term net outflows at WAM, and $11.4 billion of cash management net inflows. Long-term net inflows include $3.2 billion of long-term reinvested distributions. Net market change, distributions and other primarily consists of $17.3 billion of market depreciation and $10.9 billion of distributions. The market depreciation occurred primarily in the equity asset class and reflected negative returns in the global equity markets, partially offset by appreciation in the alternative and multi-asset classes.

Current wording

AUM increased $109.5 billion during the three months ended June 30, 2026 due to the positive impact of $98.0 billion of net market change, distributions and other and $18.4 billion of long-term net inflows, inclusive of $1.1 billion of long-term net outflows at WAM, partially offset by $7.0 billion of cash management net outflows. Long-term net inflows include $4.1 billion of long-term reinvested distributions. Net market change, distributions and other primarily consists of $110.0 billion of market appreciation, partially offset by $10.2 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 markets.

Previous wording

Long-term inflows increased 36% to $118.2 billion, as compared to the prior period, driven by higher inflows in equity, multi-asset and fixed income open-end funds, alternative private funds, equity exchange traded funds, multi-asset sub-advised mutual funds, equity and multi-asset separately managed accounts, and fixed income institutional separate accounts. Long-term outflows decreased 10% to $101.3 billion, substantially due to lower outflows across multiple fixed income vehicles at WAM, partially offset by higher outflows in equity open-end funds and exchange traded funds.

Current wording

Long-term inflows increased 61% to $122.0 billion, as compared to the prior year period, driven by higher inflows in equity and multi-asset open-end funds, equity and multi-asset separately managed accounts, equity exchange traded funds, fixed income and equity institutional separate accounts, alternative private funds, and equity sub-advised mutual funds. Long-term outflows increased 22% to $103.6 billion, primarily reflecting higher redemptions in equity open-end funds, separately managed accounts, exchange traded funds, and institutional separate accounts, partially offset by lower outflows across multiple fixed income vehicles at WAM.

Previous wording

AUM increased $20.9 billion, or 1%, during the six months ended March 31, 2026 due to $44.9 billion of long-term net inflows, inclusive of $10.6 billion of long-term net outflows at WAM, $10.2 billion of cash management net inflows, and $6.1 billion from the acquisition of Apera, partially offset by the negative impact of $40.3 billion of net market change, distributions and other. Long-term net inflows include $32.1 billion of long-term reinvested distributions. Net market change, distributions and other primarily consists of $54.1 billion of distributions, primarily from the equity and alternative asset classes, partially offset by $16.4 billion of market appreciation. The market appreciation occurred in all asset classes.

Current wording

AUM increased $130.4 billion, or 8%, during the nine months ended June 30, 2026 due to $63.3 billion of long-term net inflows, inclusive of $11.7 billion of long-term net outflows at WAM, the positive impact of $57.7 billion of net market change, distributions and other, $6.2 billion from the acquisition of Apera and $3.2 billion of cash management net inflows. Long-term net inflows include $36.2 billion of long-term reinvested distributions. Net market change, distributions and other primarily consists of $126.4 billion of market appreciation, partially offset by $64.3 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 markets.

Previous wording

Long-term inflows increased 29% to $236.8 billion, as compared to the prior period, driven by higher inflows in equity, multi-asset, and fixed income open-end funds, alternative private funds, equity and fixed income exchange traded funds, fixed income, multi-asset, and equity separately managed accounts, alternative and fixed income institutional separate accounts, and multi-asset and fixed income sub-advised mutual funds, partially offset by lower inflows in equity sub-advised mutual funds. Long-term outflows decreased 26% to $191.9 billion, substantially due to lower outflows across multiple fixed income vehicles at WAM, partially offset by slightly higher outflows in equity and fixed income vehicles across other investment groups.

Current wording

Long-term inflows increased 38% to $358.8 billion, as compared to the prior year period, driven by higher inflows in equity and multi-asset open-end funds, equity and fixed income exchange traded funds, equity, multi-asset, and fixed income separately managed accounts, alternative private funds, fixed income and alternative institutional separate accounts, and multi-asset sub-advised mutual funds. Long-term outflows decreased 14% to $295.5 billion, primarily due to lower outflows across multiple fixed income vehicles at WAM, including institutional separate accounts, sub-advised mutual funds, open-end funds, and sub-advised CITs, partially offset by higher outflows in equity open-end funds, separately managed accounts, exchange traded funds and institutional separate 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%, 39%, 38% and 35% of our total AUM as of March 31, 2026.

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 40%, 40%, 39% and 36% of our total AUM as of June 30, 2026.

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%, 54%, 54% and 50% of our total AUM as of March 31, 2026.

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 51% of our total AUM as of June 30, 2026.

Previous wording

3 Total 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 17% and 12% of our total AUM at March 31, 2026.

Current wording

3 Total 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 16% and 12% of our total AUM at June 30, 2026.

Previous wording

Investment management fees increased $145.7 million and $194.3 million for the three and six months ended March 31, 2026 primarily due to an increase in average equity, multi-asset, and alternative AUM, an increase in performance fees and the acquisition of Apera, partially offset by the impact of WAM outflows.

Current wording

Investment management fees increased $225.4 million and $419.7 million for the three and nine months ended June 30, 2026 primarily due to an increase in average equity, multi-asset, and alternative AUM, an increase in performance fees and the acquisition of Apera, partially offset by the impact of WAM outflows.

Previous wording

Our effective investment management fee rate excluding performance fees (annualized investment management fees excluding performance fees divided by average AUM) was 41.0 and 40.8 basis points for the three and six months ended March 31, 2026, as compared to 41.4 and 40.7 basis points for the same periods in the prior fiscal year.

Current wording

Our effective investment management fee rate excluding performance fees (annualized investment management fees excluding performance fees divided by average AUM) was 41.0 and 40.7 basis points for the three and nine months ended June 30, 2026, as compared to 40.5 basis points for the same periods in the prior fiscal year.

Previous wording

Performance fees were $100.8 million and $232.4 million for the three and six months ended March 31, 2026 and $71.9 million and $213.5 million for the same periods in prior fiscal year. The increase for both periods was primarily due to changes in the amount of performance fees earned by our alternative and equity investment groups.

Current wording

Performance fees were $78.1 million and $310.5 million for the three and nine months ended June 30, 2026 and $60.6 million and $274.1 million for the same periods in prior fiscal year. The increase for both periods was primarily due to changes in the amount of performance fees earned by our alternative and equity investment groups.

Previous wording

Asset-based distribution fees increased $23.8 million and $39.3 million for the three and six months ended March 31, 2026 primarily due to increases of 6% and 4% in the related average AUM and a higher mix of non-U.S. equity and multi-asset funds and U.S. equity and alternative funds, which generate higher fees.

Current wording

Asset-based distribution fees increased $37.8 million and $77.1 million for the three and nine months ended June 30, 2026 primarily due to increases of 9% and 6% in the related average AUM and a higher mix of equity funds, non-U.S. and multi-asset funds and U.S. alternative funds, which generate higher fees.

Previous wording

Sales-based fees increased $7.9 million and $5.6 million for the three and six months ended March 31, 2026, primarily due to increases of 20% and 7% in commissionable sales, partially offset by a higher mix of non-U.S. sales, which generate lower fees.

Current wording

Sales-based fees increased $14.8 million and $20.4 million for the three and nine months ended June 30, 2026, primarily due to increases of 31% and 14% in commissionable sales, partially offset by a higher mix of non-U.S. sales, which generate lower fees.

Previous wording

Shareholder servicing fees increased $7.1 million and $14.5 million for the three and six months ended March 31, 2026 primarily due to higher levels of related AUM and increased revenue related to fees earned on a contractual basis.

Current wording

Shareholder servicing fees increased $14.4 million and $28.9 million for the three and nine months ended June 30, 2026 primarily due to increased revenue related to fees earned on a contractual basis and higher levels of related AUM.

Previous wording

Other revenue increased $5.3 million for the six months ended March 31, 2026 primarily due to higher loan origination fees earned by certain of our alternative investment groups.

Current wording

Other revenue increased $7.3 million for the nine months ended June 30, 2026 primarily due to higher loan origination fees earned by certain of our alternative investment groups.

Previous wording

Salaries, wages and benefits increased $11.8 million and $16.7 million for the three and six months ended March 31, 2026, primarily due to annual salary increases, higher post-retirement and employee insurance costs, and the acquisition of Apera, partially offset by the impact of cost savings initiatives.

Current wording

Salaries, wages and benefits increased $16.6 million and $33.3 million for the three and nine months ended June 30, 2026, primarily due to annual salary increases, higher post-retirement and employee insurance costs, and the acquisition of Apera, partially offset by the impact of cost savings initiatives.

Previous wording

Incentive compensation increased $28.3 million and $59.9 million for the three and six months ended March 31, 2026, primarily due to higher bonus expense based on expectations of our annual performance, and higher deferred compensation expense for the six month period, partially offset by lower sales-related commissions.

Current wording

Incentive compensation increased $42.0 million and $101.9 million for the three and nine months ended June 30, 2026, primarily due to higher bonus expense based on expectations of our annual performance, higher sales-related commissions, and for the nine month period, higher deferred compensation expense.

Previous wording

Acquisition-related retention expenses decreased $4.3 million and $14.4 million for the three and six months ended March 31, 2026, primarily due to lower costs associated with recent acquisitions.

Current wording

Acquisition-related retention expenses decreased $71.5 million and $85.9 million for the three and nine months ended June 30, 2026, primarily due to the reversal of $67.3 million of expense upon forfeiture of certain equity awards and lower costs associated with recent acquisitions.

Previous wording

Other compensation and benefits increased $13.4 million for the three months ended March 31, 2026, primarily due to a $12.8 million increase in special termination benefits, and increased $43.6 million for the six months ended March 31, 2026, primarily due to a $28.4 million increase in special termination benefits and higher net market gains on investments related to our deferred compensation plans. The special termination benefits increased primarily due to higher costs associated with workforce optimization initiatives.

Current wording

Other compensation and benefits increased $68.7 million and $112.3 million for the three and nine months ended June 30, 2026, primarily due to increases of $50.3 million and $78.7 million in special termination benefits and higher net market gains on investments related to our deferred compensation plans. The special termination benefits increased primarily due to higher costs associated with workforce optimization initiatives.

Previous wording

At March 31, 2026, our global workforce remained flat at approximately 10,000 employees, as compared to March 31, 2025.

Current wording

At June 30, 2026, our global workforce remained flat at approximately 10,100 employees, as compared to June 30, 2025.

Previous wording

Asset-based expenses increased $36.4 million and $66.0 million for the three and six months ended March 31, 2026 primarily due to increases of 7% and 6% in the related average AUM, higher marketing support fees, and a higher mix of non-U.S. equity and multi-asset funds and U.S. equity and alternative funds, which incur higher 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.

Current wording

Asset-based expenses increased $58.5 million and $124.5 million for the three and nine months ended June 30, 2026 primarily due to increases of 8% and 6% in the related average AUM, a higher mix of equity funds, non-U.S. multi-asset funds and U.S. alternative funds, which incur higher fees, 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

Occupancy expenses decreased $2.2 million and $10.5 million for the three and six months ended March 31, 2026, primarily due to consolidation of our office space in New York City.

Current wording

Occupancy expenses decreased $8.6 million for the nine months ended June 30, 2026, primarily due to consolidation of our office space in New York City.

Previous wording

Information systems and technology expenses decreased $1.1 million and $0.1 million for the three and six months ended March 31, 2026, primarily due to lower technology consulting and spending related to strategic initiatives, substantially offset by higher costs for software and external data services.

Current wording

Information systems and technology expenses decreased $1.9 million and $2.0 million for the three and nine months ended June 30, 2026, primarily due to lower technology consulting and depreciation, substantially offset by higher costs for software and external data services.

Previous wording

Amortization of intangible assets decreased $61.9 million and $119.4 million for the three and six months ended March 31, 2026, primarily due to intangible assets which became fully amortized during the prior fiscal year, partially offset by an increase in amortization due to the reclassification of certain indefinite-lived intangible assets to definite lived intangible assets and a reduction in the useful lives of certain definite-lived intangible assets related to trade names.

Current wording

Amortization of intangible assets decreased $61.5 million and $180.9 million for the three and nine months ended June 30, 2026, primarily due to intangible assets which became fully amortized during the prior fiscal year, partially offset by an increase in amortization due to the reclassification of certain indefinite-lived intangible assets to definite lived intangible assets and a reduction in the useful lives of certain definite-lived intangible assets related to trade names.

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.

Current wording

We recognized impairment charges totaling $33.0 million during the three and nine months ended June 30, 2026, and $24.4 million during the nine months ended June 30, 2025. The impairment charges in both periods were primarily 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 increased $4.8 million and $15.2 million for the three and six months ended March 31, 2026. The increase for the three months ended March 31, 2026 was primarily due to an increase of $11.6 million in legal and other professional fees, driven by a $7.6 million decrease in insurance recoveries, and an increase of $2.4 million in fund-related expenses, driven by higher transfer agency and sub-advisory expenses, partially offset by lower fund administration costs and lower placement and platform fees. These increases were partially offset by a $10.6 million decrease in advertising expenses. The increase for the six months ended March 31, 2026, was primarily due to an increase of $17.9 million in fund-related expenses, driven by higher transfer agency and sub-advisory expenses, and an increase of $3.1 million in travel and entertainment, partially offset by a $6.3 million decrease in advertising expenses.

Current wording

General, administrative and other operating expenses increased $129.1 million and $144.3 million for the three and nine months ended June 30, 2026, primarily due to a $100.0 million regulatory settlement in the current year period. The increase for the three months ended June 30, 2026 was also driven by a $19.3 million increase in legal and other professional fees, and an $18.3 million increase in fund-related expenses, primarily due to higher transfer agency expenses and higher placement and platform fees. These increases were partially offset by a $7.7 million decrease in advertising expenses. The increase for the nine months ended June 30, 2026, was also driven by an increase of $36.2 million in fund-related expenses, primarily due to higher transfer agency expenses and higher placement and platform fees, and an increase of $17.9 million in legal and other professional fees, partially offset by a $13.9 million decrease in advertising expenses.

Previous wording

Dividend and interest income increased $19.3 million and $30.8 million for the three and six months ended March 31, 2026, primarily due to higher dividend and interest income earned from strategic investments and assets invested for deferred compensation plans.

Current wording

Dividend and interest income decreased $7.8 million for the three months ended June 30, 2026, primarily due to lower dividend and interest income earned from investments in collateralized loan obligations, and increased $23.0 million for the nine months ended June 30, 2026, primarily due to higher dividend income earned from a strategic investment.

Previous wording

Investments held by the Company generated net losses of $20.7 million and $29.3 million for the three and six months ended March 31, 2026, as compared to net gains of $46.8 million and net losses of $10.3 million for the three and six months ended March 31, 2025. The net losses in the three months ended March 31, 2026 were primarily from investments in nonconsolidated funds and separate accounts and assets invested for deferred compensation plans, partially offset by gains from investments measured at cost adjusted for observable price changes, while the net gains in the prior year period were primarily from investments in nonconsolidated funds and separate accounts and assets invested for deferred compensation plans, partially offset by losses from investments measured at cost adjusted for observable price changes. The net losses in the six months ended March 31, 2026 were primarily from investments in nonconsolidated funds and separate accounts, partially offset by gains on investments measured at cost adjusted for observable price changes and assets invested for deferred compensation plans, while the net losses in the prior year were primarily from investments measured at cost adjusted for observable price changes and assets invested for deferred compensation plans, partially offset by losses on investments in nonconsolidated funds and separate accounts.

Current wording

Investments held by the Company generated net gains of $62.1 million and $32.8 million for the three and nine months ended June 30, 2026, as compared to net losses of $31.4 million and $41.7 million for the three and nine months ended June 30, 2025. The net gains in the three months ended June 30, 2026 and net losses in the prior year period were primarily from investment activity from investments in nonconsolidated funds and separate accounts, and for the prior year period investments measured at cost adjusted for observable price changes. The net gains in the nine months ended June 30, 2026 were primarily from investments in nonconsolidated funds and separate accounts and assets invested for deferred compensation plans, while the net losses in the prior year were primarily from investments measured at cost adjusted for observable price changes and investments in nonconsolidated funds and separate accounts.

Previous wording

Equity method investees generated income of $24.3 million and $35.8 million for the three and six months ended March 31, 2026, as compared to income of $23.1 million and $15.5 million in the prior year, largely related to various global alternative funds.

Current wording

Equity method investees generated income of $22.8 million and $58.6 million for the three and nine months ended June 30, 2026, as compared to income of $23.0 million and $38.5 million in the prior year, largely related to various global alternative and equity funds.

Previous wording

Net foreign currency exchange gains were $1.5 million for the three months ended March 31, 2026, as compared to net losses of $7.5 million in the prior year period. The U.S. dollar strengthened in the three 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 certain of our European subsidiaries, as compared to weakening against the same currencies, which resulted in net foreign exchange gains, in the prior year period. Net foreign currency exchange losses were $2.5 million for the six months ended March 31, 2026, as compared to net gains of $7.0 million in the prior year, as changes in the value of the U.S. dollar against the Euro and British Pound resulted in net foreign exchange losses in the current year as compared to net gains in the prior year.

Current wording

Net foreign currency exchange gains were $2.7 million and $0.2 million for the three and nine months ended June 30, 2026, as compared to net losses of $14.4 million and $7.4 million in the prior year periods, as changes in the value of the U.S. dollar against the Euro and British Pound resulted in net foreign exchange gains in the current year periods, as compared to net losses in the prior year.

Previous wording

Other, net increased $11.6 million and $27.1 million for the three and six months ended March 31, 2026, primarily due to gains recognized on the sale of owned office space.

Current wording

Other, net increased $31.9 million for the nine months ended June 30, 2026, primarily due to gains recognized on the sale of owned office space.

Previous wording

Interest expense decreased $0.9 million and $3.6 million for the three and six months ended March 31, 2026 primarily due to interest recognized in the prior year on the $400 million senior notes which were repaid in March 31, 2025, partially offset by interest recognized on borrowings under our revolving credit facility.

Current wording

Interest expense decreased $2.3 million and $5.9 million for the three and nine months ended June 30, 2026 reflecting the repayment of $450 million of senior notes in March 2026 and $400 million of senior notes in March 2025, partially offset by interest recognized on borrowings under our revolving credit facility.

Previous wording

Investments held by consolidated investment products (“CIPs”) generated gains and other income of $96.5 million and $221.4 million for the three and six months ended March 31, 2026, largely related to gains on holdings of various alternative, equity, and multi-asset funds. Investments held by CIPs generated losses of $164.7 million and $50.6 million for 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.

Current wording

Investments held by consolidated investment products (“CIPs”) generated gains and other income of $54.8 million and $276.2 million for the three and nine months ended June 30, 2026, largely related to gains on holdings of various alternative funds, and for the nine month period gains on holdings of various equity funds. Investments held by 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.

Previous wording

Expenses of CIPs decreased $1.3 million and increased $5.4 million for the three and six months ended March 31, 2026, due to activity of the funds.

Current wording

Expenses of CIPs decreased $3.8 million and increased $1.6 million for the three and nine months ended June 30, 2026, due to activity of the funds.

Previous wording

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

Current wording

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

Previous wording

Net cash used in operating activities increased during the six months ended March 31, 2026 primarily due to timing of cash receipts reflected in changes in receivables and lower net income adjusted for non-cash items, partially offset by lower payments for incentive compensation, accounts payable and accrued expenses. Net cash used in investing activities increased primarily due to higher net purchases of investments by collateralized loan obligations (“CLOs”), higher net purchases of investments and cash paid for an acquisition in current year partially offset by net proceeds from the sale of property, plant and equipment. Net cash provided by financing activities increased primarily due to higher net proceeds on debt of CIPs and higher net subscriptions in CIPs by noncontrolling interests.

Current wording

Net cash provided by operating activities decreased during the nine months ended June 30, 2026 primarily due to higher net purchases of investments by consolidated investment products and timing of cash receipts reflected in changes in receivables and other assets. Net cash used in investing activities increased primarily due to higher net purchases of investments by collateralized loan obligations (“CLOs”), partially offset by lower additions of property and equipment. Net cash provided by financing activities increased primarily due to higher net proceeds on debt of CIPs and higher net subscriptions in CIPs by noncontrolling interests, partially offset by higher repurchases of common stock.

Previous wording

In prior fiscal years, we issued senior unsecured unsubordinated notes for general corporate purposes and to redeem outstanding notes. At March 31, 2026, 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 $1,189.3 million. At March 31, 2026, Legg Mason’s outstanding senior note had a principal amount due of $550.0 million. The note has a fixed interest rate of 5.625% with interest paid semi-annually and had a carrying value, inclusive of unamortized premium, of $714.0 million at March 31, 2026. Franklin unconditionally and irrevocably guarantees all of the outstanding notes issued by Legg Mason. We repaid the $450 million 4.750% senior notes due March 2026 using borrowings under our Amended and Restated Credit Agreement (the “Credit Agreement”) and existing cash.

Current wording

In prior fiscal years, we issued senior unsecured unsubordinated notes for general corporate purposes and to redeem outstanding notes. At June 30, 2026, 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 $1,189.6 million. At June 30, 2026, Legg Mason’s outstanding senior note had a principal amount due of $550.0 million. The note has a fixed interest rate of 5.625% with interest paid semi-annually and had a carrying value, inclusive of unamortized premium, of $712.3 million at June 30, 2026. Franklin unconditionally and irrevocably guarantees all of the outstanding notes issued by Legg Mason. We repaid the $450 million 4.750% senior notes due March 2026 using borrowings under our Amended and Restated Credit Agreement (the “Credit Agreement”) and existing cash.